Ground Level: Cities in Crisis

Up Close: How some Minnesota cities are dealing with budget deficits

October 5, 2010 updated

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With dwindling revenues and increasing expenses, many Minnesota cities have had to find new approaches to balancing the books. Find out how seven Minnesota cities have worked to solve their budget issues.

Click on the city names below to see their stories.

Solution: Partnering with neighboring cities

Annandale

  • Community

    A city of 3,000 in lake country, about an hour northwest of the Twin Cities.

    Point person

    Mark Casey, city administrator.

  • Lay of the land

    Annandale has sustained repeated cuts to LGA. Since 2008, the city has cut more than $200,000 -- or over 12 percent -- from its budget. It has lost a police officer, which City Administrator Casey points out, "is 20 percent of our workforce."

Community response

Annandale partnered with neighboring cities Maple Lake and Howard Lake to build a co-owned wastewater treatment plant. It cost half as much to build as three separate plants and a third as much to run.

The project, which was begun before the present economic downturn, was delayed by challenges from environmental advocates and citizens who didn't want the plant located in their townships. The cities persevered and the plant came online a year and a half ago.

"We're similar to a lot of cities. We've had cuts, lots of reductions in everything from staffing to operations. If there ever was fluff it's gone. All the low-hanging fruit is gone, too. It's enough just to keep the lights on. Given how tight it is now, I can't imagine what it would be like if we weren't able to spread these costs out." — Mark Casey

Solution: Merged police departments

Chisago City-Lindstrom

  • Communities

    Two cities three miles apart about 40 miles north of the Twin Cities. Each has a population of between 4,000 and 5,000 residents.

  • Lay of the land

    Officials in both cities several years ago were concerned less with saving money than with ensuring full-time law enforcement that helped maintain community identity.

  • Point people

    Lakes Area Police Chief Kevin Stenson; Deputy Police Chief Bill Schlumbohm, formerly Chisago City police chief.

Community response

The two police departments were merged in 2004 to create a 24-hour, seven-day-a-week operation. Officers are assigned a few days in one city, followed by a few days in the other to make sure all residents get to know them. This was made easier by several factors.

The two police chiefs brought the idea to the city council, with the support of some in the community. The two cities had cooperated before on a sewer district and consolidated schools. Though some apparently complain from time to time that they don't see enough presence in Chisago City (the main department is in Lindstrom, Chisago City handles the finances), patrols are designated for both cities 24–7.

"(Police) are the face of government...they are the first call for help literally. You lose that when you lose your department." — Bill Schlumbohm.

Links: Lakes Area Police Department, Chisago City, City of Lindstrom

Solution: Dimming streetlights, cutting services

Red Wing

  • Community

    A city of 16,000 residents, 45 miles down the Mississippi River from St. Paul.

  • Lay of the land

    The city was forced to trim $2 million from its budget in 2009 and expects to cut more for 2011. A garbage incinerator expected to pay for itself is instead losing a half-million dollars a year.

  • Point people

    Michael Schultz, city council president; Rick Moskwa, director of Public Works Department; Kay Kuhlmann, council administrator; John Howe, mayor and GOP candidate for Minnesota state senate.

Community response

Red Wing officials garnered residents' ideas through public meetings, telephone surveys, comment areas in public places and on the web. As a result, Red Wing is considering a laundry list of actions:
• Close the incinerator, even though it has been a contribution to sustainability for 23 years.
• Raise the property tax levy by no more than 2 percent, although the council wants that reduced.
• Levy a $1 per household fee on electric bills.
• Levy a $0.75 per household fee on natural gas.

Untouched for now is the city swimming pool, which costs $225,000 annually to operate. The council would like to see the Mississippi National Golf Links sold. A deal on that appears likely in the coming year, which would save at least the operating cost of $120,000.

Streetlights that were dimmed to save money may go back on because of business complaints. A streetlight utility is possible, but not likely, as another way to add a fee base.

Last year, the city cut a position at city hall that was responsible for ensuring residents didn't store junk in their yards.

"We're past nickel and diming. We need ideas to get to the big ticket items." — Tim Sletten, police chief

Links: Red Wing considers incinerator shutdown, City of Red Wing.

Solution: Cash reserves

Waconia

  • Community

    A city of 16,000 residents, 45 miles down the Mississippi River from St. Paul.

  • Point person

    Susan Arntz, city administrator.

Lay of the land

Waconia issued special assessment bonds to cover sewer, water, lights and road improvements so that Plowshares Development, Inc. could build a new subdivision called Interlaken.

Since late 2008, Waconia has not been paid the assessment fees by the development's financing arm, Lakeland Construction Finance, LLC. Lakeland went bankrupt and is in receivership. The city is owed at least $3 million. Though the assessments eventually will be paid, according to city administrator Susan Arntz, the default has forced Waconia to dip into its reserves.

Community response

Waconia used drained reserves to around 20 percent of operating revenue as of August of this year. The city council is in favor of moving more of the operating budget to reserves to equal 28 percent. That's still below what the Minnesota state auditor recommends, or 35 percent minimum cash held in reserve, or operating expenses to cover five months.

"We're optimistic we will be able to handle expenses through the next year, depending on how 2010 finishes. I'm concerned if below 20 percent (of operating revenue in cash reserve)." — Susan Arntz

Links: Red Wing considers incinerator shutdown, City of Red Wing.

Solution: A 10-year plan

Cambridge

  • Community

    A city of 7,600 people 45 miles north of the Twin Cities that has seen substantial residential and commercial growth in recent years.

  • Lay of the land

    Capital improvements have been delayed, and an industrial park that is not paying for itself has forced the city to make bond payments with other revenue. Local Government Aid could potentially provide more than 10 percent of the city's budget but has shrunk.

  • Point people

    Finance Director Caroline Moe; Mayor Marlys Palmer.

Community response

Cambridge is among the few cities to try to map out a financial future 10 years in advance. City officials have told elected officials that keeping city services at current levels will require roughly a 4 percent annual increase in the city's property tax levy in coming years. The elected council directed staff members to prepare budgets with lower increases, anticipating that job and service cuts will result.

Links: Feeling anxiety, Cambridge exemplifies the budget squeeze, City of Cambridge

Solution: Direct support for the library

Ortonville

  • Community

    A slowly shrinking city of 1,900 people on the Minnesota border with South Dakota.

    Point person

    Vicki Grimli, Ortonville head librarian.

  • Lay of the land

    The library has not had a budget increase in five years, resulting in zero or 1 percent salary increases and freezes in salary steps. A state and federal grant helped fund a media center of computers, which head librarian Vicki Grimli says is so busy the library had to add a full time staffer to keep it organized.

Community response

The library is trying to raise $1,800 for magazine and newspaper subscriptions by asking for direct donations for each magazine subscriptions. The tactic is both a money raiser and a means of measuring what resources users find valuable. Last fall the magazine fundraiser garnered $1,700.

The library has approximately 4,000 card holders in Ortonville and Graceville combined. The Ortonville Library also has users from South Dakota who appreciate the free interlibrary loan system. The Pioneerland Library System based in Willmar has 35 library members including Ortonville. Pioneerland handles overdues and processing.

"Families are busier than ever and so they're having to choose library or (early childhood programs). We got a state federal grant to put in a media center in our lower level. Use of that is way up by all groups. We have a lot of classes, instructional things that people do." — Vicki Grimli

Solution: Writing high-tech tickets

Virginia

  • Community

    A city of 9,100 people on Minnesota's Iron Range.

    Point person

    Dana Waldron, police chief.

  • Lay of the land

    The police department, along with other city departments, was asked to cut about 10 percent from its budget. Police chief Dana Waldron says he has one vacancy on his 19-officer staff that he can't fill. He even offered to sell an old Thompson machine gun, which the department has had for many years, for $30,000. But the city council didn't want the Tommy gun sold.

Response

The police department invested in a digital pen for officers to use when they ticket someone. It records ticket information and allows uploading directly into a database. The pen is made by Velosum, which reports Virginia is one of five northern Minnesota cities that use it: Hibbing, Proctor, Chisolm and Eveleth are the others.

The pen costs $400 each, but Waldron estimates using the digital pen allowed his department to raise 30 percent more revenue because more people pay online and don't contest tickets through the court.

Solution: Keeping up the infrastructure

Mankato

  • Community

    A city of 36,000 people in Blue Earth County in south-central Minnesota. The city sits at the confluence of the Blue Earth and Minnesota Rivers.

  • Lay of the land

    The 2011 budget is expected to be lower than the one in 2006. A big factor in the decline is that state aid makes up 25 percent of Mankato's budget, about $7.9 million. In 2010, $1.5 million of that was cut by the state. Mankato's city work force has diminished by 10 percent over the last 18 months and more jobs may be lost in the coming year.

  • Point person

    Pat Hentges, city manager

Community response

Mankato hasn't given up on infrastructure projects, actually trying to step up the pace on such items as street repair and other capital improvements. The city takes advantage of good prices, federal money in the form of stimulus grants and helps keep some of the financial ripple effect in Mankato. Even with the city spending, Mankato's construction industry has been down since September 2009. And even though Mankato has steadily grown for many years, the tax base will be down about 5 percent.

"I'm seeing two approaches: I think there is that approach that we have to dry up our budgets because we can't rely on LGA (local government aid) and then there's the other that we have to fight tooth and nail for aid. It's going to be a two-part Minnesota if we don't." — Pat Hentges

Solution: A street light by any other name

Zumbrota

  • Community

    A city of about 3,000 people in far southeast Minnesota, just south of Winona.

    Point person

    Neil Jensen, city administrator.

  • Lay of the land

    Zumbrota relies on state aid for more than a third of its budget. And state aid was cut 24 percent in 2010. Zumbrota has laid off all of its part time workers in the last few years, as well as two full time employees. According to city administrator Neil Jensen, employment stands at 1980 levels. Zumbrota is twice as big now as it was then, says Jensen. But the growth that carried Zumbrota in years past has fallen off. The levy certified for 2011 is $96,000 higher than 2010, which Jensen estimates amounts to a $45 increase for a home worth $150,000.

Community response

: "Our council now is looking at a way of weaning off of the fee, but they will keep the ordinance in place in case the state decides they're going to take it completely away. They've talk at the council meeting, of saying, 'We're going to reduce it now, but if we end up with a significant LGA cut that we can't cover in our budget, we may have to increase it again." — Neil Jensen

Solution: Using technology to make workers more efficient

Grand Rapids

  • Community

    A regional commercial hub of 10,000 people in northern Minnesota; home to the UPM Blandin paper mill.

    Point person

    Shawn Gillen, city administrator.

  • Lay of the land

    The city has experienced years of reduced government aid, which led the city council to issue a mandate to its city administrator: Cut the budget without reducing services.

Community response

The city offered an early retirement package to reduce staffing levels and then borrowed money from itself to invest in technology that makes existing workers more efficient. For example, Grand Rapids bought a $320,000 Mack truck. Not only can it plow great swaths of road at a time, it can spread salt and the accompanying de-icing liquid, which used to take two public works vehicles following each other in a tiny convoy.

In addition, the truck can be rather quickly transformed into a snow hauler, with three times the capacity of the older trucks, resulting in fewer dump trips. It does all this with one chassis, meaning reduced maintenance costs.

"We would like to be a model city for how to do things. But our goal is to fix our problem. The problem isn't unique, but the solutions have to be. If you let cities be free to innovate and create, you are going save more money. Cities do it better." — Shawn Gillen

Solution: Sharing services with a neighboring city

Minnetonka

  • Community

    A Twin Cities suburb of 51,000 people, west of Minneapolis and abutting Lake Minnetonka.

    Point person

    John Gunyou, city manager.

  • Lay of the land

    Minnetonka doesn't receive Local Government Aid, so it hasn't felt those particular state cuts. In recent years, it has experienced a reduction in another type of aid - Market Value Homestead Credit reimbursements - to the tune of $500,000. Around two years ago, the city made $2 million in permanent cost reductions and downsized its workforce by 6 percent. It lost 14 positions, about half through attrition.

    The city also has an aging population, which could affect the city's tax base in years to come. "Right now, we are about 21 percent under 18 and 29 percent over 55," says City Manager Gunyou. "In five years, that 29 percent will be 33 percent."

Community response

After three positions were lost in Minnetonka's inspections department, the city forged an arrangement with St. Louis Park to swap inspectors. St. Louis Park focuses on electrical inspections and Minnetonka on food, beverage and lodging.

John Weinand, Minnetonka's environmental health supervisor, carries two badges on his rounds, one for St. Louis Park and one for Minnetonka. If anyone questions his authority (a rare occurrence, he says), he hands them a brochure explaining the arrangement.

"We can cut back, do things smarter. But there are limits to how much you can reform. [At some point], cities will do it to the point of hurting services. We're servicing everyone. We can't say no shirt, no shoes, no service." — John Gunyou

Solution: Establishing a volunteer corps

Red Wing

  • Community

    A tourist destination of 16,000 people on the banks of the Mississippi River southeast of the Twin Cities.

    Point person

    Kay Kuhlmann, council administrator.

  • Lay of the land

    Red Wing has cut 25 employees since 2009, 16 of them from public works (a common target, since parks are often viewed as nonessential). At the same time, the city's general fund expenditures were reduced by more than $2 million, to just under $14 million this year.

Community response

With the help of former Mayor Donna Dummer, the city established a volunteer corps of 200 people who do everything from planting and weeding the city’s parks to painting picnic tables and raising flags. Many of these tasks – centered on summer maintenance – were once performed by city employees and paid seasonal workers.

Council administrator Kuhlmann estimates that the city saves more than $100,000 per year through the use of volunteers.

"People are starting to think in this mode. They want the community to look the same, but there are budget cuts. The need for volunteers is growing." — Donna Dummer

Solution: Cross-training police officers

Woodbury

  • Community

    A growing suburb of 58,000 people, southeast of St. Paul.

    Point person

    Clinton P. Gridley, city administrator.

  • Lay of the land

    Almost a decade ago, the city experienced a $1 million loss in state aid, yet, because it's a growing community, it also felt increasing demand for fire and police services. Because the cuts came so long ago, compared to most cities in Minnesota, they've had time to prepare.

Community response

With the philosophy that the aid was gone and not coming back, Woodbury came up with a "full integration public safety business model," which led the city to find a new, efficient ways to provide more service with fewer resources. Now, all police officers are cross trained as firefighters or paramedics.

Cross-training saves the city precious dollars, according to city administrator Clinton Gridley, and results in much faster response times. A paramedic in Woodbury arrives on the scene in four minutes or less 90 percent of the time, he says.

"We have a quicker service model. A call comes to a police officer who is already moving and in a car and he or she provides paramedic service quickly. The time difference is great between ours and a traditional arrangement. It can be four or five minutes. If you are going to have a heart attack, have it in Woodbury." — Donna Dummer