Update 10:48 p.m. June 16, 2009: OK, I’ve got a better handle on how this LGA cut works in relation to any potential tax hike after talking with East Grand Forks City Administrator Scott Huizenga.
LGA is determined by a complex formula that determines the city’s needs versus its ability to pay, including its tax base. I’m not exactly sure how the property tax cap works, but it has been 3.9 percent, which includes the amount of LGA that the state didn’t pay but should’ve plus something called an "implicit price deflator." The deflator is kind of like the consumer price index. Currently, it’s at about 0.86 percent.
When the governor decides to cut LGA in fiscal year 2011, which occurs in mid-2010, that amount changes the tax cap. You’ll see below that the cut is $420,019.
The total amount of property taxes and LGA is $5,494,895. The city cannot have more than this. So, if LGA totaled $2,831,969, that means taxes totaled $2,662,926. That’s the way the cap works. Notice that the state works with actual dollar amounts, not percentages or mills.
Because the state cut $420,019, the city could raise the same amount in property taxes to compensate. That means it could collect as much as $3,082,945. (I’m leaving out the implicit price deflator for the sake of simplicity because it’s so tiny.)
If the City Council were to try to collect $3,082,945, that would mean a tax hike of 15.8 percent. Add the implicit price deflator on top of that and you get 15.9 percent.
I asked Council President Dick Grassel if he thought the council would try to go that high. He said he wouldn’t support it and doesn’t think anyone else would either. The max, he said, would probably be more like 7.5 percent or so.
That means the city would collect $2,862,645.
City leaders have been saying for several years that they’ve cut pretty close to the bone. A lot of their colleagues all over the state are saying kind of the same thing. There’s not a lot of love for Gov. Tim Pawlenty and his LGA cuts.
If the city collected only 7.5 percent and not 15.9 percent, this would mean it’ll be running leaner than lean.
Things like furloughs, four-day workweeks, wage freezes, closing one of the areanas, closing the pool, cutting library hours and so on, will become real options, even if they’re not politically popular, according to Dick.
What’ll be hard to balance is that the city might be doing those things and more and, with some of the money saved, fix old vehicles or replace busted equipment. In other words, it’ll sacrifice services in favor of hardware simply because that hardware hasn’t been replaced over the past several years.
City leaders have said the city’s still catching up from the 2003 LGA cuts that the governor pushed. In two or three years, one has to wonder how much of a catch-up game the city will have to play.
Update: 3:06 p.m. June 16, 2009: Here it is, straight from the city of East Grand Forks:
|Pop.||Tax + LGA||LGA||LGA as % of T+LGA||2009 unallot||2009 LGA||% change||2010 unallot||2010 LGA||% change|
Sorry. It’s tiny. I’m in a rush.
Minnesota Gov. Tim Pawlenty will be announcing how deep he’s cutting local government aid, or LGA, in
about an hour a few minutes.
Minnesota Politics is saying that the effect of unalloting LGA in fiscal year 2010 and 2011 will increase the cap on local property taxes, meaning that cities like East Grand Forks will be able to raise taxes above the minimal levels of past years.
I’m not sure what the cap was for this fiscal year, but I reported back in November that the city raised the general levy by 2.2 percent.
The question is, can the city justify that politically? Minnesota Politics says many can’t.
Oh, here’s something else from MP last month: The Dems were doing a good job blaming future property tax hikes on the governor. Maybe justification is possible?