Local governments will get boosts on both sides of their budgets next year when an $80 million increase to Local Government Aid (LGA) and sales tax exemptions for many local government purchases come into effect. For many area cities, the LGA increase is not a trifle.
Goodview's LGA allotment will increase 80 percent next year, thanks to a new formula that is being described as a rare compromise between the metro area and greater Minnesota.
"Obviously, we're ecstatic," said Goodview City Administrator Dan Matejka. Goodview might use that money to lower the city's levy for the year, or to complete belated building or road repairs.
St. Charles will get around a 20 percent increase in LGA under the new law; Altura will get around 25 percent more; La Crescent will receive a more than 25 percent increase; Winona will receive over a half million dollars more (a 5.8 percent increase). Overall, local cities will get over a million more in LGA in 2014 under the new law, than they did this year.
Still, local governments are not singing the praises of state legislators. "It's good. I'm not complaining," said La Crescent Mayor Mike Poellinger. "But what happened in the past was that the state balanced its budget on the backs of small communities."
In recent years, cuts to LGA and the introduction of sales tax for local governments have meant that La Crescent has not replaced some its retiring city employees. In Winona, declining LGA was the impetus for the city to begin charging for boat and skate rentals at the Lake Park Lodge. City leaders are still smarting from the loss.
The increase in LGA, which is intended to relieve local property taxes, comes with a cap on local governments' taxing power. Winona City Manager Judy Bodway said that she did not believe the levy limit would be factor for the island city. Poellinger said it might be, depending on how the rules count ongoing taxes for outstanding debt on La Crescent's new swimming pool.
Local governments are not holding their breath on future LGA allotments either. Financial advisors warn that dependence on LGA is risky for cities. Do not count on it, they advise. "It's still one of those vulnerable aids," Matejka said. "We're going to proceed cautiously."
Local governments are still figuring out how much they will save with the new tax break. Cities still have to pay taxes on some purchases, but many of the basic government services will now be tax exempt. "I can't tell you if it's significant or not," Bodway said. However, Poellinger stressed that paying an extra 6.8 percent on all city purchases adds up fast.