By Craig Johnson
Each year ongoing basic services provided by our cities in Minnesota, like public safety, public works, parks and recreation facilities are funded through sources like property taxes, fees and fines, and state aids.
Some municipal expenditures, though, like those for water and wastewater infrastructure, local roads and bridges, and other costly items cannot easily be funded through those sources.
That’s why cities rely on a financial partnership with the state to ensure that costly capital expenditure projects with wide impact can be completed. The state of Minnesota’s capital budget is primarily funded by issuing what are known as state general obligation bonds.
It includes grants to local governments, approved by the legislature and the governor, to acquire and improve public lands and buildings and other public improvements like construction and maintenance of critical infrastructure.
The Minnesota State Legislature failed to pass a 2024 capital investment bill to provide for critical public infrastructure. Even though the Legislature passed a bill in 2023 that included $2.6 billion in bonding and cash investments, there still remains $5 billion in pending requests.
The League of Minnesota Cities, the state’s largest membership organization for municipalities, supports enactment by the state legislature and governor of a significant bonding bill package during the 2025 State Legislative session
Bonding dollars benefit not only individual communities, but support projects of area, regional, or state significance. Cities seeking capital investment monies must demonstrate that requested projects serve a public purpose that benefits constituents beyond residents of a particular city, be publicly owned, have a purpose clearly set forth in the law, and constitute capital expenditures.
It’s common for cities that propose projects to work with their area legislators to have bills introduced authorizing state bonds for the project. While these bills are not passed individually, they do draw attention to the issue and often receive brief hearings to allow the proposal to be explained in more detail.
The League has particular concern about recent legislative movement that would require local governments to demonstrate they have reserved money to pay for expansion, maintenance and eventual replacement of their requested projects in order to receive state bonding dollars. We believe that requirement is unnecessary and that Minnesota’s existing capital improvement planning and vetting process already provides assurance that cities are prepared.
In January, Governor Tim Walz proposed an initial state budget that includes $790 million in general obligation bonds. The governor’s proposal marks a starting point to what is likely to be a lengthy process to produce a 2025 capital investment bill. The House and Senate are both likely to unveil bonding packages, and differences with Gov. Walz’s plan will have to be negotiated before final approval.
Throughout this process, the League of Minnesota Cities will continue to be helpful and vigilant while representing the best interests of cities seeking necessary bonding dollars. We see the passage of a bonding bill as an essential responsibility of the legislature to meet our state’s needs for public health, safety, and economic vitality.
Craig Johnson is a senior intergovernmental relations representative for the League of Minnesota Cities.
