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HomeMy WebLinkAbout2014-01-07_WORK SESSIONs Adopted by the Board of Directors on 1211612013 Prepared by Messerli & Kramer, P.A. 525 Park Street, Suite 130 St. Paul, MN 55103 -9- 27093\1 SUMMARY OF 2014 LEGISLATIVE PRIORITIES I. Promote accountability and transparency in the State/local fiscal relationship A. Support policies that help promote a more equitable property tax burden as a percentage of income (Voss Database). B. Protect the circuit breaker program. C. Fix issues with the sales tax exemption for local government. D. Support policies that help simplify the property tax system. E. Improve the predictability and timeliness of Fiscal Disparities information. F. Oppose fiscal limitations on local units of government. II. Invest in job retention and growth A. Support providing DEED with the tools and incentives necessary to attract and retain businesses. B. Support flexibility in Tax Increment Financing (TIF) policies. C. Support a broad based transportation funding package that promotes economic development and growth in the region and keeps Minnesota competitive. III. Support local government policies that promote fairness and equity A. Oppose mandates relating to expenditure -type reporting. B. Support Street Improvement Districts. C. Water Resource Management- reduce or better align agency oversight. -10- 27093 \1 2014 LEGISLATIVE INITIATIVES The Municipal Legislative Commission (MLC) has identified the following issue areas as priorities for the 2014 Legislative Session: I. Promote accountability and transparency in the State/Local fiscal relationship; II. Invest in job retention and growth; and III. Support local government policies that promote fairness and equity. I. PROMOTE ACCOUNTABILITY AND TRANSPARENCY IN THE STATE/LOCAL FISCAL RELATIONSHIP MLC Communities believe that the Legislature must constantly strive to develop policies promoting greater stability, transparency and predictability in the fiscal relationship between the state and local units of government. When possible and efficient, public services should be provided by the level of government closest to those affected d. Our communities believe that the system created by the State to finance city services must be equitable, accountable and straight forward. The MLC urges the legislature to be mindful of the following guiding principles when deliberating on tax, finance and regional growth initiatives: • In order to promote accountability, local government finance should demonstrate a strong relationship between taxes paid and benefits received. • Unfunded state mandates, levy limits, property tax freeze and reverse referenda significantly limit the predictability necessary for local governments to plan with financial confidence. • Cities characterized with high property values are not universally populated with high - income residents. Populations in all of our cities include retirees on fixed incomes, single parents and apartment dwellers. The number of seniors in our communities is rising. Policies that ignore such diversity are not equitable. • In the interest of maintaining the stability of our local communities, any tax reform that is considered should minimize burden shifts on individual taxpayers and businesses, and potential revenue shortfalls for.commumties and should be recognized and addressed. A. Support policies that help promote a more equitable property tax burden as a .percentage of income (Voss Database). The Department of Revenue publishes a report called the "Residential Homestead Property Tax Burden Report," using data obtained from the "Voss Database." The purpose of this report is to look at property tax fairness throughout the state by matching homeowners' property taxes paid with their actual incomes (includes county, school and city property tax burdens). NBE 27093 \1 In its 2011 report (based on 2008 data), the findings show that the property tax burden is greater in the Metro Area compared to Greater Minnesota. In fact, the study reports a median property tax burden (after PTR) of 3.2% of income for the Metro region, and 2.3% of income for Greater Minnesota. The latest report should be out by the end of December 2013. The MLC asks the Legislature to continue to support policies that promote a more equitable property tax burden for suburban homeowners, as identified in the Voss Database Report. B. Protect the circuit breaker program The property tax refund (PTR) program ( "circuit breaker ") provides property tax relief to individuals based on their income and ability to pay. In 2013, the PTR program was enhanced by $85.6 million for FY 14 -15, resulting in a 25% increase, which our communities appreciate because it directs relief to the individuals who need it most, regardless of where they live. The MLC wants to protect the investments made in this program and will oppose any attempts to redirect funding for this program. C. Fix issues with the sales tax exemption for local governments The MLC was supportive of legislation passed last session that exempted local governments from the sales tax. However, there have been a number of glitches identified which need fixing, as weft as additional clarifications which are needed. Specifically, the MLC supports: • Add joint powers in as exempt, or be clear they are proportionately exempt. • Limit to a finite list the goods /services generally provided by business that are not exempt or. repeal. • Regarding lump -sum contracts, we should find a way to exempt these for construction purposes. D. Support policies that help simplify the property tax system. In 2010, the Legislature established a Property Tax Working Group to examine the many facets of Minnesota's property tax system and develop recommendations on how to make the system more .simple, understandable, transparent, accountable and efficient. The working group provided guidelines and principles that the MLC supports. Specifically, the MLC supports basing property taxes on full estimated market value, basing property taxes on property attributes, not ownership or occupancy and requiring local impact notes for any property tax changes. Additionally, the Property Tax Working Group reported their recommendations to the Legislature on February 1, 2013. The MLC supports the guiding principles of the working group, and requests the Legislature support policies that will help simplify (not further complicate) the State's property tax system. Specifically, the MLC highlights the following examples: o Reduce the number of classifications. • Protect and maintain the Property Tax Refund program. • Establish an agreed upon relationship ( "ratio ") between classification rates. • Consolidate reporting, application, and effective dates. -12- 27093 \1 • Base assessments on the most current economic conditions. • Make improvements to the Truth in Taxation process. • Eliminate the use of property tax for state funding. • Avoid limits, caps, and freezes. E. Improve the predictability and timeliness of Fiscal Disparities information The Fiscal Disparities_ program was enacted in 1971 to reduce discrepancies in tax -base wealth between taxing units within the metro. The program creates challenges for communities that participate in the program when it comes time to set their budgets for the corning year. Challenges include a lack of predictability from year to year relative to contributions and distributions and a need for information in a more timely manner. The Municipal Legislative Commission recommends making the following improvements to ensure communities are able to complete their work efficiently and . effectively: • Information earlier. Get preliminary estimates on Fiscal Disparities contributions and distributions earlier in the year, moving the time frame to mid - July. The information should be posted in a common location to allow communities access to the information as needed. • Truth in Taxation Notices. Move the date by which cities are required to set their preliminary levies from September 15th to September 30th. F. Oppose fiscal limitations on local units of government Our cities have been financially constrained by levy limits, which have had a negative impact on our ability to meet the needs of residents. imposing artificial caps, such as levy limits and property tax freezes, removes the autonomy needed for city officials to make decisions iri.the best interests of their fellow citizens. The MLC opposes state limitations' onlocal decision making that inhibit cities' ability to plan with financial confidence. Last year, our association opposed the levy limits that were imposed for one year. We ask the Legislature to not impose further restrictions to our budget decisions, nor to extend the 2013 levy limits. II. INVEST IN JOB RETENTION AND GROWTH Compared to the rest of the nation, Minneapolis -St. Paul and the surrounding suburbs rank at the top when it comes to the percentage of college educated adults active in the workforce, as well as the number of Fortune 500 headquarters per capita. We are also one of the few metropolitan regions in the U.S. that is home to our state's capitol and its major research university. This region has played a crucial role in the economic recovery and the recent job growth in our State. MLC cities specifically are critical job producers for the region. Combined, we are among the biggest job producing areas in the state with over half a million employees (522,191 as of 2012) -13- 27093 \1 compared to Minneapolis /St. Paul with a combined total of 472,609 employees in 20121. As such, the State needs to invest/support regional growth in the Twin Cities metropolitan area and surrounding suburbs. Our members believe the State can play a critical role in keeping and growing jobs by making key investments, and by supporting and partnering with cities. A jobs focus will help cities promote a healthy business environment, which will keep and grown jobs here rather than having companies move to .a more competitive.- state. Additionally, the MLC recommends the legislature support tax reforms that promote growth and improve the business climate by including the repeal of the Warehousing Tax and the Telecom Tax in any tax bill that moves forward'this legislative session. The MLC also support efforts to reduce, or to make more transparent, the corporate income tax rate, so that Minnesota is no longer in the top 10 states nationally. A. Support providing DEED with the tools and incentives necessary to attract and retain businesses. The MLC is supportive of DEED programs that help the State attract and retain business. Programs like the Minnesota Investment Fund and the Minnesota Trade Office have. offered proven results and have had major impacts in MLC communities. The last legislative session resulted in major investments in some of DEED's initiatives, which the MLC supports. However, other programs like the Redevelopment Fund could use additional resources. To that end, the MLC is supportive of DEED's legislative proposals2 and asks that the legislature consider. giving DEED all of the tools necessary to help Minnesota remain competitive. B. Support flexibility in Tag Increment Financing (TIF) policies TIF remains one of the most viable tools available to fund community reinvestment efforts. Further restrictions of TIF would render the tool less effective and will almost certainly curtail local efforts to support job creation, housing, redevelopment and remediation. In light of the recent economic and development downturns, cities.need greater flexibility to use the tool effectively to support the economic viability of their business and residential communities. The "2010 Jobs bill provided flexibility in the tax increment laws, recognizing that this is an important tool for stimulating development and creating jobs. Arid although the flexibility that, resulted from the 2010 bill helped advance some projects, the limited application left. any other projects stalled due to the economic climate. As a result, some cities still need TIF extensions to make job producing projects happen, as well as other tools that increase flexibility, such as eliminating the 5 year rule. Additionally, so 1 Metropolitan Council community profile data, http•//stats metc state mn us /profile/Default.aspx, citing US Census Bureau; American Community Survey (October 26, 2012); US Census Bureau; Decennial Census (July 14,2011); US Census Bureau; Metropolitan Council Annual Estimates (September 16, 2013.); and US Census Bureau; Metropolitan Council Forecasts (April 26, 2012). 2 Will confirm this statement once we learn DEED's 2014 legislative initiatives -14- 27093 \1 as to not further complicate this process, the Legislature should not enact future TIF law restrictions during the next legislative session. C. Support a broad based transportation funding package that promotes economic development and growth in the region and keeps Minnesota competitive. The MLC continues to support transportation investments to replace deficient bridges, maintain regional and state highways, and advance public transit. The MLC is supportive of a transportation funding package for roads, bridges and transit that meets the long term needs of our member cities. The significant needs have been well documented3, including: • Minnesota's population is expected to increase by almost 1 million to over 6.1 million by 2030. o The Twin Cities area is expected to grow twice as much as rest of the state. o Baby boomers will start turning 80 in 2025 (resulting in a need for more transportation options). o Meanwhile, millennials demand a more multimodal system. • Under MnSHIP, the 20 -year spending plan, pavement will worsen by 55% through 2024 and then gets even worse (MnDOT). o Interrupted service results in millions lost per day, to business. o Congestion may increase 30% per person. o Infrastructure repair dominates funding outlook— new projects less likely. • According to MnDOT, the cost to complete needed improvements and make strategic investments in the transportation network exceeds our projected funding by an estimated $50.billion during the next 20 years. o 50'percent1Of state highway pavements are more than 50 years old. o 35-percent of state bridges are more than 50 years old. o Minnesota is ranked 3 8th nationally for pavement condition. o Minnesota is ranked 9th (tied) nationally for state highway bridges. o The Twin Cities metro area will add 900,000 people by 2040. • Our purchasing power has declined 30% since 1988 (despite '08 gas tax increase). Half the `08 gas tax increase was dedicated to debt service, leaving many needs unmet. (MnDOT). • A recent study suggests that $513 invested over 20 years to maintain current performance delivers $1OB - $23B in benefits (ROI 3.1). An additional $713 invested over 20 years (achieve world -class system) gains $15B - $19B in benefits (ROI 2.1) 3 Minnesota Go, Minnesota Department of Transportation (2013) hqp://www.dot. state.mn.us /minnesotago/ citing Minnesota's Transportation Finance Advisory Committee (May, 2013), Keep Moving to Keep Ahead, Recommendations from the Minnesota Transportation Finance Advisory Committee: www.mndot.gov /TFAC; and Minnesota's Transportation Finance Advisory Committee (December, 2012), Minnesota Moving Ahead: Transportation Funding and Financing for the Next 20 Years: hM://www.dot.state.mn.us/tfac/docs/final-report.pd Metropolitan Council regional transit facts, http: / /metrocouncil org /About- Us/Facts /TransportationF /FACTS - Regional- Transit.aspx, citing The Itasca Project (November 30, 2012), Regional Transit System, Return on. Investment Assessment: hn:/ /www theitascgproject com/ Transit% 20ROI% 20exec %20summary %2ONov %202012.pdf. -15- 27093 \1 • Likewise, a 2012 study by the Itasca Project, a group of Twin Cities area business leaders, found that investing $4.4 billion to build out a system of regional transitways by 2030 would yield a return on investment of $6.6 to $10 billion, mostly in travel time savings for people and goods. (Met Council) In addition, our members support the Transportation Economic Development Program (TED), a collaboration between DEED and MnDOT which prioritizes and funds highway capacity and safety improvements which will result in significant job. growth and economic development. During the last legislative session funding ($20 million) was dedicated for this purpose from the Trunk Highway Fund, which the MLC applauds. However, that- funding source lacks the flexibility state agencies need to address the needs identified by communities. The MLC supports directing general funds for this purpose and encourages the Legislature to continue annually allocating MnDOT funds toward the TED program. III. SUPPORT LOCAL GOVERNMENT POLICIES THAT PROMOTE FAIRNESS AND EQUITY MLC cities want to partner with the State to provide the best services for its constituents. However, State mandated programs can interfere with a city's ability to make the best fiscal decisions for its community, leading to either a reduction in basic services or an increase in taxes and service charges in order to meet the requirements outlined by the State. The MLC asks the Legislature to thoughtfully consider existing mandates and their efficacy, and make the appropriate reductions or repeals where possible. We further ask that unfunded mandates be avoided altogether. Should new mandates on local units of government be proposed, we ask that legislators consider providing cities with the greatest amount of flexibility available in order to reduce implementation costs. Additionally, there are ways .the State can provide local governments tools to be successful by either structuring state programs to be more user friendly or by implementing programs that give local governments the flexibility to meet their needs. MLC asks the legislature consider proposals that give local `governments opportunities to be efficient, productive and enterprising. A. Oppose mandates relating to expenditure -type reporting Our members appreciate the intent of more transparency between local governments and taxpayers, as well as allowing comparisons across cities of counties. However, this language poses problems as drafted. First, the legislation creates administrative burdens for our cities because reporting by object code is not standard practice. In order to comply, this would need to be compiled by city staff, which would require additional resources and costs. Furthermore, the legislation requires cities to develop and :publish detailed line -item proposed and revised current budgets 15 days after the council adopts the preliminary -16- 27093 \l levy in mid- September. Most cities do not prepare budget detail for the next year until mid - November. The September requirement for detailed reporting is not workable. B. Support Street Improvement Districts Communities across the state of Minnesota are searching for ways to finance necessary road improvements. Street Improvement District legislation has been brought forward over the last several sessions as a new way to help cities find the funds to make necessary repairs. The MLC is supportive of this legislation and its member communities would benefit from having another tool in their toolbox to make road improvements. C. Water Resource Management- reduce and better align agency oversight The MLC supports efforts to review and better align water resource management in this state, to make the system more straight - forward and easy to use without jeopardizing water quality. The current system is burdensome, confusing and inefficient to local officials who must work within the system to facilitate growth and development and who are working to ensure a health natural environment. MLC supports the formation of a bipartisan taskforce of local, county, state, and private sector officials to address the overlapping, duplicative, and conflicting requirements in the current system and provide a recommendation on legislation to reduce and better align agency oversight. Further, MLC asks that when considering legislation that effects water management, like permitting and storm water regulations, legislators first consider the impact on local government, and include local officials in any process that would affect them as important stakeholders. For questions about the`MLC's Legislative Program, please contact: Tom Poul tpoul @messerlikramer.com Erin Campbell ecampbell@messerlikramer.com Charlotte de, Julio cdej.ulio@messerlikramer.com ...or by calling Messerli & Kramer, P.A. at 651- 228 -9757. A special thanks to our Legislative Program Subcommittee members: Barry Stock Brad Tabke Gene Winstead George Tourville Jim Hovland Mary G. Stephens Mike Maguire Steve Mielke Terry Schneider Terry Schwerin. 27093 \1 City Administrator, Savage Mayor, Shakopee Mayor, Bloomington Mayor, Inver Grove Heights Mayor, Edina (MLC Chair) Mayor, Woodbury Mayor, Eagan City Administrator, Lakeville Mayor, Minnetonka City Manager, Shoreview -17-