Auditor report details special district finances

The Office of the State Auditor has released its analysis of the finances of more than 550 special governmental districts that range from the Metropolitan Council to local watershed districts. As has been the case in the past, the report that covers 2011 shows that the special districts spend more in the aggregate than they take in. But Auditor Rebecca Otto cautioned that the overall numbers can’t easily be rendered as a blanket statement on the finances of all of the state’s special districts.

“You have to be careful, because there are a small number of entities that have a huge influence on the numbers,” Otto said.

Soil and water conservation districts are the most numerous type of special district, closely followed by housing and redevelopment authorities. There are also a range of less common entities such as hospitals districts and public safety authorities.

The report covers 553 special districts in the state’s 2011 fiscal year, which ended June 30, 2012 (56 districts didn’t comply with the Auditor’s reporting requests).

Special districts are divided into two categories: governmental funds that raise and spend tax dollars and enterprise funds that are built up by fees from operations. The revenue of the 372 governmental funds lagged their expenditures by $62 million. They reported $968.7 million in revenues and $1.03 billion in expenditures in 2011. But of the bunch, a relatively small number are the major players. There are 13 districts with revenues greater than $10 million, and they represent 54 percent of all governmental fund revenues. Two entities in particular, the Metropolitan Council and the Counties Transit Improvement Board (CTIB), account for 32 percent of total revenues. The Met Council and CTIB were also the big spenders. The Met Council had 20 percent of total spending and CTIB had 14 percent.

The enterprise funds posted $445.4 million in operating losses in 2011, with $2.08 billion in operating revenues and $2.52 billion in operating expenses. And again, the Met Council had a major impact on the red ink: Its six enterprise funds all showed operating losses except its environmental services operations. The total operating losses for the council’s enterprise funds were $342.7 million.

A significant share of the operating losses was covered by non-operating sources of revenue such as taxes, intergovernmental grants and interest income. In the case of the Met Council, the non-operating sources whittled down the shortfall to a net loss of $62 million in 2011.

The special districts showed $5.61 billion in outstanding long-term debt. That’s more than counties’ $3.54 billion of debt for the same period, though less than cities’ debt load of $9.51 billion. Of the 121 special districts that held long-term debt, three districts — the Metropolitan Airports Commission, Met Council and the Southern Municipal Power Agency — accounted for 70 percent of it.

At the Capitol, discussions about special districts pop up occasionally, especially in tax committees. In the 2013 legislative session, legislators devoted considerable attention to a bill by Rep. Ron Erhardt, DFL-Edina, and Sen. Jim Carlson, DFL-Eagan, that would have authorized municipalities to create street improvement districts. The bill, which was supported by the League of Minnesota Cities and the Minnesota Transportation Alliance among other groups, would have allowed cities to collect fees from property taxpayers in the district to be put in a special fund to build and maintain city streets. The proposal passed several committees as a standalone bill and was included for a time in the House omnibus tax bill, but failed to make the final version.

The backers of the bill argued that the districts would help make up for accumulated deficiencies in state aid for street maintenance. The bill was opposed by a large cross-section of the business community, including the Minnesota Chamber of Commerce, the Minnesota Association of Realtors and the Minnesota Retailers Association.