The bill amends the way city aid is calculated in Minnesota by introducing a sparsity adjustment. This adjustment is designed to factor in the geographical spread of a city’s population, particularly benefiting cities with lower population densities:

1. Population Thresholds and Aid Calculation:

   • Cities with 10,000+ residents: The formula for calculating city revenue needs includes variables like pre-1940 housing stock, city age index, and commercial/industrial utility percentage, adding a "sparsity adjustment" to accommodate sparsely populated areas.
   • Cities with 2,500 to 9,999 residents: A slightly different set of variables is used, including a base amount plus adjustments for pre-1940 housing, commercial/industrial utility percentage, peak population decline, and the sparsity adjustment.
   • Cities with fewer than 2,500 residents: The formula mainly considers an adjusted base amount, transformed population factor, and sparsity adjustment.

2. Transition Factors:

   • For cities near population thresholds (like between 2,500 and 3,000, or between 10,000 and 11,000), the revenue need is a blend of calculations from two tiers, adjusted by how much the city’s population exceeds the minimum threshold for each tier.

3. Annual Adjustments:

   • Starting in 2024, the calculated city revenue needs are further adjusted annually by economic factors, specifically state and local government expenditure patterns as indicated by the U.S. Department of Commerce's implicit price deflator.

This bill aims to refine local government aid distribution by acknowledging both the population size and density, ensuring that funds might be allocated more equitably, especially for smaller or less densely populated communities.