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.