Drop in state aid pinching Minnesota cities

Minnesota cities and suburbs are cutting jobs and finding other ways to stretch tax dollars as they face their toughest budget balancing act in years, officials said.

Budgets were tight even before recent state projections of a $5.2 billion tax shortfall. Gov. Tim Pawlenty and legislators have said state aid, often a sizable chunk of city budgets, will be one of the first cuts. Pawlenty is expected to announce some local government cuts today.

"Cities are now facing very, very tough choices about what to provide to their residents," said League of Minnesota Cities analyst Rachel Walker. She noted that cities also are feeling a property tax revenue pinch in the wake of high foreclosure rates and declining home values.

The likely cuts in state aid come at a bad time because most cities have finalized their 2009 budgets. The budget-stretching in the metro area includes:

•Ramsey plans to borrow from its utility funds.

•Woodbury increased building permit fees for the first time in a decade, and added athletic field fees. It also will keep police cars a year longer-- for four years -- before replacing them.

•Minnetonka postponed $525,000 of park and building improvements until building fees rebound.

Shakopee, Champlin and Woodbury are also among area cities making net staff cuts in 2009.

"Cities are running out of reserves and have no choice but to cut core services," said Apple Valley Mayor Mary Hamann-Roland, the League's board president. "This is not hyperbole, it's reality."

The League issued a list of potential state aid cuts by city this week that ranged from minor amounts to millions of dollars for Minneapolis and St. Paul.

Many cities, including Champlin, Woodbury, and Minnetonka, have seen building fee income plummet as construction waned. To offset that loss, Champlin will have a net reduction of three jobs next year. The city had previously combined public works and parks departments under one manager, but will cut that manager position next year and have lower-level supervisors run those departments, said Heitkamp.

"When revenues are a lot less than in the past, we need to cut back," he said.

After years of adding city jobs as housing and the population boomed, Woodbury and Shakopee have each cut five staff positions for 2009. That included two vacant police positions in Shakopee, said City Administrator Mark McNeill. He said Police Chief Dan Hughes wanted to fill those jobs and add three new officers.

"He can justify that but the money is not there," McNeill said. The city also initiated a $36 recreation fee for nonresidents.

Although Woodbury approved hiring two more officers for next year, it had a net loss of five jobs, including summer lifeguards, said city administrator Clint Gridley. The city also delayed a $190,000 street resurfacing program for a year.

About 70 cities, including Minneapolis, Richfield and St. Paul, sent mayors or other officials for tax committee hearings at the Legislature on Dec. 10. They pleaded for continued local government aid, which accounts for a half to two-thirds of most city budgets, according to the Minnesota House Research office.

Apple Valley's Hamann-Roland testified at the hearing that cities still haven't recovered from 2003 state aid cuts made to cover another huge state tax shortfall. She said later that combining state aid cuts with state-imposed property tax limits means "it's a dire situation for so many cities."

Bakk said cities and other groups need to bring "their bare bones needs" and ideas "to help us get a balanced budget put together."

When the session ends in May, "I hope everyone gets what they need, but nobody is going to get what they want. The problem is just too big."

Hamann-Roland noted that a League survey found city jobs have been cut by 6 percent across the state since 2003. The League surveys its 830 member cities every year and has found more than 80 percent of responding cities have annually increased fees, taxes, or license charges since 2003.

Finding ways to save

More than 30 percent of the cities surveyed found ways each year to increase efficiency, including sharing program costs with schools or counties, conserving energy or privatizing services.

He said the city also is considering switching more officers from squad cars to gas-saving motorcycles. Chaska Police Chief Scott Knight has gone a step further by putting more cops on bikes in the warmer months.

League surveys found many cities cut spending, service and jobs in 2003-04, but those cuts tapered off in 2007 when 6 to 12 percent of cities cut those three areas.

"Cities made the easier cuts right away in 2003 and 2004," said League analyst Walker. "They are still running with fewer workers, and delaying [capital] projects. ... There will be service cuts in public safety and streets."