The viability of small communities may be at risk as we hit what some are calling the “perfect storm” of local government finance.
State aid has been cut significantly. Mankato stands to lose $3 million over the next two years as the result of Gov. Tim Pawlenty’s unallotment decision. North Mankato, St. Peter, Wells, and other small towns will also be hurt. They’ll lose significant state funding. Counties won’t be in any better shape.
And while those kind of reductions in state aid have been experienced before over the last several years, a growing local economy always provided a growing base of property value from which to increase local property tax collections without increasing the rate.
That era appears to be ending. Proposals for double digit tax increases may be the norm.
The total value of existing property in Blue Earth County declined by about $10 million for the upcoming tax year. Fortunately, $75 million in new construction increased the total tax base by about $65 million, a minuscule amount on $2.4 billion in value.
City councils and county boards will have tough decisions. Public input should be a cornerstone of these discussions because they are not just about taxes, but the future of small communities. Some small communities, loathe to raise already burdensome taxes, may resort to raising fees for such services as street lights, as the city of Northfield has moved toward.
Reinstatement of state aid doesn’t seem likely anytime soon, so small communities will be forced to raise taxes or cut services to levels that may be OK to some, but that may also deter growth, both residential and commercial.
The governor’s direction appears to toward breaking off state and local government partnerships and letting lots of small communities more or less fend for themselves.
That would create an entirely different outstate Minnesota, an entirely different small-town Minnesota. There is likely to develop, under this scenario, a mishmash of fees and costs uneven across cities in Minnesota. It will create a tax and fee structure that will be less understandable, and less accountable for businesses and residents.
One small town may choose to cut back on early snowplowing. Others may want streets cleared soon. You might cross from Mankato to North Mankato and find one side of the bridge plowed and the other not.
Businesses also will suffer from this confusing mix. Apartment building owners may end up paying one utility fee in one city, a different one in the next. This newly created “fee competition” among cities will also pit one city against another for development, creating costly bidding wars.
But while those inconveniences may be bothersome, the real changes might come in the quality of life, which has been solid in most Minnesota outstate communities. Our system of local government aid had small community vibrancy as a goal. It tried to make sure that communities, for example, that had a lot of non-taxable property, or more residential and less commercial, would have access to the same basic level of funding per capita to provide basic services.
Local government aid ensured that police service in one town wasn’t less than another just because one town had more taxable property than the other. Leaders instituted this state/local partnership because they saw how successful small towns were at creating a solid quality of life.
Small towns had low crime, well-educated children and generally were safe-feeling places outside the big city where people could find a peaceful, quiet and prosperous life.
A lot of small towns will likely continue to prosper because their residents are willing to pay higher taxes or accept fewer services, But ultimately, their quality of life is likely to deteriorate.
The governor seems to want to pull the support system out from under the small towns in one fell swoop, changing a long-held Minnesota philosophy with the a stroke or two of the pen.
And he makes a good case, even to educated Minnesotans. Everyone, of course, wants lower taxes, but we’re not sure everyone would want to see the quality of life in small-town Minnesota go away.
