The recession ended years ago, but Minnesota cities are still feeling the pinch.

Cities around the state are relying on less money and spending less to provide services than they did a decade ago after adjusting for inflation, according to the state auditor’s office. That’s despite an upswing in recent years.

The recently released annual report on the finances of Minnesota’s 852 cities through 2015 shows that major sources of municipal revenue, including state and federal grants, have not kept pace with inflation. To compensate, cities have turned to property taxes for larger portions of their budget. Property taxes made up nearly 40 percent of cities’ collective budgets in 2015, compared with 31 percent in 2006.

But the money doesn’t stretch as far as it did a decade ago, and many cuts made during the recession have not been restored.

Burnsville reduced its staff by about 20 people during the recession, and only a handful of jobs have been replaced, said City Manager Heather Johnston.

“You’re seeing that with a lot of different cities,” Johnston said. “The cuts that they made in 2009 were deep and they just haven’t replaced those people.”

The report presents an aggregate picture of city budgets — a collective $5.2 billion in revenue — but the experience may differ in any individual city. Smaller cities are more reliant on grants from other governments, for example.

The analysis offers a glimpse into a city’s purchasing power, which is different from each city’s actual budget figures. The auditor’s analysis shows total revenue is 6 percent below 2006 levels after accounting for inflation. Without the inflation adjustment, however, city revenue has risen nearly 17 percent.

The same is true of spending. It is down over the decade when adjusted for inflation, but up nearly 13 percent in actual dollars. The drop in inflation-adjusted spending is due to lower spending on infrastructure and debt service payments, but some of that has begun to bounce back in the last several years.

“I think a lot of people have been delaying investment in their facilities because of what happened in [the recession], so they’re now starting to feel like they can start to make those investments again,” Johnston said.

For instance, actual spending on parks and recreation infrastructure — $268 million in 2015 — is double what it was in 2011, according to the report.

Minneapolis’ chief financial officer, Mark Ruff, who formerly advised cities as a financial consultant, said cities have shifted expectations in the past several years.

“Those of us who had parents or grandparents who grew up in the Depression era, I think sometimes cities have that same mentality,” Ruff said. “The recession and associated [Local Government Aid] cuts have created a mentality that is very much, ‘I’m going to spend as little as possible.’ ”

Cities have had to be creative as a result of the squeeze, said Lena Gould, a policy analyst with the League of Minnesota Cities, such as sharing resources or contracting with a private entity to manage a rec center.

“Cities are adapting and finding new ways to do things, collaborating or just doing things differently,” Gould said.

 

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