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��� , �� <br />Memo <br />To: Neal Beets, City Manager <br />From: Chris Miller, Finance Directo G� <br />Date: January 30, 2001 <br />Work Session <br />Date: 02/04/02 <br />Item: II. A <br />Background <br />The following information has been prepared to provide an overview of the potential fiscal <br />impact of the Governor's proposal for eliminating the projected State budget deficit for the <br />current biennium. The impacts detailed below, are based on information obtained through the <br />League of MN Cities, Association of Metropolitan Municipalities, the Municipal Legislative <br />Commission, and the Department of Revenue. <br />Potential Fiscal Impacts <br />The Governor's proposal contains a number of potential fiscal impacts, most notably the <br />elimination of the City's Loca1 Government Aid (LGA) in the amount of $41,381, and, the <br />partial reduction in the City's Market Value Homestead Credit Aid, in the amount of $179,000. <br />Overview of LGA <br />Given the heightened <br />information to provide <br />media attention on LGA, Staff has compiled the following supplemental <br />an overview of LGA. <br />Local government aid was originally established in 1971 as a property tax relief program to <br />replace various tax aids provided by the State to local governments. Since its inception, the LGA <br />formula has been changed many times. The 1993 Legislature enacted a new "need-based" <br />formula that distributed aids based on a city's relative tax base. Cities with relatively lower tax <br />bases would receive more LGA than cities with relatively higher tax bases. The formula used to <br />calculate each city's share of LGA takes into account the number of housing units, population, <br />market value, and various other state aids currently received by the city. <br />Based on the LGA formula, the City is slated to receive $41,38 1 in 2002. This is relatively small <br />compared to other metro area cities, and results from the City's relatively strong tax base. <br />Staff will provide additional information on the potential fiscal impacts of the Governor's <br />proposal at the worksession, and will be available for additional inquiries. <br />