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ITEM 7.4 Recommend Review of Coalition of Greater MN CitieseF Ot�co MINNESOTA CDP DEPARTMENT INFORMATION Request for City Council Action ORIGINATING DEPARTMENT: REQUESTOR: MEETING DATE: Administration Lori Johnson, City Administrator February 8, 2016 PRESENTER(s): REVIEWED BY: ITEM #: Lori Johnson, City Administrator 7.4 AGENDA ITEM DETAILS RECOMMENDATION: Recommend review of letter from Coalition of Greater Minnesota Cities regarding Local Government Aid. ARE YOU SEEKING APPROVAL OF A CONTRACT? No IS A PUBLIC HEARING REQUIRED? No BACKGROUND/JUSTIFICATION: I recently received a letter from Robert Broeder, President of the Coalition of Greater Minnesota Cities requesting support for a resolution in favor of a $45.5M Local Government Aid (LGA) increase. Otsego is not a member of the Coalition of Greater Minnesota Cities; however, as Mr. Broeder states in his letter, the Coalition is requesting member and non-member support of the resolution. According the the State Department of Revenue's website, the 2016 total LGA distribution is $519,398,012 of which Otsego receives $127,590 or 0.02456%. Otsego does not receive much LGA because of the factors used in the LGA formula. Otsego is a growing community with the vast majority of its growth and building construction occurring after 1970. Other cites with higher percentages of older housing, lower tax base, and higher expenditures fair better in the aid formula than cities like Otsego. If the Council is interested in adopting a resolution in support of a request for a statewide LGA increase, a resolution will be drafted for adoption at the next meeting. SUPPORTING DOCUMENTS: X ❑ ATTACHED ❑ NONE • Correspondence from the Coalition of Greater Minnesota Cities • Minnesota Department of Revenue Summary of LGA Certified for 2016 POSSIBLE MOTION Please word motion as you would like it to appear in the minutes. No motion required. BUDGET INFORMATION FUNDING: N/A ACTION TAKEN BUDGETED: X ❑ YES ❑ APPROVED AS REQUESTED ❑ DENIED ❑ TABLED ❑ OTHER (List changes) p�`�`®,� GF GREATER IyjNN��O I i I lE� Dedicated to a Strong Greater Minnesota January 18, 2016 Lori Johnson City Administrator 13400 90th St NE Otsego, MN 55330 Dear Ms Johnson, Happy 2016! The new year is a symbol of hope and opportunity. We all want our cities to become stronger and more prosperous this year. When city leaders from throughout Greater Minnesota work together, we become better poised to meet the challenges facing all of our communities. Local Government Aid (LGA) is among the Ivey issues that will be discussed during the 2016 legislative session, which begins March 8. The Coalition of Greater Minnesota Cities (CGMC) is requesting a $45.5 million increase for the LGA program, which would bring funding back to the 2002 level. With a projected surplus of over $1 billion, Minnesota has a prime opportunity this year to invest in a modest LGA increase to strengthen cities across the state. To boost support for this proposal, we are asking all cities -- CGMC members and non-members alike — to pass a resolution in favor of a $45.5 million LGA increase. More than 40 cities have already adopted a resolution; we'd like your city to do so as well. See the attached sample resolution as a guide. Once your city adopts a resolution, please send copies to your local legislators, Gov. Mark Dayton, Senate Majority Leader Tom Bakk and House Speaker Kurt Daudt. Please also send a copy to CGMC lobbyist Bradley Peterson at bmpetersonMflaherty-hood.conn so that we can keep track of all of the resolutions. In addition, I'm pleased to invite you and other leaders from your city to join the CGMC for our Legislative Action Day on Wednesday, March 16 in St. Paul, Legislative Action Day is a great opportunity to meet with your legislators to discuss issues that are important to Greater Minnesota cities. The daylong event cuhninates with a dinner with legislators and other city leaders at Mancini's Char House. To encourage more cities to get involved, the CGMC has agreed to waive the registration fee and meal costs for city officials from cities that are not current CGMC members. Please see the attached registration form for more information. I hope you will be able to join us! I look forward to working with you to help make Greater Minnesota even better. Please visit the CGMC's website at greatermncities.or for more information on our organization and its goals. If you have any questions, please contact me at r broeder u,msn.com or 507-665-3023. Sincerely, f/ (� RobertBroeder, Mayor of Le Sueur President, Coalition of Greater Minnesota Cities Sample LGA Resolution for Greater MN Cities City of State of Minnesota Resolution in Support of Increasing Local Government Aid in the 201G Legislative Session WHEREAS, Local Government Aid (LGA) is a critical need for our city and WHEREAS, LGA provides funding to restrain property taxes on homeowners and businesses and WHEREAS, LGA provides for basic services such as public safety, infrastructure and fire protection and WHEREAS the legislature and state agencies have imposed unfunded mandates upon local cities, including increased pension requirements, expensive wastewater infrastructure costs, among other mandates and WHEREAS an LGA increase would help the city of do the following {INSERT LOCAL EXAMPLE OF IMPACT OF LGA INCREASE ON YOUR CITY e.g specific service or staffing needs, levy flat or decrease?} WHEREAS, no Omnibus Tax Rill was passed by the 2015 legislature, thus freezing the LGA appropriation; THEREFORE, BE IT RESOLVED that the City of supports an increase in the base appropriation for Local Government Aid of $4S.S million effective for aid payable in 2017 and urges adoption of this proposal by the House and Senate. BE IT FURTHER RESOLVED that a copy of this resolution be sent to the following: the legislators representing the city of , Speaker of the House Rep. Kurt Daudt, Senate Majority Leader Sen, Tom Bakk, House Tax Chair Rep, Greg Davids, Senate Tax Chair Sen. Rod Skoe, and Governor Mark Dayton. Adopted: Attest: Prepared by Flaherty & Hood, P.A. for CGMC, 11/09/15 City- Name/Title:, Name/Title:. Name/Title:, Name/Title:, Guest(s): Guest(s): Guest(s): Guest(s): Please place the INITIALS of ea ers-Qn attending the session in the space provided below. Agenda 10:30 a,m. Legislative Update & Message for Legislators Flaherty & Hood office 12:00 p.m. Lunch with Speakers (Senate Majority Leader Tom Bakk & House Speaker Kurt Daudt have been invited) Flaherty & Hood office 1:00 p.m. Lobby at Capitol Complex *Members are responsible for scheduling legislative appointments 5:30 p.m. Legislative Reception Mancini's Char House 6:30 p.m. Dinner at Mancini's Registration $65 per member $26 Wfflal dinner Tot $!Bill � �� T e rent enclosed (make checks payable to CGMC) Initials of guests requiring vegetarian meals To RSVP, please submit this form by March 2 via: Email: RSVP@flaherfy-hood.com Mail: Coalition of Greater Minnesota Cities c/o Dana Hogan 525 Park St., Suite 470 St. Paul, MN 55103 Pax: (651) 225-9088 ®�Z, GREATER frA>rER C I rV, 1 J& MINNESOTA- REVENUE Summary of Local Government Aid (LGA) Certified for 2016 Use of Formula Aid For aids payable in 2016, the formula aid calculation is altered by replacing the previous year's certified aid with the previous year's formula aid. Also for aids payable in 2016, if a city's certified aid from a previous year is greater than the sum of its unmet need plus its aid adjustment, its formula aid is adjusted to equal its unmet need. Minimum Aid Calculation For aids payable in 2016 and thereafter, the total aid for a city must not be less than the amount it was certified to receive in the previous year minus the lesser of $10 multiplied by its population, or five percent of its net levy in the year prior to the aid distribution. Appropriation The total LGA appropriation for aid payable in 2016 is $519,398,012. Data Used in LGA Calculations The following is an explanation of the variables used to calculate your city's 2016 LGA certified amount certified on July 31, 2015. Pre-1940 housing units: This is the total number of housing units in your city that were constructed before 1940 according to the 2010 Federal Census. Housing Units 1940-1970: This is the total number of housing units built between 1940 and 1970 according to the 2010 Federal Census. Total housing units: This is the total number of all housing units in your city (both vacant and occupied) according to the 2010 Federal Census. Household Size: This is a city's average household size as reported by the State Demographer and Metropolitan Council. Number of Employees: This is the average number of annual employees from the quarterly census of employment from the Department of Employment and Economic Development. Peak population decline: This is a city's population decline (if any) from its highest population in a decennial census from 1970 or later. Sparsity Adjustment: For a city with a population of 10,000 or more, the sparsity adjustment is 100 for any city with an average population density less than 150 per square mile. The sparsity adjustment is zero for all other cities. Tax Effort Rate: This is the net levy for all cities divided by the sum of the city net tax capacity for all cities. The tax effort rate is the same for all city calculations. Minnesota Revenue, Property Tax Division 07/2015 MINNESOTA• REVENUE City Revenue Need City revenue need is defined in three separate calculations based on population. Small Cities The formula for cities with a population less than 2,500 (small cities) is: 1) 410 + (.367 X Population over 100) The city revenue need for cities with a population less than 2,500 cannot be over $630 per capita. Medium Cities The formula for cities with a population between 2,500 and 10,000 (medium cities) is: 1.15 multiplied by the sum of: 1) Pre-1940 Housing Percentage X 5.026 2) Minus Household Size X 53.768 3) Peak Population Decline X 14.022 4) Lines 1-4 + 572.62 Large Cities The expenditure formula for cities with a population of 10,000 or more (large cities) includes the following variables multiplied by the respective coefficients: 1.15 multiplied by the sum of: 1) Pre-1940 Housing Percentage X 4.59 2) Housing 1940-1970 Percentage X .622 3) Jobs per capita X 169.415 4) Sparsity Adjustment (defined in data points) 5) Lines 1-4 + 307.664 Transition Factors The formula provides for a transition mechanism for cities between the three need formulas. Small to Medium Cities For cities with a population of at least 2,500 but less than 3,000 the city revenue need is equal to (1) the transition factor times the medium city revenue need, plus (2) 630 times the difference between one and the transition factor. Medium to Large Cities For cities with a population of at least 10,000 but less than 10,500 the city revenue need is equal to (1) the transition factor times the large city revenue need, plus (2) the medium city revenue need times the difference between one and the transition factor. For the purposes of revenue need the transition factor is .2 percent times the amount that the city's population exceeds the minimum of its size threshold. Unmet Need Unmet need is the difference between (1) its city revenue need multiplied by its population, and (2) its city net tax capacity multiplied by the tax effort rate. Formula Aid Formula aid determines the cities whose spending needs are greater than their revenue raising capacity. 2 Minnesota Revenue, Property Tax Division 07/2015 MINNESOTA- REVENUE The formula aid for a city is the sum of (1) its formula aid in the previous year and (2) the product of (i) the difference between its unmet need and its certified aid in the previous year and (ii) the aid gap percentage. Certified Aid Adjustments MS 477A.013, Subd. 13, provides for two aid adjustments to the formula. • The city of Warroad will receive an additional $150,000 for aids payable in 2014 through 2018. • The city of Mahnomen will receive an extra payment of $160,000 annually. Certified LGA Payment Dates LGA payable in 2016 will be paid to qualifying cities on July 20, 2016 and December 26, 2016. Questions? Questions regarding 2016 Local Government Aid should be directed to proptax.admin@state.mn.us. •Tr Bill Sparks bill.sparks@state.mn.us (651) 556-6095 MS, Section 477A.014, subdivision 2, provides that a government unit may object to the amount of aid that the Department of Revenue has determined for it. No objection may be raised later than 60 days after receipt of certified LGA notice. Objections should be addressed to Director, Property Tax Division, Minnesota Department of Revenue, Mail Station 3340, St. Paul, MN 55146-3340. Minnesota Revenue, Property Tax Division 07/2015