MEASURES OF CITY CAPACITY & NEED Eric Willette & Nick Greene For Mayors LGA Advisory Group June 8, 2012.

MEASURES OF CITY CAPACITY & NEEDEric Willette & Nick Greene

For Mayors LGA Advisory Group June 8, 2012

Road Map Overview

Intro

• Goals Review

• Clusters

• Formula Overview

Capacity

• LGA & Revenues

• Taxes & Tax Rates

• Other Capacity Measures

Need

• Spending

• Overburden

Purpose / Goals Review•What we think we’ve heard so far

• Provide property tax relief

• Ensure ability to provide core services (esp. public safety and public works)

• Increase reliability and stability

• Recognize diversity of needs and capacity

• Encourage innovation and cooperation• Simplify formula

Cluster Background•Clusters group cities according to region, size, property wealth, income and growth patterns

•Updating needed but still show general trends

•For ease of use, we’ve combined clusters into 3 metro and 5 Greater MN categories

Cluster Background, Part 2

Cluster# of

Cities

Average populatio

n

Property tax base

per capita

GMN Small 357 215 $584

GMN Stable / Moderate Growth 268 1,838 $575

GMN Regional / Sub Reg. Centers 49 10,182 $765

GMN Major Cities 3 85,337 $876

GMN High Income / Urban Fringe 36 6,099 $1,112

METRO Diversified / Old / Small 72 9,448 $1,132

METRO Large / High Growth / Income 66 21,684 $1,364

METRO Minneapolis / St. Paul 2 336,671 $1,052

Distribution Formula Overview

• Current need-capacity formula

• Aid bases

Need

• Pre-1940 housing %• 10-year pop decline• Accidents per capita• Avg household size• Metro / Non-metro• Commercial industrial

market value %• Adjusted population

Capacity

• Property tax base times average city tax rate

Gap

• If need exceeds capacity, a city receives formula aid

Local Government Aid Per Capitaaverage 2008-2010

$0

$50

$100

$150

$200

$250

$300

$182

$257

$217

$174

$34 $29$1

$184

Source: State Auditor's Office, Minnesota City Finances

All city per capita average = $103

Per Capita City Revenues average 2008-2010

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

$1,800

$2,000

$182 $257 $217 $174$34 $29 $1

$184$116

$147 $147 $118

$59 $65 $54

$131

$270$286 $303

$296

$389 $412 $418

$540

$386$393 $480 $595

$403 $396$334

$998

All OtherProperty TaxOther State AidLocal Government Aid

Source: State Auditor's Office, Minnesota City Fi-nances

City Property Tax Ratesaverage 2008-2010

$0

$100

$200

$300

$400

$500

$600

0%

10%

20%

30%

40%

50%

60%

70%Property Tax Per CapitaLGA Per CapitaCity Tax Rate

Source: Department of Revenue

Property Tax Per Capita & City Tax Rates average 2008-2010

$0

$100

$200

$300

$400

$500

$600

0%

10%

20%

30%

40%

50%

60%

70%

$270$286 $303 $296

$389$412 $418

$540

Property Tax Per CapitaLGA Per CapitaCity Tax Rate

Source: Department of Revenue

Property Tax and LGA Per Capita & City Tax Rates average 2008-2010

$0

$100

$200

$300

$400

$500

$600

0%

10%

20%

30%

40%

50%

60%

70%

$270$286 $303 $296

$389$412 $418

$540

$182

$257$217

$174

$34 $29 $1

$184

Property Tax Per CapitaLGA Per CapitaCity Tax Rate

Source: Department of Revenue

Property Tax Base Per Capita and City Tax Rate average 2008-2010

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

0%

10%

20%

30%

40%

50%

60%

70%

$584 $575 $765 $876 $1,112 $1,132 $1,364 $1,052

Tax Base Per Capita City Tax Rate

Source: Department of Revenue

City Property Tax BasePer Capita

by county2008-2010

Median Household Income (2010)

$k

$10k

$20k

$30k

$40k

$50k

$60k

$70k

$80k

$90k

$40k $44k $42k$49k

$67k$59k

$80k

$46k

Median Household Income

Source: Census Bu-reau

LGA and Sales Tax ($ millions)

 Coun

t LGA2 Sales Tax3

Chng Net Revenue

Total Sales Tax Cities1 136 $319 $319 $0

Non-LGA cities (receive zero LGA) 52 $0 $138 $138

LGA cities: Sales Tax > LGA 34 $27 $60 $33

Sales Tax < LGA 50 $292 $120 ($172)

All other cities4 717 $128 NA -

1 Based on Department of Revenue sales tax statistics for 136 cities2 Based on average LGA received 2008-2010 3 Based on average taxable sales 2008-2010 at a rate of 0.717%4 City specific sales tax data is not available for cities with smaller populations and business counts

Source: Department of Revenue

Per Capita Net Revenue Change from Replacing LGA with 0.717% Sales Tax

-$600 -$400 -$200 $0 $200 $400 $600

Per Capita Net Revenue Change for 136 cities

Source: Department of Revenue

About 30% change by less than

$50 per capita

LGA Per Capita & Sales Tax Per Capitaaverage 2008-2010

$0

$50

$100

$150

$200

$250

$300

$267

$218

$174

$32 $25$0.2

$184

$58

$108$93

$63$85 $83

$98

LGA Per Capita 0.717% Sales Tax Per Capita

Source: Department of Revenue

For 136 cities with sales tax data

City Spending Per Capita by major category, average 2008-2010

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

$1,800

$2,000

$2,200

$229 $280 $311 $423$190 $269 $225

$636$196$290 $392 $252

$293 $262 $233

$189$538$531

$522 $693

$416 $414$349

$990

OtherStreets & HighwaysPublic Safety

Source: State Auditor's Office, Minnesota City Finances

Public Safety Spending Per Capita average 2008-2010

$0

$100

$200

$300

$400

$500

$600

$700

$165$221

$272

$367

$172

$251$210

$615

$64$59

$39

$56

$18

$18$16

$21Capital Expendi-turesOperating Expenditures

Source: State Auditor's Office, Minnesota City Fi-nances

Streets & Highways Spending Per Capita average 2008-2010

$0

$50

$100

$150

$200

$250

$300

$350

$400

$450

$136 $132 $142$99 $93 $79 $84 $109

$60$159

$250

$153 $200$183 $149 $80

Capital ExpendituresOperating Expenditures

Source: State Auditor's Office, Minnesota City Finances

Formula Factors of NeedFactor

Cities over 2,500 population

Cities under 2,500 population

Pre-1940 Housing Percentage 10-year Population Decline Accidents per Capita Average Household Size Metro / Non-metro Commercial Industrial Market Value Percentage Adjusted Population

Other measures of Overburden

Variable Current formula

Jobs LGA jobs aid

Tax-exempt property -

Crime rate County aid formula

Poverty County aid formula

Age-adjusted population County aid formula

Rental Housing % -

Public Safety City Spending Per Capita & Jobs Per Capita average 2008-2010

$0

$100

$200

$300

$400

$500

$600

$700

0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

$229 $280 $311$423

$190$269 $225

$636

Public Safety ExpendituresJobs Per Capita

Source: State Auditor's Office, Dept. of Employment and Econ Development

Public Safety and Streets City Spending Per Capita & Tax Exempt Property average 2008-2010

$0

$100

$200

$300

$400

$500

$600

$700

$800

$900

0%

5%

10%

15%

20%

25%

30%

$425 $570 $704 $675 $482 $532 $458 $824

Public Safety & Streets Spending Per CapitaTax Exempt MV Percent

Source: State Auditor's Office, Department of Rev-enue

Median Household Income (2010) and LGA Per Capita (2008-2010)

$k

$10k

$20k

$30k

$40k

$50k

$60k

$70k

$80k

$90k

$0

$50

$100

$150

$200

$250

$300

$40k $44k $42k$49k

$67k$59k

$80k

$46k

Median Household Income LGA Per Capita

Source: Census Bureau, Department of Rev-enue

Wrapping Up• LGA cities raise less property tax with higher tax rates and spend more

• Property tax base is more uniform than sales tax base among cities

•Higher spending on public safety and public works is correlated with several overburden measures

Wrapping Up (continued)

•Cities have diverse needs and capacities

•What you measure depends on the program goal or goals

•Multiple goals and many variables results in a complicated formula

•A more simple formula must ignore some relevant differences among cities

Thank you

•Eric [email protected]

•Nick [email protected]