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
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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.
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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).
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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.
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• 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)
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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
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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.
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• 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
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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.
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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
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