State budget spares Minneapolis' local government aid but ends proposed cannabis revenue for cities

Director Topinka said Minneapolis avoided cuts to Local Government Aid but lost a projected local cannabis revenue stream.

Director Topinka, Director of the Intergovernmental Relations Department, told the Intergovernmental Relations Committee on June 24 that the final state tax bill did not cut Local Government Aid (LGA) or county program aid, outcomes city staff had been tracking closely. She said the Legislature repealed the local cannabis aid account and raised the state cannabis sales tax from 10% to 15%, and noted the city had not yet received cannabis aid and had projected about $250,000 per year if it had been paid.

Why it matters: LGA is a routine part of many cities’ operating budgets; avoiding reductions preserved an expected revenue floor for Minneapolis in a year Topinka described as fiscally constrained. Removing the local cannabis aid will reduce an anticipated modest revenue stream and the higher sales tax changes the state-level revenue split that had been expected to benefit cities and counties.

Topinka also described a clarification related to a prior Alliance Housing Supreme Court decision: properties owned by charities “used primarily for housing” will not be tax exempt in the same way as other charitable property; qualifying affordable housing instead will be taxed at the 4(d) exemption rate and renters in such properties will remain eligible for the renter’s credit and will not be required to pay personal property taxes. She characterized that change as benefiting low-income renters.

Other provisions Topinka flagged included expansions to research-and-development tax credits and changes that created tribal property exemptions for specified institutions (Red Lake Nation College and a Mille Lacs Band property) after city staff reviewed language with the assessor’s office. Topinka said some city priorities did not pass, including a credit for converting commercial to residential buildings and a proposed TIF change for adaptive reuse.

Council members discussed follow-up briefings and technical questions about items that did not pass. Chair Oreen Choudhury thanked staff for the session’s work and emphasized continuing advocacy in the next session.

Topinka framed the overall session as difficult but noted the tangible wins for the city’s budget planning and urged continued engagement with the Legislature on items that failed to pass.