The full impact of the 2013 Minnesota legislative session may not be felt for some time, and many are still trying to fully understand how the decisions made in St. Paul this year are going to directly affect them; among those still muddling through all of the decisions are city leaders in Redwood Falls, and even though they are still trying to figure it all out there are a couple of things they do know are going to happen.
The full impact of the 2013 Minnesota legislative session may not be felt for some time, and many are still trying to fully understand how the decisions made in St. Paul this year are going to directly affect them.
Among those still muddling through all of the decisions are city leaders in Redwood Falls, and even though they are still trying to figure it all out there are a couple of things they do know are going to happen.
According to Keith Muet-zel, city administrator, two big things happened during this session and those two decisions should have a positive impact on the city.
The first was the elimination of the sales tax requirement on city purchases.
“Years ago cities were exempt from paying sales tax,” Muetzel explained.
Then in 1992 that changed as the state legislature had to address budget issues. One of the ways the state determined to balance its budget was to impose a sales tax on those things purchased by local units of government, such as cities.
Muetzel said there were some minor exemptions to the sales tax, but for the most part city purchases included a sales tax just like purchases made by everyday citizens.
Muetzel said it is hard to quantify what kind of impact the sales tax exemption is going to have on the budget, because the sales tax being paid is not clearly delineated in the budget.
However, the total amount of sales tax revenue going into state coffers each year from local units of government was $130 million.
Muetzel said the sales tax exemption is a positive for local units of government.
The second outcome from the session was the decision to in-crease the local government aid (LGA) allocation to cities.
After experiencing a number of years when the LGA allocation remained flat or was on the decline, having funds that are now headed in a positive direction is good for cities like Redwood Falls.
The LGA allocation a unit of government receives is based on a complicated formula, and its intent is to aide those that are not property rich and therefore do not have a strong tax base in which to support those needed services for the public.
For the City of Red-wood Falls the impact is significant, as the estimated 2014 LGA – based on information from the Minnesota Department of Reven-ue – is 30 percent higher than the certified amount paid this year.
The city has re-ceived or is going to receive by the end of 2013 $1,075,270 in LGA, and it is estimated to be receiving $1,398,367 in 2014 – representing a $323,097 increase.
Those dollars, said Muetzel, go into the general fund of the budget and are used to help pay for services ranging from police and fire to parks and the local library.
What this funding does is it gets local units of government back to LGA levels it had been receiving 10 years ago, and while the increase is real the reality is costs have increased over that 10 year period, too.
The LGA allocation represents about 20 percent of the city general fund revenue.
With the addition of more aid, the state did make another change affecting local government, as it implemented levy limits for 2014 property tax levies.
While the city does not yet know what that limit is going to be, there is not a lot of concern heading into budget planning, as the city has taken a conservative approach in recent years. The 2013 levy increased by 1.99 percent, with the 2011 and 2012 staying flat.
“The city fared well in this session,” Muetzel said, adding the impact should be good overall for the city budget.
City budget planning for 2014 is set to begin very soon.