07-27-2010 Council Work Session Packet

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_ h hoicesaheac� Methodology Toug c These findings are staggering—that cities of To illustrate,in a deficit situation as severe Research staff at the Humphrey all kinds will fall into a deficit within the next as projected,cities as a group would have Institute performed two main tasks five years and be unable to provide the level to eliminate a wide range of services or as part of the analysis:projection of services residents and businesses have double property tax levies. For senior citizens of overall city revenues and expen- come to expect. In other words,it won't mat- across the state,those service cuts could ditures through the year 2025 and ter where a city is,how big or small its popula- mean no access to a library or a senior center. interviews with city officials across tion,what its tax base composition is,what its For children and families,there could be no the state.The researchers relied local economy looks like,or what its unique baseball fields,hockey rinks or swimming primarily on city revenue and expen- mix of revenue sources is—all types of cities pools for after-school and summer recreation. diture data from the Office of the end up in the red if nothing changes. For homeowners,property values could State Auditor's annual cityfinances If cities reach the point where they are un- decline as sidewalks and streets crumble into reports.The most recent data from able to pay the bills,agonizing choices would a maze of cracks and potholes. This isn't the OSA is for city budget year 2008. have to be made that would impact the day hyperbole—it's simply the continuation of LMC provided historical data from to day lives of Minnesota families,businesses, the slow path of degradation Minnesotans the Department of Revenue on and communities across the state. Cities have been seeing for the past seven years. local government aid,market value would become very different places in which homestead credit reimbursement and to live,work,and play. property tax Ievies.The researchers looked at 11 years worth of historical r city revenue and expenditure data Why this analysis was done, and vuhy it s sa important aswellasdataon propertytaxes, Cities that rely on local government aid(LGA) tough economy and are increasingly on and state aids and credits. and other state programs have experienced fixed incomes. Based on those historical trends dramatic cuts since�003,and with a S6 billion In response to this current situation, and assuming current policies con- state deficit looming,the prospect of restoring the League asked the Humphrey Institute tinue unchanged,they projected that funding looks grim,to say the least. to calculate a projection of what the future that total city revenues will increase All cities—regardless of the level of LGA would look like if nothing changes—if no at an annual rate of 3.7 percent they receive—are facing growing community property tax levies were raised,LGA funding between 2010 and 2025 and that pressure for expanded services and lower was essentially flat,and services remained at total city expenditures will grow taxes.Population trends,such as the aging current Ievels.The Humphrey Institute projec- at an annual rate of 5.5 percent in of the Baby Boom generation,are raising the tion confirms that the future is not sustainable that time period.That projection is expectations for many services.Yet at the given the current financial trends and historic the status quo outcome if no policy same time,city councils are reluctant relationship between the state and cities. changes are enacted between now to raise property tax levies or fees because The time has come to find a new state-local and then.Cities are facing and will they know Minnesotans are dealing with a financial relationship. continue to face several cost pres- sures that are beyond local control such as the price of fuel,rising We need broader thinking and better solutions health care costs,foreclosures, and changing demographics.The The League believes that the time has come To this end,the League plans to get researchers calculated the overall for bold action: a complete rethinking of the Minnesotans of all walks of life,in all regions city surplus or deficit at various services cities provide and how to pay for of the state,thinking and talking about what points in the future as a percentage those services. To find better solutions for the the future holds for their communities.The of total city revenues. people of Minnesota,a broader conversation plan is to hold a variety of community conver- The researchers also projected must begin now—in cities of every size in sations throughout Minnesota over the course revenues and expenditures for every corner of the state. of 2010 and 201 1.The League has already eight different profiles of cities. Broader thinking is needed—where more begun to collect citizen perspectives through The projections for these profiles Minnesotans are involved in the conversation its new blog site:www.outsidetheox.org. serve to demonstrate the extent to and the conversation is about more than the The thoughts gathered from citizens will form �nrhich the problem of expenditures current ways of doing things. the basis for policy proposals and,hopefully, outstripping revenues spreads to The solutions aren't obvious.We need more legislative action. cities of all kinds(see Appendix for than just those who are typically involved in The League is confident that the collective revenue and expenditure figures public policy to be thinking and talking about thinking of Minnesotans throughout the state for al)profiles). cities,services and funding in order to ensure will lead policymakers toward better solutions continued that what we know and love about our com- for our communities. munities will be there in the future.