Understanding Rochester Finances – Part 1 of many

There are many nuances to city finance that most folks don’t necessarily understand. Let’s be honest there are multiple reasons for this including the fact that many folks are generally not excited about municipal finances. However… I am…

This is somewhat self serving. I often get these questions and having a consistent canned answer will likely make my life easier.

As such I thought I might write a few posts explaining how city financing works. You have probably heard this before. The Federal government can pass issues onto the State, The State can pass issues on to local governments, but local governments have to solve issues. This is true of County, City, and School Boards in Minnesota.

While higher levels of governments often pass along obligations, they tend to not pass along the funding to meet those obligations. Further they often put substantial restrictions in place in terms of a city’s ability to fairly charge for services. They even go so far as to not allow cities to implement policies that could improve public safety and lower expenses.

As much as possible I would like to communicate verifiable facts. Of course, my opinions will also be interspersed. The overall theme in this series is that we have set our self up for substantial property tax increases. There are fundamentally 2 things that would change this. Both are opposed by a substantial portion of the community. We could get more efficient in how we lay out the city (basically think more tax base per acre). We could diversify funding sources if allowed to by the state.

I think this is a good time to share some of this information because we are in an era of new city leadership. The previous administrator did not leave the structural finances of the city in good condition. Every week we seem to learn more about this. The biggest issue with his legacy is that he left more that $1 billion in unfunded liabilities with no plan to fund them. The new leadership of the city is improving our processes, transparency, and willing to take these issues on directly. Between city staff and the elected body I really only see holdover from that bygone era. That is not enough to slow change.

Here are some of the topics I plan to cover in this series in 2019. I am also encouraging you to give me additional questions and topics that you would like to see addressed.

  • What are our long term trends?
  • How do property taxes work?
  • What is Local Government Aid (LGA)?
  • What funding sources does Rochester have access to?
  • Who doesn’t pay property taxes?
  • What is a Street Utility Districts?
  • How sensationalized media coverage skews the discussion
  • General government vs. Utilities
  • Taxes vs. Fees
  • What drives property tax increases?
  • TIF WTF?
  • How does Rochester do budgeting?
  • Consultants vs. Staff
  • What does a AAA rating really mean?

3 comments

  1. Thank you, Michael, for attempting to help citizens better understand our local finances. I hope the result is more informed and serious conversation in every venue!

  2. Glad to see your blaming the departed administrator and staff, the council and mayor were on board for the decisions that have been made that you are critical of!
    This fits nicely with my position that the city needs to have finances and policy in the hands of the mayor proposing and the council deciding, untilthat happens decisions will continue to be made by non elected administrators!
    You still seem to be waiting for the new administrator to find the answers?

    1. I would feel guilty about this is I had not been a critic when they were here. However this is what I said then as well. I like the idea of a strong Mayor, but just having a council that keeps a qualified administrator is a great start. I am supportive to the current Mayor and Administration.

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