DL, county see nice LGA bump
For the first time in roughly 10 years, cities and counties are looking at a bump in local government aid instead of a decrease.
The state will be providing an extra $80 million to cities, $40 million to counties and $10 million to townships in aid.
“After a lot of years of cuts, we’re finally going to get some extra LGA. I think it will be about $90,000,” Detroit Lakes Finance Officer Pam Slifka said.
Detroit Lakes was already scheduled to receive about $690,000, the same amount it received the last two years.
Becker County will receive about a $261,000 increase in LGA.
“There are two other options, too,” Becker County Administrator Jack Ingstad said. “There’s also a $10 wheelage tax that the state has given the counties permission to enact, and that would be on each registered vehicle in the county.
“And there is also authorization by the state for the county to adopt a half-cent sale tax.”
Both would be used for transportation funding, he said.
The half-cent sales tax would raise about $1.4 million, and the wheelage tax would generate about $318,000.
Though he’s not sure there is any interest on the county board for either of those taxes at this point, the purpose of counties having these options is to reduce property tax levies and find other revenue sources.
“I think that’s what the state was trying to do this session, stabilize levies,” he said.
Over the last 10 years, cities and counties have seen cuts in local government aid when it came time for budget cuts.
Between 1998-2002, the city of Detroit Lakes was hovering around $1.5 million in local government aid. From there it was a steady decrease, and in 2008, it dropped below the $1 million mark from $1.1 million in 2007 to $777,000 in 2008.
In 2010, LGA hit a low with $550,000 to Detroit Lakes, and then recovered slightly in 2011 and 2012 at $690,000 each year.
Due to cuts in LGA, many cities had to compensate with higher property taxes. To ensure that wouldn’t happen with the bump for 2014 and 2015, the state also imposed a one-year cap on property taxes.
The extra money will go into the general fund and be used as the city council sees fit.
“We’re just going into our budgeting period now, so we’ll be going through the budget process and trying to figure out what they want to use the LGA for,” Slifka said. “It’s much better than we’ve had in the past.”
The budget set by the state is a two-year plan, so the $90,000 bump should come in both 2014 and 2015.
“Hopefully. No guarantees,” she said.
The levy limit numbers haven’t been set yet, Slifka said.
“We don’t know exactly where our levy limit will be,” she said. “They will come out with the numbers on that next month, but I think it will be under 3 percent.”
In 2012, Detroit Lakes’ levy was over 6 percent, and last year it was 3 percent, she said.
“So we won’t be able to spend excessively,” she said of having the extra funds. “We’ll have to work within certain parameters.”
One more component the legislature approved was that cities and counties will not have to pay state sales tax on purchases. That would mean savings on anything from paint for a building to signs.
“Just about everything we buy,” Skifka said.
That will start Jan. 1.
That exemption does not apply to electric utilities or the liquor store because they are public entities with competition. They will still need to pay taxes to stay on an even playing field with other entities offering the same services.
“That’s going to be big on our Armer radio system for public safety,” Ingstad said of the Allied Radio Matrix for Emergency Response system that the county is considering adopting. “That’s going to be a purchase of up to a million dollars at least — could be a couple million, so that will be big.”
The first year (next year) that counties and cities will be able to be tax exempt, the entities will have to report what they saved to the state.
Ingstad said as far as he knows the tax exempt portion is a permanent thing, not just a two-year plan like the LGA increases. With counties and cities making constant requests for various exemptions, this would blanket everything.
“The good news is the state’s economic condition is improving,” Ingstad said. “I just saw that (Minnesota) is the fifth fastest growing economy in the nation, so it’s a positive.”
“It’s a good thing, getting the LGA up,” Slifka said. “Ninety-thousand is pretty substantial. It’s actually about 3 percent of our annual budget.”
Follow Pippi Mayfield on Twitter at @PippiMayfield.