New Ulm may lose 2 percent of state aid

By RON LARSEN

Journal Staff Writer

NEW ULM--If Gov. Jesse Ventura gets his way in reducing aid to cities, it appears the best New Ulm could expect is a 2 percent drop in local government aid, representing a loss of about $147,000 this year.

That's if the state includes the Homestead and Agricultural Credits Act aid the city received in 2001 in calculating the percent of increase of levy plus state aid in 2002.

The formula is outlined in a summary "Big Fix" impact report released by the Minnesota Department of Revenue this week.

If HACA aid is not included in the calculation, however, then because of the nearly 44 percent increase in local government aid this year--in part to cover the loss of HACA--the city would show an 11.6 percent increase in levy plus aid which would throw it into the "excessive increase" category. That might mean possibly another $37,000 bite in LGA.

As the department's report points out, there are two components to calculating the "Big Fix" LGA reduction.

A uniform reduction of 2 percent of levy plus aid would be applied to all cities. Then there's the reduction targeting cities with "excessive" increases in their 2002 levy plus aid revenues.

The latter is more complex in trying to determine how much reduction in LGA would be made for municipalities deemed to have excessive increases.

According to the department, the "excess" provision applies to cities of greater than 1,000 population with "a Pay 2002 levy plus aid increase greater than 4.5 percent" which represents a three-year statewide average growth in households plus inflation.

Here's where it gets complex.

"A city's 'excess' aid reduction in Pay 2002 is the difference between its actual levy plus aid increase and 125 percent of its three-year average growth in households plus inflation," the report said.

"If a city's three-year average growth in inflation plus households is less than the three-year average statewide growth in inflation (2.95 percent PGSL), then its growth rate will equal 2.95 percent for purposes of this calculation."

The department's report noted the "excess aid reduction is applied first to LGA, then if necessary to Market Value Credit."

Now, that's for 2002.

In 2003, the uniform rate reduction is equal to 1.7 percent of the city's adjusted net tax capacity which will be used to "reflect a city's ability to raise revenues from its property tax base."

"We're still in the first month of our budget year," City Manager Brian Gramentz said. "There are going to be Democrat, Republican, as well as the Governor's, plans out there. We'll see where it all falls out; maybe there won't be a cut at all. Anyway, there's still plenty time for adjustments."