Wednesday, May 26, 2010

Survey of Minnesota city officials shows growing concerns about facing financial challenges, meeting service needs
Only 17 percent of Minnesota cities reported being able to better meet service needs in 2009 than in the previous year according to survey data from the 2010 State of the Cities Report, released today by the League of Minnesota Cities. City officials from 463 cities participated in the 7th annual fiscal conditions survey.

This is the third consecutive year that the share of cities reporting improved fiscal conditions dropped. In 2008 slightly more than one-quarter of cities reported being better able to meet needs. Some of the budget factors that respondents identified as areas of concern for 2009 included increasing employee pension costs, infrastructure needs, uncertainty surrounding local government aid, and the continued economic recession. The share of cities predicting favorable financial circumstances in 2010 is only 18 percent.

Almost two-thirds of cities responding reported shortfalls in property taxes for 2009, more than double the share of cities with property tax shortfalls in 2003. Frequent reductions to market value homestead credit (MVHC) reimbursements and effects of the economic recession on property owners contribute to this trend. Additionally, more than half of cities reported an increase in delinquent property tax payments in 2009 and reports of fee revenue shortfalls grew from 17 percent in 2003 to 57 percent. Survey results also indicated that home and business owners are finding it much more difficult to pay their utility fees and other charges, as 70 percent of cities experienced an increase in unpaid utility bills for 2009.

Despite the gloomy economic environment, there is room for optimism. The majority of cities expect to recover from the economic recession in two to five years, while only four percent don’t believe they will ever recover. There is greater variability in expected recovery times among Greater Minnesota cities and small cities.

The survey was sent to the chief administrative official in each League member city. Officials had from December 16, 2009 until February 16, 2010 to respond to the survey, and the response rate was 56 percent.

Monday, May 17, 2010

Special Session needed to complete budget work
No third round of cuts for cities

This morning, the House and Senate reconvened a brief special session and approved HF 1, the omnibus budget balancing bill. The bill is now on its way to the governor for his expected approval. The special session adjourned Sine Die late this morning.

For cities, the bill includes no additional cuts in local government aid (LGA) and market value homestead credit (MVHC) distributions for 2010 or future years.

The bill does ratify the governor’s 2009 and 2010 city LGA and MVHC unallotments at the identical levels originally announced by the governor in July, 2009. The ratification of the unallotments was necessary due to the May 5 Supreme Court ruling that called into question the validity of the governor’s 2009 unallotment actions.

The only other major fiscal impact of the 2010 legislative session was the supplemental budget passed in March that included $52.5 million in city cuts. Estimates of the ratified unallotment cuts and the cuts approved in March can be found on the League of Minnesota Cities website.

Wednesday, May 5, 2010

Supreme Court Rules Against Governor in Unallotment Lawsuit
(Statement published today by the League of Minnesota Cities)
In a divided decision, the Minnesota Supreme Court ruled against the Governor today in the Brayton et al. v. Tim Pawlenty et al unallotment lawsuit. The Court found that the Governor exceeded his budget unallotment authority last summer when he made cuts to the Minnesota Supplemental Aid – Special Diet program. A majority of the Court concluded that the manner in which the Governor exercised the unallotment authority was not permitted by the statute.

While the decision only directly affects the cuts to dietary aid program, it certainly leaves in political and legal limbo the validity of the remainder of last summer’s unallotment decision – including the $192 million of local government aid and market value homestead cuts effectuated last July and this January. The League of Minnesota Cities participated in the case by filing a joint amicus curiae brief with the cities of Minneapolis and St. Paul, the Coalition of Greater Minnesota Cities, Metro Cities and the Minnesota Association of Small Cities; however, the League Board of Directors had previously declined to initiate direct legal challenging the local government aid and market valued homestead credit cuts. In light of today's Supreme Court decision, there will be further discussions with the Board about the ruling and its implications for cities.

A copy of the decision can be viewed at the attached link.