The Death of LGA

Holy crap.

That was my reaction Wednesday when I left our Board of Estimate meeting.

The short explanation goes like this. The City has about $85 million in Local Government Aid now. The governor is recommending cutting $35 million dollars in local government aid from the City’s budget in 2010. That is $35 million on-going every year. One has to expect given the trajectory that we have been on, that in six or seven years that LGA will simply disappear. That leaves us with an $85 million loss on-going.

Now to put that into perspective, I pulled numbers for the property tax and LGA-supported portions of various budgets. These numbers are not exact but close enough to give you a sense of the magnitude of these two figures – $35 M and $85 M.

Assessor $3.9 M

Attorney $7.1 M

Clerk/Council $7.1 M

City Coordinator $41 M

Civil Rights $2.5 M

CPED $2.4 M

Fire $49.2

Health Department $3.7

Mayor $1.4 M

Police $112. M

Public Works $28.2 M

Park Board $66.5 M

Now let me make this a bit more complex. The public works budget has already been bled dry. Our streets are not being maintained at a sustainable level (the pavement condition index is declining). The Fire Department is pretty much arrayed so no one is more than four minutes away from a fire station. The vast majority of runs are for medical issues and the fire fighters are keeping people alive. The further away the firefighters are, the more people will die. Police and parks folks get. The other stuff, like the Finance Department and the Human Resources Department (buried in the City Coordinator budget) are needed to support the Police Department, Fire Department, Public Works etc and can only be cut if you cut these other departments. You need an assessor to get the property tax revenues. You need the attorneys to prosecute bad guys and help run the City. You need a Clerk and you need an Elections Department that makes up a big part of their costs.

Now lets assume that after 8% a year property tax increases coupled with the crash in home values (which makes us all poorer) plus possibly having commercial property values crashing which will shift a larger burden onto homeowners, that you can’t raise property taxes any faster than inflation. You have to find the $35 M and eventually the $85 M just from cuts. What would you do?

Now let me also layer onto this the problem that we were already facing a need for an additional $25 M in five years for the pension systems and now they have lost one-third of their value. I have not yet seen numbers that would resolve this but some estimates are much much higher than the $25 million we were already looking at. I believe that employees deserve fair pensions but this has to be balanced with the other needs within the City.

Now you understand why I started this e-mail by saying, “Holy Crap”.

In a crisis of this magnitude, I think that radial ideas, ideas that we have not wanted to entertain, will have to be implemented. I think that there are some departments that provide services that are duplicated elsewhere would have to be eliminated. I think that some things that we do not want to lose will be lost. But in the end, I don’t think this will generate enough money.

I also think that the relationship between the City and the State will have to be renegotiated. If there is a divorce with the LGA partnership, we need to also look at no longer taking care of state obligations. The Convention Center is a state asset and should be paid for by the State. The Target Center is a state asset and in essence being subsidized through property taxes. The Chain of Lakes is a state park and should be funded by the State. The costs of the 150,000 people who flood into the downtown and the costs of the largest concentration of poverty in the state should not be borne by the City taxpayers. There has to be some consideration by the State for these things. One obvious place is for the State to take over the costs of the Convention Center (capital and operating and the “Meet Minneapolis” costs which are really promotion of tourism in Minnesota) and let the City have the half cent sales tax and the other associated sales taxes to partially offset the losses in LGA. This would be a start. We need to also think of other costs that are really state costs and have the state pay for them.

These are just a few of my thoughts and I look forward to the ideas of other folks on how to radically reduce the City’s budget.

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