Duluth braces for LGA cuts

Digging out
A resident of Duluth, Minn., begins the process of digging out from the season's first big storm.
MPR Photo/Catherine Winter

It can be disheartening. Duluth was in the news a lot last year while trying everything to fix a $6.5 million budget deficit. City officials raised a bunch of fees, laid off city workers, and almost sold an antique Tiffany window.

Duluth Mayor Don Ness said they just fixed last year's budget with just a few weeks to go, by selling two, pricey lakefront housing lots.

"And we brought in $1.2 million right at the end of the year," Ness said.

But, at the same time the city lost $1.7 million when the governor, with a stroke of the pen, cut Local Government Aid.

Create a More Connected Minnesota

MPR News is your trusted resource for the news you need. With your support, MPR News brings accessible, courageous journalism and authentic conversation to everyone - free of paywalls and barriers. Your gift makes a difference.

"And all of that hard work is just wiped away," Ness said.

So instead of breaking even, the city ended the year with a deficit, and facing more cuts for the current year.

Enter 2009 and another round of cuts, this time $2.3 million from state Local Government Aid proposed this week by Governor Pawlenty. The two LGA cuts would put Duluth $4 million in the hole going into the new budget year.

Somehow, Mayor Ness remains optimistic. He thought the Governor's LGA cuts would be bigger than that.

"Well, I think we're right on the edge at this time," Ness said. "You know, a $4 million deficit, I think that we can address that without moving to layoffs. There will probably be additional cuts to service. We will probably hold positions open, and keep positions open on an attrition basis. But it will have an impact on services, there's no question about that."

That's not going to be good news for Duluth residents. Some are already unhappy with this year's cutbacks on snow-plowing, libraries and community centers.

City council members are as weary as the mayor with budget issues. But it goes on.

"We have to keep looking," said at large council member Tony Cuneo. "The only way to get through 2009, will be like how we got through 2008, and that means using every tool at our disposal. And so, creative solutions have to be part of the process. You know, maybe we'll have to change the process by which we have to find them. Maybe we'll have to make a greater effort to get ideas from outside of City Hall."

That reflects 3rd District council member Sharla Gardner's thoughts. In a written statement, Gardner suggests consulting with economists at local universities and sharing more services with St. Louis County. She also points out the need to increase revenue coming in to the ailing budget.

Part of the trouble is that Duluth depends heavily on Local Government Aid. LGA is the single biggest contributor to the city's General Fund Budget, making up almost 38 percent of the budget that funds many of the city's operations.

First District council member Todd Fedora said that's too much.

"The challenge that Duluth has had, is that we have not done a good job of expanding our tax base over the years," Fedora said. "We've continued to rely on Local Government Aid."

Fedora said a 1 percent local sales tax, the second biggest source of city funding, is also at risk.

"You're so dependent on LGA and on local option sales taxes, we're in a recession and people are cutting back on their spending," Fedora said. "And when they do that our collections on that 1 percent local option sales taxes are projected to fall as well, at least in my mind."

Mayor Ness said he's looking for more creative solutions, thinking new land sales might help patch the budget from two directions.

"We're undertaking a comprehensive inventory of all city land holdings and to see which land is appropriate to put into private hands, put on the tax rolls and to achieve some upfront sales proceeds as well," Ness said.

Ness expects to be presenting ideas to the city council by March. Meanwhile, Duluth residents will get a chance to wade in with their thoughts on the budget. Three of the region's state lawmakers have scheduled a budget crisis meeting Saturday, Feb. 7, in Duluth's DECC convention center.

But there's a general consensus the state budget picture will look even worse when the new forecast comes out next month, and cities will be looking at even bigger cuts.