Saturday, April 4, 2009

Cut in LGA? Here's what happens in Remer

Cut in Local Government Aid?

Here’s what happens in Remer.

Remer, Minnesota is a town of about 200 people in rural north central Minnesota. It grew up along the railroad during the days of the lumberjacks, when a small town could survive off its lumber and the railroad.

Today Remer, like many Minnesota cities, relies heavily on intergovernmental transfers, or local government aid (LGA). With an aging population, declining housing stock, and fewer people choosing the city of Remer as home, local revenues have shrunk. Tourism is a huge draw to the area, yet most people are visiting lakes and forests in lieu of the small city. In Remer, local government aid fills the gap in an increasingly problematic budget.

How much does it take to run Remer?

While it may seem impossible that a small town can operate off of less than $15,000, Remer is just able to cover basic services with the money they are able to collect from local taxpayers. The infusion of LGA capital into the Remer budget gives this small town the ability to put money aside for capital improvements in the future, a vital part to them remaining a sustainable town.

Remer is not alone in suffering from a lack of tax capacity and dwindling LGA. According to the MN 2020 researchers’ poll of Minnesotan mayors, greater Minnesota’s cities receive 43% of their revenues from state aid, leaving the rural areas of the state in dangerous position. Raising local taxes fails to provide incentives for people from moving there, yet neglecting maintenance of public safety can lead to declining property values. Island View, Minnesota experienced the loss of local revenue and increased costs of operation, leading to the eventual dissolution of the city in 1992.

In 2003, the State Auditor conducted a study of municipal expenditures in relationship to state aid. The study found that the more money a municipality is given per capita in state aid, the higher their per capital expenditures tend to be. The study asserts that cities with more non-taxpayer revenue coming in feel freer to spend their money on essential and non-essential services, taking advantage of the state’s grant. While it may be true that some places take advantage of the state’s money, places like Remer are barely surviving off of it. Can a city with a $20,000 budget really overspend its state grant money by funding road repair and salaries for their staff? Suggesting this undermines the difficult work done daily by small city leaders to try and keep their communities alive.

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