LGA Distributions: Some Cities May Qualify for Early Payments

Cities impacted by recent natural disasters and those with cash flow needs may be eligible to receive an early distribution of December 2014 LGA.
(Published Jul 14, 2014)

As usual, most cities will receive the first half of their 2014 local government aid (LGA) distribution this month. In addition, cities that were affected by the recent severe storms and flooding may be eligible to receive their December LGA payments early.

Regular LGA distribution
Cities that have fulfilled the uniform financial accounting and reporting obligations with the Minnesota Office of the State Auditor should receive the first half of their 2014 LGA distribution on July 20. The second half payment of LGA will occur in late December.

By the end of July, cities should also receive information from the Minnesota Department of Revenue on their 2015 LGA distribution. The certification notices are required under state law to be distributed before Aug. 1 each year. The certification notice will include information on the formula factors and the computation of LGA.

Early distribution due to natural disaster
With the recent natural disasters in Minnesota, officials in affected cities should be aware that in addition to other federal and state disaster assistance programs, there is a procedure for cities to receive an early distribution of their December 2014 LGA payments. State law (Minnesota Statutes, section 477A.015) provides that when the commissioner of Public Safety determines that a local government has suffered financial hardship due to a natural disaster, the commissioner shall notify the commissioner of Revenue, who shall make payments of aids otherwise due on Dec. 26 as soon as is practical after the determination is made, but not before July 20.

The League has contacted the governor’s office and the Department of Revenue to see if a similar determination will be made for cities and counties affected by the severe storms and flooding that occurred in June. An update on this will be included in the next edition of the Cities Bulletin.

The statute does not specify how the financial hardship determination is made by the commissioner of Public Safety or whether cities must formally request the early distribution to address financial hardships related to the natural disaster. In 2007, Gov. Pawlenty directed the Public Safety commissioner to examine the situation in southeastern Minnesota, and subsequently, the commissioner notified the Revenue commissioner that a hardship existed in the affected areas, which triggered an automatic expedited LGA and county program aid distribution. In 2012, during the major flooding in northeastern Minnesota, the Department of Revenue contacted individual cities to see if an early distribution was needed.

Early distribution due to cash flow needs
In addition to the disaster-related acceleration of LGA, current law provides that a local government may make a request to the commissioner of Revenue that an early distribution of LGA is necessary to meet the city’s cash flow needs. The statute does not require that the cash flow need be related to a natural disaster. The early payment is at the discretion of the commissioner, who may pay all or part of the Dec. 26 LGA payment any time after Aug. 15. Requests for early distributions for cash flow needs should be submitted to the commissioner of Revenue.

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