The cities of Minneapolis, St. Paul and Duluth would see a combined drop of $85 million in local government aid from the state of Minnesota under legislation being pushed by the Republican majority in the state House.
"Frankly, the premise behind LGA (local government aid) is that cities that don't have the tax capacity would get assistance in infrastructure and basic functions of the city," said Rep. Duane Quam, R-Byron, who introduced the measure. "You've got these cities where a large portion of their budget is coming from LGA."
Quam's provisions have been included in a broad package of property tax changes that's under consideration Wednesday in the House Property Tax and Local Government Finance Division. Rep. Greg Davids, chairman of the House Taxes Committee, said the LGA cuts were likely to be included in his House tax bill, which is set to be unveiled next week.
"You wonder how it got to the point that Minneapolis, St. Paul and Duluth are getting so much more than other cities across the state per capita," said Davids, R-Preston.
Under the House GOP proposal, Minneapolis would see its yearly LGA allotment cut by $40 million a year. That's more than half of the total LGA payment to Minneapolis in 2013 of $64 million. St. Paul's LGA would be cut by $34 million, after getting $50 million in 2013; and Duluth, which got $27 million in 2013, would take an LGA cut of $20 million.
"Our entire fire department budget is $14.8 million," David Montgomery, Duluth's chief administrative officer, told the House panel. "We could eliminate our fire department completely and we would still have to find $5 million to cut."
The money would not be shifted to smaller cities but rather cut entirely from state spending rolls. The House GOP property tax proposal, assembled by Rep. Steve Drazkowski, includes significant reductions in the state's commercial/industrial property tax, state property taxes on seasonal recreational property, and property tax reductions for farmland owners.
Quam noted that the other Minnesota city defined as "first class" under state law -- Rochester -- gets significantly less in LGA than the other three cities. In 2013, it was $5 million. LGA rates are determined by a complex formula that considers local tax capacity per capita, but also considers various "need" factors over which city officials have little control, like the age of housing stock and amount of property that's exempt from tax rolls.
Still, the LGA reductions face significant opposition in the state Senate, where the DFL majority is comprised of numerous members from Minneapolis, St. Paul and Duluth. There are no House Republican members from any of those cities.