Richfield is set to receive a financial boost from the state, according to a bill that has been approved in the Minnesota House of Representatives.
The omnibus tax bill includes a new local government aid formula that gives Richfield about twice as much money than it would receive under the current Local Government Aid plan. Richfield would receive about $900,000 under the current arrangement, but would receive about $1.9 million under the House bill, which still must be reconciled with plans from the Senate and Gov. Mark
Dayton before changes take
The state disperses LGA to offset certain cities’ shortcomings in property tax revenue. The LGA formula proposed by the House distributes money based on the gap between the unmet financial need of a given city and the amount of LGA it received the previous year.
Richfield is one of the neediest cities, according to the new formula. No other Twin Cities suburb received as much of an increase. West St. Paul was the closest, projected to get nearly a $1 million bump.
“I think the formula recognizes the challenges that cities like older suburbs like Richfield have,” Richfield City Manager Steve Devich said.
Richfield has a shallower pool of property taxes than its neighbors, which boast more industry and higher household incomes. Under the House plan, Bloomington would go from receiving no LGA to receiving about $400,000. Edina currently receives no LGA, which doesn’t change under the new formula.
For Richfield, Devich knows where the extra money would likely go.
“All of our infrastructure is at a point where it needs to be looked at,” he said. “We have a huge investment in streets.”
Prominent among such investments, the city will pay for part of upcoming reconstructions of Portland Avenue and 66th Street.
While the LGA boost, set aside for infrastructure expenditures, would help the city incur less debt, there should be little effect on property taxes.
“This really wouldn’t have a huge impact in terms of the tax levy,” Devich said.
It will indeed make balancing the books easier, though, acknowledged Richfield Mayor Debbie Goettel, who for the last year-and-a-half has participated in a task force made up of mayors from across the state, assembled to address LGA shortages that have become common.
“Richfield is going to do pretty good, thank goodness,” Goettel said. “We’re going to at least not be backpedalling again and not have to cover a budget shortfall.”
Still weening off LGA
Cities have found LGA to be increasingly unreliable in recent years. While Richfield was promised $1.2 million for 2013, the city only counted on
receiving $400,000 of that.
Since 2001, LGA has gone from accounting for 24 percent of Richfield’s general fund revenues to 2 percent, and the shortages have stressed the bonds between cities and the state, Goettel believes.
“There was a relationship that was broken because of that,” she said. “They are trying to repair that relationship.”
The city is not likely to end its weening process due to an improved short-term LGA picture, according to Devich. “We’re not going to treat that as a windfall,” he said.
“I don’t think it would be a very good strategy for the city of Richfield to get back into the mode of relying heavily on Local Government Aid. It’s been a long painful process for the city to try to ween
itself off of local government aid.”
Devich noted that even though legislators have promised to better fulfill LGA payments, that stance could change before long.
“The legislature is talking like when the state certifies their promised local government aid payments to a city, they will stay behind it,” Devich said. But he added, “In a couple years there will be a new Legislature.”
And anyway, despite what legislators say now, “there’s no way to stop them from tapping into it now and then, like they did in the past,” Goettel said.
“Who knows what the future will bring,” Devich stated, “and that’s the main reason that we’re going to be cautiously optimistic about this.”
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