State of Main Street: Local Cities ‘Able to Weather the Storm’
State of Main Street: Local Cities ‘Able to Weather the Storm’
“A difficult balancing act.” That’s how Minnesota State Auditor Julie Blaha described how local cities tried to handle budgets during the COVID-19 pandemic in her 2021 “State of Main Street” report.
While the pandemic may have crippled some local businesses, local governments did not see significant drops in reserves. Instead, Blaha said cities managed to “stay on their feet.” Many cities saw flat or slight decreases in revenue.
“I think we’re very lucky that local governments came into 2020, on average, in good shape,” said Blaha. “They were able to weather the storm a lot easier.”
Cities and counties were required to submit proposed budgets by the end of January. The state auditor’s office release of data is the first opportunity to see the full effect the pandemic had on local government finances.
view of Main Street in Maple Grove
Property Taxes Increase, Other Revenue Sources Plummet
Cities, on average, budgeted a 4.3 percent increase in property taxes. Property taxes made up 51 percent of revenue for cities in 2021 proposed budgets, an increase from 49 percent in 2020. All other sources of city tax revenue decreased 27 percent. Those sources include sales, liquor and hotel taxes.
“We found, generally speaking, cities and counties were very moderate with any tax increases,” said John Jernberg, research analyst with the state auditor’s office. “They were focused on limiting large changes in property taxes.”
Cities are required to keep five months of operating expenses on hand because property taxes come in twice a year.
Blaha said the data points to a need to keep federal and state aid to local governments stable going forward. She also said the pandemic’s impact is far from over.
“This may take longer than we anticipate because of the lags in local government budgets,” Blaha said.
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