Herald JournalHerald and Journal, Sept. 16, 2002

Dodging budget bullets: Small cities bracing for state aid shortfall

By Lynda Jensen

Small cities waiting for the state's shortfall to be resolved adopted double digit preliminary levy increases nearly across the board in the area.

Levy increases ranged from 5 to 41 percent, with Waverly being the only city that proposed a single digit increase.

Winsted City Administrator Brent Mareck pointed out that proposed budgets are just that ­ proposed ­ and that Winsted may actually end up raising the levy only five or 10 percent itself.

This is true for many cities, since proposed levies are generally considered a worst case scenario financially, since the state will not allow cities to raise their figures after they are turned into the county for calculating tax rates.

Montrose is having an unusual year for levies, since its proposed levy increase is 41 percent; although it is unlikely the actual figures will go this high, commented Montrose Clerk Barb Swanson.

It has been several years since Montrose levied for debt, Swanson said. "Keep in mind that $2,000 is one percent," she added.

The increase is because of improvements being planned for Buffalo Avenue in Montrose, which involves extending sewer and water service, commented Swanson said.

The Buffalo Avenue project itself hasn't been bid yet, and there are many unknowns to be accounted for budget-wise, she said.

Since cities can lower (but not raise), their levy figures, proposed budgets are generally higher than expected because there is little room for error, Mareck said. Actual budgets may come in lower.

Last year, cities were taken by surprise with the budget shortfall ­ and if it hadn't been for the veto override ­ would have been hit hard by state cuts.

This was predicted to be $80,000 in cuts last year for Howard Lake, which was something that didn't materialize, said City Administrator Kelly Bahn.

This year, cities know the state will probably make cuts, but don't know how much or even when, commented Howard Lake Clerk Gene Gilbert.

"We don't know until the check is in our hands," Gilbert said.

Most small cities receive a sizable sum from Local Government Aid (LGA) given by the state.

For Howard Lake, the LGA amounted to a total of about $384,770 this year.

Winsted's share of LGA is in the $400,000 range, Mareck said.

"We were lucky this year that nothing got cut," Bahn said.

The League of Minnesota Cities is advising cities to cut their budgets by 5 percent, Mareck said.

State departments have been asked to trim their budgets by 10 percent, she said.

"Worrying about it isn't going to get us anywhere," commented Winsted Mareck said.

When and if a shortfall occurs, the city will simply sharpen its pencil, and cut non-essential items, Mareck said. "It's not what we like to see ­ it's what we need to see."

The projected state budget shortfall for 2004 is expected to be even larger than last year, or about $2.7 billion, Bahn said.

The state will probably cut about $59 to $70 million in LGA, Bahn said.

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