Defending Local Government Aid is a shared priority in 2021

BEMIDJI -- With budget deficits expected in the future for Minnesota, outstate cities like Bemidji and organizations representing them at the Legislature are expecting a fight over local aid.

The Local Government Aid program provides dollars directly to cities across Minnesota from state revenues. In Bemidji's case, LGA is especially useful as nearly 50% of the city's property is non-taxable, because large portions of land are dedicated to BSU, health facilities and government buildings.

The LGA from the state peaked in 2002, when the city received $3.82 million, but by 2008, the number fell to $2.82 million. In 2014, the amount increased to $3.21 million and in 2018 it reached $3.34 million.

Because of a projected deficit of $2.4 billion in this biennium and a $4.7 billion deficit for the next biennium, there's now concern that LGA funding may be cut.

"From the coalition's standpoint, we're making our highest priority the maintenance and defense of the Local Government Aid program," said Bradley Peterson, executive director of the Coalition of Greater Minnesota Cities. "In the past, when there have been state budget deficits, the program has come in for cuts, which would be just an extra layer of devastation on top of the pandemic for these rural communities."

"Our cities have been telling me that local economies are hurting and revenues have been impacted, so protecting LGA is one of the top priorities," said Gary Carlson, director of government relations for the League of Minnesota Cities.

Bemidji Mayor-elect Jorge Prince also has a focus on LGA as he prepares to take office.

"Once sworn in, I'll be able to gather the rest of the council together and plot out what the strategy will be in the next session," Prince said. "That's an important part to all of this. I will say generally speaking, working hard to maintain our level of LGA funding will be at the top of the list. Fighting to maintain that is going to be important."

Protecting local funding will also partially depend on the state receiving more federal funding in the next several months.

"I think a lot of how the next session goes could hinge on the extent and timing of any additional federal stimulus," Peterson said. "The state and local governments are hurting, and that is the one thing that could be a difference maker during the session is help from the federal government."

According to Carlson, the League of Minnesota Cities is also focused on additional federal stimulus and has been in communication with the state's congressional delegation about getting more assistance.

For the city of Bemidji, lobbying the Legislature was an effort taking many months. For 2020, the city made a request for funding to help pay for a water treatment plant.

Now under construction, the plant will treat chemicals found in the city's water wells near the Bemidji Regional Airport. In June, the city awarded a bid of $6.06 million to Rice Lake Contracting to begin the first phase of the project. Additionally, Barr Engineering was hired for design and inspection work, bringing the project to $7.34 million.

In the future, the city eventually plans to expand the facility and increase the amount of water that can be treated, meeting standards set by state agencies.

In October, during one of several special sessions, the Legislature passed a bonding bill that included $10.1 million for the Bemidji project.

"The bonding bill was a tremendous thing to get done and it's unfortunate that it took as long as it did," Peterson said. "For the communities that are getting projects funded like Bemidji, it's a great help. There are still a lot of projects in the pipeline, though, and I would hope that the Legislature and governor would consider another round of bonding even next year to continue the good work they started this fall."

Another request made in 2020 by the city was for the Legislature to authorize a referendum that, if approved by Bemidji residents, would increase the city's sales tax by 1/2%. The funds generated would go toward the water treatment plant, future improvements at the wastewater treatment facility, and capital improvement needs at the Sanford Center.

No legislation with the approval was passed in 2020, though. Additionally, because of the coronavirus pandemic, Carlson said some cities with existing taxes on either retail sales or restaurants have been impacted negatively.

Because of the uncertainty, Prince said discussions will be needed on whether or not another sales tax push should be pursued.

"There will also be time to consider whether or not to put forward something like a sales tax," Prince said. "For me personally, I haven't come to the conclusion that it's the right thing for the city. If it were, it would have to be something the whole council would have to agree upon. I would have concern with the timing of it all, with everything going on right now, that it would be poor timing."