A True Reform of LGA

Consolidating cities could save the state millions

When the state is facing a huge budget deficit, money-saving ideas that reduce redundancy in services and reduce and transform government should be welcomed with open arms.  Some have looked to changes in Local Government Aid to deliver such reform.  So is there a way to save the state money, reduce redundancy in service and reduce and transform government?  Yes, but it might make more than a few people uncomfortable. It’s called consolidation, not just of services, but entire cities.

Minnesota has 854 cities, 140 inside the seven-county metro area, and 714 outside.  That’s a lot of cities for a state of 5.3 million people.  In Greater Minnesota there are many small older cities that developed to support the farm economy.  In fact, only 35 cities have a population over 10,000 in Greater Minnesota and nearly 600 have a population under 2,500, including 478 that have populations less than 1,000.  Consolidation of these cities, however, is difficult given the distance between them.

Inside the seven-county metro area it’s a different story.  The vast majority of cities were not established – or did not really start to grow – until after World War II.  There are exceptions: Minneapolis, St. Paul, and Stillwater along with a few others.  For the most part, however, metro suburbs formed, especially in the late forties and early fifties, intentionally separate from the older core cities.  Reasons for this phenomenon go far beyond the scope of this article, but the end result is numerous cities.  Every city has its own government and tax base, and each is making decisions that impact beyond its borders.

So what if past policymakers made different choices?  What if instead of allowing rapid growth in the number of city governments they instead allowed the core cities of Minneapolis and St. Paul to grow with the region?  Or what if we consolidated those cities today?

If St. Paul were consolidated with the other cities in Ramsey County – let’s call this city St. Ramsey – it would reduce the number of city governments from 16 to one.  The current cities are certified to receive $69 million in LGA in 2011.  The consolidated city of St. Ramsey would, under the current LGA formula with the savings going to the state and not redistributed to the cities, receive $47 million, a savings of almost $22 million.  While not a huge savings to the state, it’s a start.

St. Paul’s suburbs go far beyond the Ramsey County border.  If the 45 cities in Washington and Dakota Counties were also consolidated with St. Ramsey, the savings to the state would grow to $76 million.  The new city – let’s call it St. Ramwashakota – would receive zero LGA under the current formula if the savings go to the state.

Looking to the other side of the river in Minneapolis, consolidation really starts to show its worth.  Hennepin County has 42 cities and 22% of the state’s total population.  Currently nearly $99 million in LGA is sent to cities in Hennepin County.  If all the cities consolidated into one – let’s call it New Minnehenapolis – under the current LGA formula with the savings going to the state, the consolidated city would get zero LGA, a $99 million savings to the state.

Has this made you a little uncomfortable yet?  If not, maybe this will.  What if we consolidated all cities in the seven-county metro area?  That’s right, all of them.  Minneapolis and St. Paul together with all the suburbs – let’s call it Metroville – the savings in LGA would be $185 million.

While savings from consolidation can mainly be found in the metro area, there are several Greater Minnesota communities that could catch the fever, but in a different light.  Let’s look at Alexandria.  Alexandria’s population is 12,415 for its certified 2011 LGA.  The city has two adjacent townships, Alexandria and La Grand, that have populations of 3,342 and 4,437 respectively.   Both townships have stronger tax bases per person than the city of Alexandria.  If these two townships were consolidated into the city, Alexandria’s LGA, using the same system as before, would reduce an estimated 45% from roughly $1.6 million to $900,000.

So what is the point of this exercise?  We are never going to consolidate St. Paul and its suburbs or Minneapolis and its suburbs, much less the whole metro region.  Alexandria may consolidate with its townships, but current land use laws do not really encourage this action and without township support it’s very difficult.  The point is: decisions on land use matter.  Minnesota has set up a system that allows for fractured local governance.  Cities’ abilities to raise revenue within a region are dependent on way more than locally controlled decisions.  Tax bases within a region vary due to large infrastructure investments and historical migration trends.  The price we pay for our numerous individual city governments is the need for some equalization to offset the higher burdens placed on some cities and the lower tax bases found in others, sometimes divided by nothing more than a residential road.

While LGA reform might be wanted, reform strictly for reform’s sake is probably not desired.  Minnesota’s current formula addresses the needs created by our history of allowing fractured local governance.  The next LGA reform must also be based on a strong policy rationale and meet common public policy goals.