Business group calls for more transparency in local tax data
WILLMAR -- A group representing Minnesota commercial real estate developers says more budget transparency is needed to help taxpayers understand how local governments are spending their money.
To help make that happen, legislation will be proposed next year that could require city and county governments to present budget and spending information in an easy-to-understand format designed to educate taxpayers and get them involved with local government spending decisions.
Kay Rakow, director of public policy for the commercial real estate development group known as NAIOP, said the "cost drivers" of local government spending make up the biggest part of the budget process, but are difficult to extrapolate from most budget spreadsheets.
During a presentation Thursday to business and local government leaders attending the Willmar Lakes Area Chamber of Commerce event, Rakow proposed a new "object code" format. In accounting terms, the "object code" of an account entry designates the type of expense or type of revenue.
Rakow said that kind of report would provide a clearer picture of where tax money is spent by grouping expenses into categories, like salary, benefits and pensions.
The information in that report could be used to compare spending trends between communities and provide data that could help identify and reduce spending, and therefore reduce property taxes.
It's a practice that some local governments are already doing. She said the Paynesville City Council gets such an "object code" breakdown every month. The Fargo, N.D., City Commission sends spending breakdowns with the property tax statements, according to Bob Dols, a Willmar businessman.
Having this kind of detailed information not only helps the public understand local budgets, but also helps elected officials who decide how to spend taxpayer money, said Rakow.
She said people "fuss and fume" about property taxes, but until there's an understanding of where money is spent, there can be no budget solutions.
Some local government leaders she's spoken to have been receptive to the new reporting format but are concerned that adding another layer of required paperwork to the long list of mandates local governments already provide could involve more costly staff time.
But she said it's vital that taxpayers have "useful information" about local spending.
Spicer Mayor Denny Baker said when people come to truth-in-taxation hearings, they are usually angry and "ready to tear you apart" but are seldom eager to put in the time to learn about the budget.
That's why the Spicer City Council created a citizens' committee to provide input on shaping the local budget. After spending eight hours over several days going line by line through the city budget and explaining where the money went, Baker said the group did not propose budget cuts but instead proposed budget increases.
He said he hopes that by educating a small group of people about the budget process, the information will make it back to the coffee shops.
Rakow said having spending information available in a form that's easy to digest would help make that process easier. She said it's a method businesses use to identify budget trends to help curb spending.
Kandiyohi County Administrator Larry Kleindl said everyone benefits when the public understands how tax money is spent and there's increased efficiency in government.
But he has reservations about how well the proposed reporting system would work. Because every government entity has different responsibilities and because county tax statements include multiple jurisdictions, Kleindl said the report could still be confusing.
Chamber President Ken Warner said the business community doesn't want to be "antagonistic" to local governments, but wants to work with government to find solutions. He said county and city representatives he's spoken to have been receptive to the idea.
Rakow said changes are needed not only to reduce property taxes but also to keep cities solvent. She said a League of Minnesota Cities report from June of 2010 indicates cities of all sizes will be broke by 2015 without policy changes and by 2025 cities will see a deficit of 35 percent of city revenues.
She said NAIOP intends to lobby for the new object code reporting requirements when the Legislature meets next year. At this point efforts would only be made to implement the new reporting standard for local governments and not the state government, she said.