MARSHALL — The COVID-19 pandemic left a lot of questions for local governments – including questions about how to make financial plans for 2021. Financial data for local governments show that across Minnesota, cities and counties have been planning to keep their budgets as stable as possible and control spending, the Minnesota Office of the State Auditor said last week.

It’s a pattern that holds up for Lyon County and the city of Marshall, local officials said. The pandemic and its effects on businesses and taxpayers were some of the uncertainties local governments faced this year.

“I think when we adopted the budget for 2021, we definitely had that in mind,” said Lyon County Administrator Loren Stomberg. The farm economy wasn’t looking great at the beginning of the year, and Lyon County commissioners were also clear about not wanting large levy increases, Stomberg said.

Lyon County approved a levy increase of 2.23% for 2020, and a proposed budget that included about $13.11 million in general fund revenues and $13.16 in expenditures. For 2021, the county approved a levy increase of 1.1%, and a proposed budget that included about $13.39 million in general fund revenues and about $13.45 million in expenditures.

Marshall City Administrator Sharon Hanson said the city typically starts the budget process each year with a larger proposed levy increase and budget, and pares the proposal down to a final amount.

“We really do try to look at what is the reality of our property tax payers,” she said. In June 2020, “We knew the council wanted us to be cautious,” she said.

The city of Marshall approved a levy increase of 3.99% for 2020, and a proposed budget that included about $12.71 million in general fund revenues and about $12.88 million in general fund expenditures. For 2021, the city approved a 2.8% levy increase and a proposed budget that included about $13.11 million in general fund revenues and about $13.25 million in expenditures.

Annette Storm, director of administrative services for the city of Marshall, said aid like CARES Act funding also helped the city a little in 2020, although some of that funding was passed on to local businesses in the form of grants. At the same time some normal city expenses, like employee travel expenses or operating the Marshall Aquatic Center, were down in 2020 because of COVID-19 restrictions.

The Minnesota State Auditor’s Office said many cities and counties in greater Minnesota are in a similar position. The Auditor’s Office presented some general trends in local government last week, as part of its 2021 “State of Main Street” analysis.

“Our main top line is about balance,” said State Auditor Julie Blaha. “We are seeing that, as most entities have been going through a difficult time, they have been able to balance revenue shortfalls with other options.”

“On average, we are not seeing big drops in reserves, we’re not seeing big increases in reserves. We’re actually seeing a lot of stability, and if you’re a local government official, stability is your goal,” she said.

To do the State of Main Street analysis, the Office of the State Auditor compared 2020 and 2021 summary budget data from Minnesota cities and counties. At the beginning of each year when cities and counties formally adopt a budget, they are required to report that information to the State Auditor’s Office. While the budget numbers are estimates and not actual financial data for those years, they can help show how cities and counties are planning during the COVID-19 pandemic, representatives from the Auditor’s Office said.

“This year we know that legislators, Congress, so many people are trying to make decisions relatively quickly in light of the pandemic,” Blaha said. “So as a result, we decided to stop and as soon as we had information that was useful, get that out to people.”

In general, the trend for city and county governments in 2021 was to keep budgets flat, or plan for decreased total revenues and expenditures. Across Minnesota, counties and cities were planning for less in expenditures, especially for capital outlay projects. In contrast, actual city and county revenues and expenditures had increased over 6% between 2018 and 2019, the State Auditor’s Office said.

Other trends the State Auditor’s Office noted were that counties and cities were planning to use fund balances like reserves to help balance their budgets, and that cities were bracing for a reduction in revenue from local option taxes like food, lodging and sales taxes.

Storm said the city had planned to use about $142,000 from fund balances in 2021.

Lodging and food and beverage tax revenues were down for the city of Marshall in 2020, Storm and Hanson said. However, the city did collect about $1.56 million in sales and use taxes in 2020, which was about a 3.3% increase from 2019.

Over the past year, Hanson said, “Everyone was just kind of holding their own.” The concern for the city into the future is what impact the pandemic will have on Marshall’s tax capacity.

“We’re concerned about our business community, and whether they could survive the shutdown,” she said.

While COVID-19 did bring a lot of uncertainties for local governments, so far, “We have been able to weather it pretty good” in Lyon County, Stomberg said.

“The bottom line is, the county is stable. That said, we’re always looking for what negative impacts are coming down the road,” he said. In the long term, Stomberg said he was also worried about whether some large employers in the county will go back to using their office buildings after the pandemic is over. If the property values on some of those business properties go down, it could lead to residential and agricultural properties taking on a bigger portion of county property taxes.