How are cities responding to the pressure of state aid cuts? Are they cutting road spending, boosting public safety spending, raising taxes?
Amid all these changes, do they still have a healthy balance sheet?
The state’s annual auditor’s report, the 2010 version of which was released recently, offers data on the health of cities’ finances and trends on their spending and revenue.
The trends are not particularly surprising: Cities statewide spent a bit more (3 percent) in 2010 than the previous year, and spent less (6 percent) on construction.
Cities’ funds, measured as a percent of the year’s spending, were a bit less healthy. Cities with a population of more than 2,500 had so-called fund balances on average worth 50 percent of the year’s spending in 2010, compared with 45.1 percent in 2009.
Cities use this measure because they often go months at a time without major cash influxes, so they need a sizable amount of money saved up.
Figures alone, of course, rarely tell the whole story.
St. Peter, for example, had a healthy 62.7 percent of its yearly budget when auditors asked for data at the end of 2010. Its fund balances, the auditors reported, had shot up a striking 101 percent from 2009 to 2010.
City Administrator Todd Prafke said the city had spent about $1 million on the utility portion of the 2009 reconstruction of Highway 169. By the end of that year, the city was in a deficit.
But by the time auditors got data in 2010, the city had received a state loan that covered its share.
“Everybody looks flush on payday Friday,” Prafke said.
Mankato’s fund balances were down 6.8 percent by the end of 2010 compared with the prior year, and it had enough money in the bank, so to speak, to fund about eight months of its operations (about 66 percent of spending).
City Manager Pat Hentges said the city dipped into its reserves in 2009 when then-Gov. Tim Pawlenty cut state aid in the middle of cities’ budget years.
“That’s what reserves are for,” Hentges said.
More police spending
Like other cities, Mankato has been spending more on law enforcement and less on building roads.
On average, cities in Minnesota spent 18.4 percent more on public safety operations in 2010 than they did five years before.
On most building projects, there were declines. In the “general government” category, there was a 28.4 percent drop, and a 24.2 percent drop for streets.
The outlier is, again, public safety, for which building costs rose 21.6 percent on average over five years.
In Mankato, per capita spending on police operations went from $166 per person in 2006 to $178 per person in 2010. The statewide average is about $127 per person.
Hentges said about 65 percent of police spending is on salary and benefits, and the city has hired more people since 2006, when there were 51 full-time equivalent positions in police. The city reached a peak of 58 positions a few years later but dropped to its present level of 54 with unfilled retirements.
In North Mankato, police spending was unchanged in five years, at about $96 per person.
The difference between the cities may have something to do with Mankato’s heightened responsibilities for crime.
Comparisons between cities aren’t simple.
The auditor’s report reveals wide variation in how cities handle their money. Take debt, for example.
Brian Gramentz, New Ulm’s city manager, said his city has fairly high debt among similar-size cities. That doesn’t mean New Ulm is irresponsible. Instead, Gramentz said most of the borrowed money is spent on infrastructure.
“We’re an old community, we’re not an Eagan or a Woodbury,” he said.
Even so, 2010 wasn’t a big year for New Ulm, which borrowed $3.15 million, or about $233 per person. That was in the middle of the pack statewide, and under the average of $343 per capita for the 19 cities within a few thousand population of New Ulm.
Even in one city, though, this figure varies widely. In 2009, New Ulm borrowed $795 per person, a figure up from only $173 just the year before.
It is difficult in other words, to compare the year-to-year financial decisions of a single city, much less make comparisons with others. Gramentz isn’t keen on making lots of city-to-city comparisons.
“Does it give me any value to look at another city?” he asked. The New Ulm City Council will inevitably make different decisions than other councils, he said, which will result in different financial choices.
Hentges agreed that comparisons require context, but he was a bit more enthusiastic about making them.
“Generally, I do pay attention to per capitas with a peer group of cities,” he said.
Incidentally, residents looking to compare cities should avoid the recently released auditor’s report. The data break out individual cities but is filled with financial jargon.
The auditor’s website has an easy-to-use tool that arranges these data to allow for side-by-side comparisons of cities, counties and school districts. It’s at www.osa.state.mn.us/search/citysearch.aspx.