09-09-2020 Workshop Packet - Laserfiche WebLink

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State Budget Conditions and Aid Distribution Due to the COVID-19 pandemic, the budget outlook for the State of Minnesota is worsening and remains extremely volatile. An economic forecast done in February 2020 showed the state had a projected $1.5 billion budget surplus for the remainder of the biennium. An updated economic forecast done in May 2020 showed the state now faces a $2.4 billion deficit instead. Given the economic uncertainty caused by the pandemic, these estimates may change. The deficit will have significant impacts on future budgets at the state level so it is important to understand the revenues that Little Canada receives from the state. The state budget includes approximately $564 million for the Local Government Aid (LGA) program which provides financial aid to approximately 90 percent of Minnesota cities including Little Canada. The 2021 Little Canada Budget includes LGA of $434,379. This is the same amount that was in the 2020 Budget. Due to the potentially volatile nature of LGA, only 20% of LGA has been budgeted in the General Fund and 80% has been budgeted in the General Capital Improvement Fund. Staff believes that this is a sufficiently conservative approach and budgeted revenues from LGA should not be reduced any further. The City receives Municipal State Aid (MSA) funds that help with the maintenance and construction of certain roads in our community. The maintenance portion of these funds are included in the General Fund Budget and the construction portion of these funds are included in the Infrastructure Capital Improvements Fund. MSA funds are derived from the state’s gas tax. With less driving and lower fuel usage in 2020, MSA revenues will be adversely affected. 90% of the maintenance portion received in 2020 has been budgeted for 2021. It should be noted that the State of Minnesota, through the Department of Revenue, does provide various tax relief programs intended to assist individual homeowners and renters. These offerings include the Homestead Credit Refund, the Renter’s Property Tax Refund, and the Property Tax Deferral for Senior Citizens programs. Additional information on these programs is available at https://www.revenue.state.mn.us/property-tax-refund. Property Taxes and Property Tax Levy The State has granted local municipalities with the authority to levy taxes in order to fund operations and debt payments. For the City of Little Canada, the property tax levy accounts for approximately 77% of the General Fund revenues. Per the City’s Financial Policy, “the total sum appropriated for the General Fund shall be less than the total revenue by a safe margin”. It is the policy of the City that this “safe margin” will allow for property tax collections of 97.5% in any given year”. The 2021 Budget continues to include this 97.5% collection rate. During the last ten years, 2009 was the only year that property tax collections were less than the 97.5% collection rate. DRAFT DOCUMENT -9/3/2020 5