Real disparities among communities will be a major topic of discussion as legislators and the governor wrangle over local government aid (LGA) in the coming months. Some cities will no doubt be held up as poorly managed and leaching off more "successful" communities.
A story this weekend illustrates why it's not helpful to the debate to simplify the issue down to "Chaska, frugal" and "Minneapolis, profligate."
Chaska residents paid the least per capita in city taxes — $184, compared with the Minnesota-wide city average of about $500 per resident, according to a story in the Star Tribune. My own suburb, Golden Valley, ranked in the bottom 10 in the state, at $746 per capita. The costs were figured by combining the cities' tax levies and LGA and dividing by number of residents.
Since the two cities are roughly the same size, both well-governed, good places to live and receive essentially no LGA, I thought I'd take a quick tour of their financial statements to see what accounts for the disparity. (I compared 2006 numbers on revenues and expenses, since those reports were most immediately accessible, so these comparisons won't align precisely with the 2008 data reported in the Strib. [Golden Valley PDF] [Chaska PDF])
The story quotes Lena Gould, a policy analyst for the League of Minnesota Cities, as saying the per capita figure is an indicator of local government efficiency. Well, maybe. Though this is hardly a deep analysis, it's fair to say that this ranking should not be taken as the story's headline suggests: "Chaska, thy name is frugal, in city taxes list."
It's true that Golden Valley raises more than twice the amount of revenue from property taxes that Chaska does, but its tax base is 27.2% commercial and industrial compared to 15.8% in the more rural suburb, so the impact on households is muted. (Both cities have higher than average commercial/industrial development to diversify the tax base.) Chaska benefits considerably more from restricted operating grants and capital grants that are often attached to development activity.
Chaska has a median age ten years younger, with larger average households, which means more of those "capitas" are children, not tax payers. And it has other advantages. Some of its success may be traced back to continuing some of the vision from the planned community of Jonathon and its relative lack of legacy costs that go with being a still-growing community. Chaska also has a revenue stream from its city-owned electric utility that contributed more than $2 million in "franchise taxes."
Golden Valley, as a first-ring suburb, is built up and hemmed in. Its homes have a higher average market value.
When you compare expenses, the two cities had essentially the same total costs for government activities in 2006, with Golden Valley expending more for public safety and public works for the year and Chaska spending more on economic development; it was also carrying more debt.
All these factors make the straight levy/LGA comparisons deceiving — not just between the two suburbs, but any cities on the list.
A new website called Thank LGA has just launched to weigh in on the side of maintaining LGA.
Another useful comparison in the Citizen League's 2008 Residential Homestead Property Tax Profile, which calculates the effective tax rate on a community's average value home. By that measure, Golden Valley's 1.272% ranked 7th out of 117 metro-area communities and Chaska's 1.131% ranked 33rd out of 117 — lower, but hardly the best in the state.
— Charlie Quimby
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