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Report: City taxes continue to rise

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Report: City taxes continue to rise
Morris Minnesota 607 Pacific Avenue 56267

Minnesota cities' revenues from property taxes have increased by more than 100 percent since 1999 as the amount of aid cities receive from the state and federal governments continues to fall.

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State Auditor Rebecca Otto on Thursday released the Minnesota City Finances Report, which summarizes the financial operations of Minnesota cities for 2008.

"Minnesota cities deliver some of our most essential services like public safety and street and highway maintenance," Otto said.

The 2008 City Finances Report revealed two noteworthy long-term trends:

•As federal and state governments have reduced the amount of aid to cities, the result has been a greater reliance on revenues derived from property taxes. Between 1999 and 2008, actual revenues derived from property taxes grew 102 percent, compared to 10 percent for revenues derived from intergovernmental sources.

•From 1999 to 2008, the proportion of total revenues derived from property taxes grew from 24 percent in 1999 to 35 percent in 2008. During this same time frame, revenues derived from intergovernmental sources decreased from 32 percent of total revenues to 25 percent.

"Property tax levels are an ongoing concern for Minnesotans," Otto said. "If this trend continues, it will further increase the reliance on property taxes as a source of revenue. With the foreclosure crisis and the tight economy, this trend is troubling."

Another long-term trend revealed in the report is that during the 10-year period between 1999 and 2008, when adjusted for inflation, 2008 revenue and expenditure levels are below 1999 levels. Inflation-adjusted total city revenues and expenditures decreased 7 percent between 1999 and 2008.

"The State is facing a large budget deficit," Otto said. "If the Legislature and governor further cut local government aids, this will continue the trend of a greater reliance on property taxes."

Other highlights from the report:

•Total revenues of the governmental funds for all Minnesota cities totaled $4.66 billion in 2008. This represents a decrease of 1 percent from 2007 revenues. Total revenues of cities over 2,500 in population decreased 1 percent, while revenues of cities under 2,500 in population increased 2 percent.

•Total expenditures of the governmental funds for all cities totaled $5.53 billion in 2008. This represents an increase of 4 percent over 2007. Total expenditures of cities over 2,500 in population increased 4 percent, while total expenditures for cities under 2,500 increased 3 percent.

•The largest expenditure categories for both groups of cities are streets and highways and public safety. For large cities, streets and highways accounted for 20 percent of total expenditures, and public safety accounted for 26 percent. For small cities, streets and highways accounted for 24 percent of total expenditures, and public safety accounted for 21 percent.

•The unreserved fund balances of large cities General and Special Revenue Funds totaled $1.39 billion in 2008. This represents an increase of 5 percent over the level reported in 2007. Large city unreserved fund balances as a percent of total current expenditures averaged 46 percent in 2008, compared to 48 percent in 2007.

To view the complete report, which includes an Executive Summary, graphs and tables, go to www.auditor.state.mn.us/default.aspx?page=20100114.000.

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