12-15-2021 Council Packet - Laserfiche WebLink

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State Budget Conditions and Aid Distribution 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 2022 Operating Budget includes LGA of $434,909. 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. Under the current LGA funding formula, the City was to receive a reduction in LGA of $105,800 in 2022. However, due to legislation that was passed to freeze the 2022 funding at the same amount as 2021, the City will receive the same amount of LGA in 2022. Unless the funding formula is changed, the City will likely see reductions in future years. 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 were reduced in the 2021 budget. These reductions are again reflected in the 2022 budget. 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 2022 Budget continues to include this 97.5% collection rate. During the last twelve years, 2009 was the only year that property tax collections were less than the 97.5% collection rate. Therefore, we believe this is a conservative budget approach. 5