Zero percent levy hike isn't a sign of good times in LqP
MADISON -- The flat-line levy approved last week by the Lac qui Parle County Board of Commissioners isn't a sign of a flush economy for the county.
Instead, the zero increase to the 2010 levy is a desperate attempt not to gouge farmers with a huge property tax increase cau-sed, in part, by what county representatives call an unfair cut to their state aid that benefitted metro counties.
Even with the action, property taxes for ag land in many rural counties will increase because of strong sales and values, which is a complete opposite of the housing market in urban areas.
That difference between urban residential land and farmland values is what created a lop-sided calculation in the county program aid between rural counties and metro counties, said Jake Sieg, auditor/treasurer for Lac qui Parle County.
The results were damaging for many small, rural counties on the western and southern borders of the state where there's a lot of farmland and few people.
All counties were anticipating the unallotment of state aid for 2010, which was about $100,000 for Lac qui Parle County. "That wasn't as bad as we were thinking it would be," said Sieg in an interview.
But at the end of July when the Department of Revenue re-calculated the formula to account for difference in land values, Lac qui Parle County was notified that it would lose an additional $205,425.
That was a total of $308,932 in lost revenue for next year, which is about 10 percent of the county's total annual levy.
"We were caught off guard by the formula change," said Sieg.
They had been preparing for the $100,000 unallotment by planning budget cuts, but the additional cuts "blew the whole thing apart," he said.
While the state took away additional money from small rural counties, the formula gave additional aid to large metro counties.
"The formula recognized the increasing values in rural ag-based counties like Lac qui Parle while residential values plummeted in our metro counties and other urban centers as a result of the housing market collapse," wrote Sieg in a letter to county employees to explain the process.
"Basically, millions of dollars were shifted from outstate counties to our metro areas," he wrote.
All counties are losing state aid in 2010 compared to 2009. But Sieg said the formula recalculation means Hennepin County, with a population of 1.16 million, is gaining $1.4 million from the formula while Lac qui Parle, Lincoln, Rock, Grant and Norman counties, with a combined population of 35,673, are losing more than $1.3 million.
Sieg said Lac qui Parle County's cut of nearly $42 per person was the ninth largest in the state, compared to an average cut of $9 per person in seven metro counties.
Sieg said the county commissioners recognize that there are "hard times in the metro" area, but said a cut "of this magnitude" was a big hit for Lac qui Parle County.
The state's small counties "don't have a lot of room to maneuver" when it comes to making cuts or finding new revenue, said Sieg.
The Lac qui Parle County Commissioners have identified cuts in personnel and operations in nearly every department for 2010 to reduce costs. They'll also use $475,000 in reserves to keep the levy at a zero increase.
If the county had sought even a 5 percent levy increase, Sieg said some ag land owners would have seen property tax increases of 35 to 40 percent. As it is, property taxes on farmland will go up 25 to 30 percent because of strong sales and values.
By cutting expenses, using revenues and keeping the levy flat, the county will provide "some kind of tax relief for those ag land owners," said Sieg.
But the problem is expected to get worse next year when even larger cuts are expected to state aid.
Cutting deeper into the budget will mean loss of services, and using reserves is a one-time solution that won't solve the problem, said Sieg.
"The angry period has passed. It's more frustration now," he said.
The commissioners will be meeting next month with Sen. Gary Kubly, DFL-Granite Falls, and Rep. Andrew Falk, DFL-Murdock, to make them aware of the situation and look for solutions.
Kubly said the disparity was an unintended consequence of the formula and a solution needs to be found to make the reductions in aid fair.
He said he'd like to see a limit on how much state aid could be cut in any given year to a county on a per capita basis. "That might be helpful in slowing the bleeding," said Kubly. "I don't know what else to do."
He said rural legislators need to get together to come up with a solution but the support of metro lawmakers will be needed. "We don't have enough votes on our own," said Kubly.