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IMPROVING FISCAL FUTURES <br />FF-1. State -Local Fiscal Relations <br />Issue: Since the 1970s, services provided by <br />Minnesota cities have been largely funded <br />through a combination of property taxes, <br />state aids, and state property tax relief <br />programs. This system of municipal finance <br />has evolved to ensure that municipal <br />services can be funded without excessive <br />local tax burdens. <br />Over the past decade, the state -local <br />partnership has vacillated with the state <br />budget, challenging the ability of city <br />officials to plan for the future fiscal needs of <br />their communities. <br />Response: The League of Minnesota <br />Cities supports a strong state -local fiscal <br />partnership. The state -local fiscal system, <br />and any future modifications, should be <br />consistent with the following principles: <br />Accountability. Cities believe a viable <br />partnership with the state requires cities <br />and the state to communicate effectively <br />with each other and with the public about <br />their roles and responsibilities. Cities and <br />the state must also exercise sound <br />financial stewardship, including <br />maximizing efficiencies in service delivery <br />and other means of cost containment <br />whenever possible. <br />Certainty. Cities need to have more <br />certainty and predictability in all of their <br />available revenue sources, including the <br />property tax and the amount of funding <br />they receive from local government aid <br />and similar programs. The current <br />practice of almost annual adjustments to <br />local government aid (LGA) and similar <br />programs, recent unallotments of the <br />appropriation and the imposition of levy <br />limits do not allow for prudent financial <br />planning and decisions. In addition, the <br />2011 state government shutdown further <br />decreased the certainty of the system <br />when the Department of Revenue <br />indicated that despite the standing LGA <br />appropriation, the shutdown of many <br />state government operations would <br />prevent the distribution of the LGA. <br />Adequacy. The revenue sources available <br />to cities and the state must raise adequate <br />funds to meet city needs, to fund <br />mandates, and to maintain Minnesota's <br />long-term competitiveness. <br />Flexibility. As cities become increasingly <br />diverse in their characteristics and as <br />existing aid and credit programs have <br />eroded, a "one -size -fits -all" system that <br />limits all cities to the property tax as the <br />major, non -state aid revenue source is <br />increasingly unworkable. Some cities <br />have sufficient property tax base to <br />sustain an adequate service level, but <br />many do not. Cities should have greater <br />access to other tax and revenue sources <br />than currently permitted. <br />Equity. All citizens should receive <br />adequate levels of municipal services at <br />relatively similar levels of taxation. This <br />means that the state should provide <br />financial assistance to cities that have <br />high costs, including costs related to <br />overburden created by non-resident users <br />of city services, low fiscal capacity, or <br />both. State financial assistance should <br />also reduce tax burden disparities among <br />communities and between cities and <br />surrounding areas. <br />League of Minnesota Cities <br />2018 City Policies Page 102 <br />