GRANITE FALLS - Many cities need it to make ends meet, but Minnesota's system for allocating Local Government Aid money is far from perfect. It's also too complicated for a quick fix, a group of Minnesota mayors said. That's why they were gathered in Granite Falls, in the fourth of a series of meetings to look at possible revisions for LGA and property taxes.
Members of the Mayors Tax Reform Advisory Group for Local Government Aid met with Minnesota Revenue Commissioner Myron Frans and other presenters in a work session Friday. The advisory group was formed at the request of Gov. Mark Dayton in February to review policies and issues related to LGA and property tax reform. The group's feedback will be part of the governor's 2013 tax reform proposal.
The advisory group focuses on municipal LGA issues, "because LGA is the most complex for cities," Frans said.
A total of 15 mayors from cities around Minnesota are part of the advisory group. Nine of the 15 group members were present Friday, including one of its co-chairmen, Minneapolis Mayor R.T. Rybak. The cities represented in the group range from Minneapolis and St. Paul to smaller communities and include southwest Minnesota residents like Granite Falls Mayor Dave Smiglewski and Worthington Mayor Alan Oberloh.
"There are five mid-sized cities, five large cities and five smaller cities, and they're working together to find a common solution," Oberloh said.
There are many aspects of LGA and property taxes that advisory group members need to consider before making their final recommendations, Frans said. Some of the topics discussed Friday included what kinds of information should be used to calculate LGA formulas, and how a city's need for LGA funding could be measured.
Presenter Pat Dalton of the Minnesota House Research Department said the group needed to consider its goals for LGA, as it would affect what data gets selected to go into LGA formulas.
"I think what we're saying is, whether we're Hoyt Lakes or Minneapolis, we need to have the capacity to provide services equally," said Hoyt Lakes Mayor Marlene Prospeck.
However, while group members agreed that cities need to be able to provide basic services, there were differing opinions on the role state aid should play in accomplishing that. Cities' use of LGA varies widely. Oberloh said it was important for keeping property taxes from getting too high in smaller communities. But Richfield Mayor Debbie Goettel said the city of Richfield has tried not to depend on LGA to make up for property taxes.
"It's too inconsistent," she said. Consistency needed to be a part of LGA reforms.
A concern shared by group members in discussing how to measure cities' need for LGA was "overburden," the cost to provide city services to non-residents like workers and visitors. Paying for those costs can be a particular challenge for cities that serve as regional centers. Smiglewski and Buffalo Lake Mayor Joyce Nyhus pointed out that even small cities can be regional centers, depending on the location of services like education or health care or major employers. On the other hand, Cloquet Mayor Bruce Ahlgren said, a city can have high overburden costs without being a regional center.
Rybak said he hoped solutions could be found "challenging the conventional wisdom" about LGA.
"We have to fix a system that's broken," he said.
Frans said the mayors group would continue to meet and discuss LGA policies. After the state budget forecast in November, the group will reconvene to work on its final recommendations to the governor.