State of the Cities preliminary findings

Vast majority of Minnesota city officials show concern for city finances

Findings from the LMC State of the Cities Report indicate pessimism
for fiscal year 2009

(St. Paul, Minn.—April 13, 2009) In the wake of a slumping economy and anticipated cuts in state aid, Minnesota city officials are showing overwhelming concern for continued ability to adequately fund basic services according to a new fiscal conditions survey compiled by the League of Minnesota Cities. The League’s seventh annual State of the Cities Report, to be formally released at the end of April, shows that a scant nine percent of Minnesota cities surveyed expressed optimism about being able to meet financial needs in 2009. The fiscal conditions survey portion of the State of the Cities Report was administered to the League’s 831 member cities at the end of 2008, and 445 submitted responses.

According to Rachel Walker, the League’s policy analysis manager, optimism levels are among the lowest recorded since the annual survey was first administered six years ago. “Cities were similarly pessimistic about their fiscal conditions following local government aid (LGA) cuts in 2003,” Walker said. “Many of the cities responded to the most current survey just as they began to feel the sting of Governor Pawlenty’s December 2008 unallotment of LGA and market value homestead credit. Now, city officials are bracing for even more state aid and credit reimbursement cuts in 2009, and beyond.”

Additionally, according to the report, more than half of Minnesota cities surveyed reported a shortfall in property tax revenues in 2008, up from 43 percent of cities in 2007. Respondents indicated that the ongoing housing foreclosure crisis and rising unemployment rates have contributed to property tax delinquencies. Survey respondents were also asked to describe the fiscal challenges faced by their cities, and the strategies used to address those challenges. Respondents indicated that the most common budget-balancing actions taken in Minnesota cities in 2008 in preparation for 2009 included revenue increases, spending decreases, and increases in efficiencies.

Complete results for the 2009 State of the Cities Report will be released in conjunction with the Joint Legislative Conference of local governments in St. Paul on April 29. In addition to the survey of city fiscal conditions, the Report will include findings related to the impact on Minnesota cities of the nation’s economic downturn, including declining housing markets and the recent crisis in financial markets.

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