Poor policy and finance in regional fund distribution

I voted against staff’s plan to authorize $5 million in distributions to surrounding communities but lost the decision by a 5-1 ( ) vote.  I think this decision represents bad policy and bad finance.  Here is why.  I’m not necessarily against regional investments, but the way this was done was underhanded, incompetent, and inconsistent.  Rep. Greg Davids is the individual most responsible for the poor policy.  If your community wasn’t good enough to get Davids Dollars, maybe you just didn’t show him enough love.  Sorry Claremont, but congrats West Concord.  Interestingly enough these decisions are on top of the $90 million we already lose on net to the state every year.  If you want to do a quick hypocrisy check on Davids just check if Lanesboro has a similar policy.

While Davids and company did see fit to micromanage Rochester’s funds, the didn’t finish the job.  Davids did determine which communities were worthy in his eyes, and what the total amount would be.  He did not however tell us when the funds should be expended, how they should be expended, what agency should over see them, or whether they could be used for intra regional competition.

I voted against this on the basis of it being pad policy and bad finance.  This does not however change my belief in some of the incredibly dedicated people that work for surrounding communities.  I have met many and rarely been disappointed.  I think they will do a good job, however as a steward of these dollars faith should not be enough.

Bad Policy:

  1. Rochester is the only community in the state that the MN legislature insisted share its revenues with surrounding communities.  In fact, communities big and small don’t even vote on their sales taxes.  This is punitive policy applied to Rochester.
  2. While Davids and company saw fit to add his appropriation to surrounding communities, they also saw fit to eliminate funding for the busiest and most regional library in the state.
  3. We are signing over $5 million in blank checks with no ability to oversee how the funds are spent.
  4. We are distributing the money on the basis of an arbitrary population number as opposed to how we can do the most good.
  5. Claims that we are protected my statute are incorrect as there is no provision to prevent intra regional competition, with the narrow exception of pursuing an existing company within Minnesota

This alone would be sufficient for a “no” vote.  Sadly the method in which we are distributing these funds will also cost Rochester an additional $1.2 million dollars for the benefit of blank checks to be spent elsewhere.

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In the chart above 5 members voted to give away the money shown column 2, I supported column 3.

We are obligate by state law to provide $5 million to surrounding communities, but we can do that any time over the course of the sales tax collections which should run through 2028-2031.  We as a city are within our legal rights to have this $5 million be the last $5 million that comes in.  Because we authorized this money to go out in 2013-2014 the effective c?ost in today’s dollars is about $4.95 million.  Had we waited to pay the money in 2028 the cost in today’s dollars would have been $1.2 million less.  Because we are paying out this money 15 years before we need to we are effectively bonding for it in the interim.  This is just plain nuts.

Getting this money out early might be better overall, and it is definitely better for surrounding communities.  However we are effectively losing $1.2 million of Rochester tax dollars.  My oath is to the City of Rochester not these other communities.  As such, I clearly had to vote against this foolish acceleration of payments.  If we had just given out a fraction each year we would have still saved nearly $700 thousand.

My idea was to provide small grants to each community and the have an independent, qualified 3rd party distribute the remainder to the projects that achieved the maximum regional benefit and avoided intra regional competition.  This plan met 100% of the language in the law.  I also think that we should have committed the money in 2028 and let other cities (not Rochester) borrow or effectively borrow for it in advance.

If you remember only 1 thing it is that Rochester just unnecessarily lost $1.2 million.

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