FFM Bulletin 5/11/12

Legislative Auditor Study: Local government units should consider consolidation

A report released Wednesday by the Office of the Legislative Auditor (OLA) noted that the more than 2700 local units of government may want to take another look into combining services as a cost saving measure for taxpayers.

Though consolidation is rare for local units of government in Minnesota, the report says the legislature should make it easier for cities and counties to do so. The study found that the total cost of city, county, and township government was roughly $11.5 billion in 2009.

“We found that there may be opportunities for more consolidation among smaller local governments in Minnesota, particularly those with capital-intensive service or equipment needs. However, consolidation proposals need to be evaluated on a case-by-case basis to determine if consolidation would be appropriate,” the summary report read. “ We recommend that the Legislature use requests to fund local capital projects as opportunities to encourage consolidation and collaboration.” 

Be sure to read the check out the entire report on consolidation of local government.

And, while they’re at it, the Freedom Foundation of Minnesota encourages local elected officials to consider elimination of non-essential services better provided by the private sector….see story below for a good place to start.

Taxpayer bailout on the horizon for Vadnais Heigh

Lower than expected revenues, higher than expected expenses, and sloppy record keeping have forced the controversial Vadnais Heights municipal sports facility into a financial dilemma with serious implications for taxpayers: either cut ties to the sports center and default on $26 million in bonds, or ask taxpayers for a $1 million bailout.

The Vadnais Heights Sports Center, which opened just 19 months ago, has quickly become a testament to what happens when government provides services  best left to private industries or providers.

According to an article from the Star Tribune:

“The sports center owes Vadnais Heights $127,000 for a loan the city gave it last year to make a bond payment. The center also owes the city $47,000 for unpaid legal and insurance costs, and there are $54,000 in unpaid utility bills. But most alarming for council members is that even though the arena turned an operating profit of $330,000 in 2011, that was far below the amount needed to cover debt service of $1.1 million.”

An audit in 2011 found that there was confusion between the city and the facility management group about who was responsible for financial aspects. Either way, the taxpayers are the ones left on the hook to pick up the tab for the city’s irresponsibility.

Said Councilmember Joe Murphy: "I'm not sure we can afford this facility.”
We nominate Councilmember Murphy for the understated quote of the week.  Too bad he didn’t say it loud enough for legislators at the Capitol to hear it.

Wasn't government owned housing a big failure in the former Soviet Union?

U.S. taxpayers will now be on the hook for a government planned $62 million affordable housing plan in St. Paul.

Earlier this week, the city announced that it has finalized “financing with a commitment for mortgage insurance deal” with the US Department of Housing and Urban Development for the Penfield development project. 

You remember the Penfield project – it’s the development near the Central Corridor light rail project that private developers lost interest in.  So now we’ll have a government planned and subsidized transit line next door to a government planned and subsidized housing project.

The city’s $62 million deal paves the way for 254 market-rate apartments anchored by a Lunds grocery store, a main priority mentioned by St. Paul Mayor Chris Coleman.

“The Penfield project is catalytic, not just for downtown but for all of Saint Paul. It will drive business along the Central Corridor and provide the quality, full-service grocery store our downtown residents have been seeking for many years,” said Mayor Coleman. “I am thrilled we have received this critical HUD commitment, and I look forward to breaking ground in the very near future.”

Despite support from Mayor Coleman, the city council has been divided over the course of the project. According to a MinnPost article, Council President Kathy Lantry voiced concerns over the city’s “financial exposure” with this deal and argued the city could spend your taxpayer money on, well, more affordable housing. 

FFM in the news

Last weekend, a column in the Wall Street Journal cited FFM research in an opinion piece titled “Gouged by the Wind.” The research was specifically regarding the state’s costly renewable energy mandate.

From the column:

The Minnesota Rural Electric Association, which represents about 50 small utilities serving about 650,000 rural residents, reports that its members lost more than $70 million in 2011 because of the high cost of wind power. "Right now we're paying for wind power we don't need, we can't use and can't sell," says association executive director Mark Glaess.

Utilities absorb some of the cost, but Mr. Glaess estimates that annual residential utility bills are between $50 and $100 higher per household due to the renewable mandate. That may be nothing to a $10,000 donor to the Sierra Club, but tell that to family of four living on $25,000 a year in Fergus Falls.

The costs will rise as the mandates tighten. An analysis by the Freedom Foundation of Minnesota found that Green River Energy utility had $22 million in losses in 2010, $35 million in 2011, and this year it is projecting another $35 million loss. 

Read MN State News for your end-of-session news

On Thursday, both the House and Senate adjourned Sine Die to officially end the 87th Legislative Session. Check out Minnesota State News(www.mnstatenews.com) for the end-of-session news from the Capitol over the past several days.

Also, be sure to follow MN State News on FacebookTwitter, and at www.mnstatenews.com for future updates from St. Paul and local governments around the state.


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