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
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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
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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