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City could lose $170K in state aid

The city of Rosemount will likely be out $171,000 as the results of spending cuts aimed at relieving the state's budget deficit. The cuts mean Rosemount probably will not receive its second scheduled payment from state market value homestead credit funds.

Expecting such a loss city staff acted with caution and made some spending cuts to absorb any surprises. With the governor's decision on state spending cuts expected any day now, those cuts look wise.

"It would be better for the budget to have those funds than not to but we'll still be in the black," city administrator Dwight Johnson said.

Minnesota is facing a short-term deficit of at least $426 million for the remaining seven months of the current biennium and a long-term deficit of nearly $5 billion for 2010-11. To address the deficit Gov. Tim Pawlenty has proposed making cuts to government aid to cities.

On Monday the League of Minnesota Cities put up estimates on its web site calculating how much cities including Rosemount stand to lose. The LMC estimated that if the legislature makes a $25 million cut to LGA and MVHC funds Rosemount will lose $134,200. If there is a $100 million cut the city will lose all of its MVHC funds.

Rosemount, which doesn't receive any local government aid funds, is scheduled to receive a MVHC payment of $171,480 Dec. 26. The city received its first scheduled payment in October.

Rosemount finance director Jeff May said staff and the city council has been aware that the city could lose the funds so it held back on spending part of a contingency fund in anticipation. For 2009, May said, the city council did not include the funds in its budget.

"We know that we're going to lose something," May said.

The MVHC reimbursement makes up part of the city's levy. The credit to homeowners reduces a city's property tax receipts by an allocated amount. The state is supposed to make up the difference by reimbursing cities. However, May said, the program hasn't worked most years since it was enacted in 2001.

"Historical trends show that we're not going to get the money," said May.

According to the LMC web site the estimated cuts were calculated by determining the percent of total city revenue base that is represented by the total cut amount. The cut is taken first from the LGA and then from the MVHC if there is not enough LGA.

May said Rosemount will fare better than many because it doesn't receive any LGA and does not rely heavily on MVHC funds.

The governor is expected to announce his decision sometime early next week.