Local cities deal with LGA cuts

Local cities were hit with state funding cuts at the end of 2008 that affected their bottom lines.
The cuts came too late for many cities to adjust their budgets.
“This could not have come at a worse time, as cities are closing the financial books on 2008 and were counting on full December local government aid (LGA) and market value homestead credit (MVHC) payments – amounts that were committed to by the state in July of 2007 – to meet year-end financial obligations,” said League of Minnesota Cities Executive Director Jim Miller.
In general, cities lost roughly 4 percent of their total revenue.
More cuts are anticipated as the state of Minnesota attempts to solve its budget deficit.
Local cities are responding by planning ahead and identifying areas to cut now.
BRAHAM
Braham lost $36,293 in December. ‘Like all other cities and counties, this money was already spent, and the unallotment will result in a shortfall of revenues in the 2008 budget,” said City Administrator Sally Hoy.
To compensate for the 2008 loss and an anticipated LGA loss of about $50,000 in 2009, the city council approved decreasing its 2009 budget in several areas. The city did not receive $30,000 in taxes due to delinquencies.
Employees will not be laid off, but their salaries (and that of the building official) will be reduced by five percent. To compensate for that, employees will only be required to work 95 percent of their regular work hours. City hall hours will go back to 8 a.m. to 4:30 p.m. to reduce utility costs.
The city will not fund flowers, buy a new squad car, or pick up stray cats. It will not mail out its city newsletter, but merely post it online, nor will it send out reminders to those who forget to read their water meters. It cut funding to parks by $11,800.
CAMBRIDGE
The December blow of losing $207,383 in state money was softened by an increase of $111,988 the city received in 2008 tax revenue over what is expected. The city council had also revised its budget several times in 2008 to account for the slowing economy.
The amount earned through licenses and permits was also up by $10,000 as were other charges for services, according to Finance Director Caroline Moe.
Additionally, the city did not spend as much as it had anticipated on health insurance following a partnership with the city’s unions. That amounted to a savings of $88,178.
In all, the city was actually able to put an additional $9,539 in its contingency fund to apply for next year.
“What we remain most concerned about is whether or not the city will see any of the $801,772 in LGA certified to the city by the Department of Revenue in July 2008 while we were preparing our 2009 budget,” noted Cambridge City Administrator Lynda Woulfe. “If these funds are cut again on top of the $207,383 from 2008, it will hurt substantially.”
Woulfe and Moe are working on a plan that will pare down the 2009 budget. “This won’t be presented until we get a better sense of how the Legislature will deal with the $5.2 billion dollar deficit,” said Woulfe.
ISANTI
Isanti fixed its 2008 budget deficit of $112,316 by applying unspent 2008 dollars.
The city council then approved cutting $112,316 from its 2009 budget in anticipation of additional revenue reductions.
The city enacted a freeze on public works hiring, eliminated the warming house staff, and took out all charitable giving. The council decided not to erect granite signs for the Economic Development Authority and eliminated a transfer from the EDA fund to the revolving loan fund. Council members also imposed a “no new non-budgeted spending” rule. Additionally, $100,000 was transferred from the liquor store fund to the general fund.
“The days when Isanti or any city can count on the state to keep its financial house in order are over,” said Mayor George Wimmer. “We must do what every small- and medium-sized business must do: live within our means.” He added, “Relaying on LGA for daily operations must become a thing of the past.”
LGA accounts for 17 percent of the city’s budget.
The mayor also proposed seven other options that range from eliminating a position in public works or the police department to transferring money into the general fund from other funds.
“We will not know until late spring or early summer what to expect from the state, but we will have all our plans in place for different funding levels,” said Wimmer.
HARRIS
With an influx of new faces leading Harris, a clear plan for how to deal with the 2008 decrease in LGA and an anticipated cut in 2009 has not yet been laid out.
Council members are considering filling the city clerk position at 24 to 28 hours a week, instead of the 32 to 40 hours a week initially planned.
In order to save on utility costs, they may also close city hall one day a week, noted Harris Treasurer Marlys Belfany.
A budget workshop has been set for Jan. 26 to discuss the issue.
NORTH BRANCH
Because of the 2008 reduction in LGA, North Branch entered 2009 with $162,324 less than it had planned.
The announcement that LGA was being reduced simply came too late in the year, according to Finance Director Richard Hill.
“It reduces our cash position going into 2009, and it adds to the cash crunch that will be felt in 2009,” Hill said.
The city is just beginning to discuss areas it can cut, and is trying to identify over $400,000 worth. The city was promised $429,000 in LGA for 2009. Hill noted that it’s very difficult to get halfway through the year and then find out their LGA has been reduced. That leaves no recovery time.
The city is cutting out projects and eliminating some supplies. It will also take a hard look at consulting fees and employee costs.
“It’s going to have a substantial impact on operations,” Hill said, adding that you can’t eliminate $400,000 in a budget without it having a big effect.
RUSH CITY
Rush City lost $39,000 from its 2008 budget. It reacted in December by adjusting its budget through a variety of fund transfers.
It was too late in the year to avoid any purchases, noted City Administrator Amy Mell.
As it looks ahead to 2009, the city council is trying to be proactive. The budget committee has already met and will continue meeting to identify possible areas to cut. If the predictions are true that city LGA is cut by half, Rush City will lose one-quarter of its general fund. General fund covers streets, the fire department, police protection, administration, the airport and the city council.
“Personnel is a big part of our budget, so we’re looking at that very closely,” said Mell. Committee members have tossed around the idea of a wage freeze, as well as cuts in staff.
They have also talked about trimming down travel expenses and eliminating training expenses. The city did not plan to make many equipment purchases in 2009, which means it can’t merely cut out those, and it has no control over utility costs.
Mell said she is watching the Legislature very closely. “The problem is we just don’t know,” she said.