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Small towns 'just one disaster away'

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Floodwood, Minn.
Like many smaller Minnesota communities, Floodwood, Minn. is experiencing declining school enrollment, state aid cuts and increased taxes among many other challenges.
Derek Montgomery for MPR

Tough economic times are forcing cities of all stripes to re-examine how they spend tax dollars. But in the smallest towns, like this one halfway between Duluth and Grand Rapids, many are starting to worry that growing pressure is putting their actual existence in danger.

In downtown Floodwood, for example, there's been a Bridgeman's cafe since the 1960s, when about 700 people lived here. But with taxes and other expenses rising and the population down to 528, owner Rick Ebert isn't sure how much longer that will be true.

"If the town shrinks, the business is going to shrink," Ebert said. "And there's going to be more and more, I feel, businesses closing, because they won't be able to pay their taxes, for one thing."

The state projects Floodwood will lose another 100 people by 2035, and tax increases have been a big deal in Floodwood lately. Some residents worry they will make the town shrink faster.

The city has raised its tax levy on local businesses and residents by nearly 30 percent since 2002. That's about the time the state of Minnesota began cutting local government aid to cities. 

Taxes on Ebert's cafe have gone up 36 percent over the past decade. And with changes to state tax regulations this year, his taxes will probably see another big hike in 2012.

"The business has kept us in the area," Ebert said. "But if things don't change and prices continue to rise, it's going to be very hard to stay in business here."

Floodwood is nothing like it was in its heyday, when there were car dealerships, a movie theater and several grocery stores. But there are still about 30 businesses in town, including a hardware store, banks, some convenience stores and a small clinic. There's still a local elementary and high school

City officials say they've slashed their general fund budget by 26 percent over the past decade to keep taxes down. Technology has made them more efficient. The police department, for example, gets by with two full-time officers instead of three by using in-car computers and electronic systems that save officers trips to the St. Louis county seat in Duluth. 

But the lack of financial resources still takes its toll.

Tight budgets mean city properties get mowed half as often, said Dave Denoyer, a former mayor of Floodwood who now serves on the school board and is the town's police chief. Bigger projects, like maintaining roads and infrastructure, happen less frequently, he said.

"You're not getting your street repair done," he said. "You're piecemealing things together because the money isn't there. Every time they cut local government aid, it does set you back in a small community.

In a small town like Floodwood, paring back can mean local officials pitch in when they're needed to save money. Mayor Jeff Kletscher has done everything from planting shrubs and spraying for weeds to getting behind the wheel of a city snow plow to fill in for a vacationing city worker.

Kletscher, president of the Minnesota Association of Small Cities, says growing economic pressures are putting small towns in peril, especially those with shrinking populations of just a few hundred people.

"Small towns are in a sense just one disaster away," he said. "It's not a big disaster. It's a leaky roof, it's a sewer pump that could go, it's a big water main break. It's just one little step away from things going bad."

Some towns won't survive, he thinks. 

"There will be less than 854 cities in the state of Minnesota in 10 years," he said. "I'm fairly confident of that. Some of them just aren't going to make it. The population gets too small and the cost of providing minimal service is just too big."

That possibility is leading to increased discussion among policymakers about who provides services when small towns can no longer afford to. Some of that burden could fall to counties. And some services people are used to may just go away.