Hermantown to Lose All Local Government Aid in 2018

HERMANTOWN, Minn. – The following is a release from the City of Hermantown on Local Government Aid cuts:

The City of Hermantown is preparing for another cut in Local Government Aid (LGA) as it prepares their 2018 City Budget. The City will lose all Local Government Aid in 2018. In 2017, the City received $66,001 in LGA, but the City will receive no LGA in 2018. This is the fourth consecutive year the City has seen a reduction in LGA. In 2014, the City received $355,571 in LGA. This is equivalent to approximately 9 percent of the City’s tax levy.

The fact that the City is receiving zero in LGA is in stark contrast to the surrounding cities which are receiving the following amounts in LGA in 2018:

Duluth $29,645,959
Proctor $1,047,772
Rice Lake $429,943

Despite this lack of LGA, the City still has the second lowest City tax rate of 39.565 when compared to the tax rate of surrounding cities.

Duluth 37.568
Proctor 61.955
Rice Lake 44.030

Furthermore, the City should have received $163,261 in LGA in 2017. According to the Minnesota House of Representatives Research Department the 2016 LGA was less than the state determined “unmet need” and should not have been cut to $66,001. This was called an “unintentional error” in the formula. When the Legislature attempted to correct this “glitch” in the law, they corrected it going forward, but not for the current year of 2017. Because of this, the City of Hermantown did not receive the aid it should have received in 2017 and consequently, will now receive zero aid in 2018.