The state uses a formula that measures need and a city’s ability to raise its own revenue via property taxes. How it’s measured depends on the city’s population — small, medium or large.
Minneapolis, St. Paul and Duluth get the most state aid. For some smaller cities, it’s a third or more of their annual budgets and is considered necessary to sustain that “small town life,” said Fairmont City Council Member Jay Maynard.
“If they can’t get [that life] in Minnesota, they will go someplace where they can,” Maynard said.
Cities with fewer than 2,500 residents get LGA based on a population formula. For cities that fall between 2,500 and 10,000 residents, the aid is based on population decline, age of the housing stock and the percentage of commercial, industrial or utility property tax base. For larger cities, it’s the same, but the formula also accounts for the percentage of residents 65 and older.
The aid is largely driven by a city’s property tax base, so cities with high tax bases compared with their needs will get little or nothing, said Bradley Peterson, a lobbyist for the Coalition of Greater Minnesota Cities.
State leaders in the 1970s wanted residents to have a high quality of life across Minnesota, regardless of their tax base, he said.
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