By Mark Fischenich
The Free Press
After a decade of watching state aid fall or stagnate, cities and counties are facing the prospect of a big increase in 2014 under a budget proposed by Democratic Gov. Mark Dayton.
The decline in aid, made in response to recurring state budget shortfalls, resulted in service cuts and rising property taxes. But if Dayton's boost in county aid and Local Government Aid to cities is approved by the Democratic Legislature, property owners could be in for good news next year, according to area city and county administrators.
"You could see a reduction (in property taxes) or at least you're certainly not going to see an increase," said Mankato City Manager Pat Hentges.
Dayton's budget raises about $2 billion in additional revenue by boosting income taxes on wealthier Minnesotans, increasing cigarette taxes nearly $1 a pack and expanding sales taxes to services now exempt. With the state facing another shortfall of just over $1 billion, that leaves about $1 billion in new spending.
But Hentges said about a quarter of that new spending is actually aimed at reducing property taxes through rebates of up to $500 for most homeowners, through restored rebates for renters and through increased payments to cities and counties.
Dayton would give $40 million more to counties and $80 million more to cities in 2014 than current law would provide. For Blue Earth County, that means $524,000 more revenue without any increase in property taxes. For Nicollet County, state aid would rise by $263,000. Le Sueur County's aid would grow by just less than $200,000.
Other county increases include Brown (up $206,000), Waseca ($162,000), Watonwan ($120,000), Sibley ($88,000), and Faribault ($85,000). In all but a handful of counties statewide, the increase is either 24 percent or 25 percent.
"It's quite a different position we find ourselves in at this time than in the past few years," said Blue Earth County Administrator Bob Meyer. "It starts to return the County Program Aid back to the level we saw in the mid-2000s."
Meyer wouldn't predict whether the increase will go mostly toward cutting property taxes, more toward restoring county services eliminated during the years of state aid reductions, or some combination of the two.
"That's what the county board will have to take a look at," Meyer said.
St. Peter City Administrator Todd Prafke said the City Council there, based on past performance, would likely try to make sure property owners felt some relief resulting from the increased state aid. One caveat, though, is property tax cuts might be less likely if the jump in state aid looked to be temporary.
A one-year bump might be better used for a one-time expenditure -- for instance, if the municipal pool needed to be repainted, Prafke said. Otherwise, a one-year reduction in property taxes would probably be followed by a corresponding jump the following year.
St. Peter, though, has kept its property taxes stable or rising only a percent or two annually despite seeing cuts in state aid in the past decade. And Prafke expects residents would see good news on their 2014 property tax statements if the governor's aid increase becomes law.
"I would anticipate it would make a difference in property taxes here in St. Peter," he said.