Metro Cities News
April 19, 2013
Annual Meeting and Election of New Board Members and Officers
Thanks to all who were able to make their way to Metro Cities’ Annual Meeting on Thursday. The University Club, with its grand and plentiful windows, provided a spectacular if surreal view of the winter scene outside.
The challenging weather resulted in a smaller than usual crowd, but 40+ officials attended for the social hour, guest speaker and business meeting. Lori Sturdevant from the Star Tribune provided her perspective on the newly configured legislative environment, and made some historical comparisons between this session and those past around session themes, vision, and partisanship.
Metro Cities’ members elected Waconia City Administrator Susan Arntz as President and Minnetonka city councilmember Brad Wiersum as Vice President. New Board members were also elected: Frank Boyles, Prior Lake City Manager, J.D. Burton, St. Paul Government Relations Representative, Mike Knight, Andover Councilmember, and Melissa Lesch, Minneapolis Government Relations Representative. Congratulations to our new officers and board members, whose terms start in July.
House Omnibus Tax Bill Clears Committees, Heads to House Floor
The omnibus House Tax bill (HF 677-Lenczewski) passed the House Taxes Committee Wednesday after few amendments but several hours of debate, on a 17-11 vote. It was then heard and passed Friday morning in the Ways and Means Committee. An amendment that requires labor peace agreements for hospitality workers in certain projects in counties with cities of the first class was added to the bill after a contentious discussion in Ways and Means before the bill was passed and sent to the House floor.
The bill increases revenues by $2.6 billion. Revenues are raised through a temporary four percent surcharge on incomes over $500,000 and an 8.49% rate for upper income filers. The bill also includes a sports memorabilia tax, increases in taxes for certain types of tobacco and an increase on the alcohol excise tax rate by seven cents per drink. The bill also abolishes certain corporate tax exemptions. The tax bill restores the K-12 payment shift by 2014 and includes local bonding and tax provisions to assist the Mayo Clinic expansion.
The bill contains several provisions of interest to cities including:
· New LGA formula (see the March 25 newsletter for description) with inflation factor and funding increase of $80 million. The bill was amended Wednesday to increase LGA by $80 million in 2014; the original bill increased funding by $60 million in 2014 and $80 million in 2015;
· Expanded direct property tax relief program (circuit breaker) and renaming of program to “Homestead Credit Refund”;
· Repeal of Housing Improvement Area/Special Service District sunsets;
· Street Improvement District authorization for street maintenance and improvement costs (see article below) and other public finance provisions including an expansion of street reconstruction bonding authority;
· Market Value Homestead Exclusion fixes relating to levy and debt limits and adjustment to net tax capacity for TIF districts that lost tax capacity as a result of the new program;
· Local TIF provisions for Bloomington, Maplewood, Oakdale, Ely, Glencoe, St. Cloud and the Dakota County Community Development Agency;
· Fiscal Disparities exemption for Mall of America and study of Iron Range Fiscal Disparities Program;
· $5 homeowner/auto insurance surcharge to assist with police and firefighter pension costs;
· Adjustment to original net tax capacity for TIF districts that saw reductions in tax capacity resulting from the 2011 homestead market value exclusion; and
· Modifications for local sales tax provisions for some communities and food/beverage tax for Bemidji.
An amendment to allow the Dakota County Community Development Agency to assume the powers of a city with respect to establishing Housing Improvement Areas was added to the bill and is moving forward. Metro Cities and the League flagged the provision for its lack of a city approval/review mechanism and we’ve informally polled cities in the county about whether there should be such a mechanism in the language. Although the provision is restricted to Dakota County, the language sets a precedent for other counties and thus could have broader impacts.
Click here for a copy of the bill summary.
The Senate tax bill is expected to be released next week and debated in the Senate Tax Committee. Once the bills have gone through their respective processes and passed off the floors of each body, they will be sent to a conference committee for reconciliation, a process we anticipate would begin end of April-early May.
Please contact Patricia Nauman at 651-215-4002 or for additional information.
House and Senate Transportation Bills Take Divergent Paths
The Transportation Finance bills in the House and Senate have split into starkly contrasting versions. The Senate abandoned a ‘lights on’ bill that nearly passed out of committee last week and replaced it with a comprehensive package that includes a significant modification to the gas tax, increases the metropolitan area transit sales tax to ¾ percent with an extension to the entire seven county metropolitan area and authorizes cities and counties to implement local wheelage and street maintenance tools.
The Senate bill includes a reduction to the gas tax at the pump of six cents and imposes a tax on gasoline at the distributor level of 5.5 percent. Because this is still a tax on gas, the funds would be distributed by the constitutional formula that sets aside nine percent to Municipal Street Aid (MSA). The change is calculated to increase funding to the Trunk Highway Distribution Fund by $230 million in FY 2015.
The Senate bill also includes an increase in the metro area sales tax for transit of ½ cent for counties currently collecting the ¼ cent sales tax and an increase of ¾ cent for Scott and Carver Counties so the total sales tax rate would be ¾ cent throughout the metro area. The tax would be levied by the counties but the governance of the funds and their distribution would be jointly managed by the CTIB and the Met Council.
The GEARS committee, which includes city officials, would oversee funding of up to 3.9% of the sales tax and would evaluate and award grants to local units of government for construction and maintenance of regional bicycle, trail, and pedestrian infrastructure, safe routes to school infrastructure and for planning activities related to land use and transportation linkages, streetcar development, or bicycle and pedestrian connections. The Senate proposal also increases the sales tax on autos to match the lease rate of 6.875 percent, and reduces the metro share of the Motor Vehicle Sales Tax (MVST). Currently the split is 36 percent for metro transit and four percent for Greater MN transit. The new proposal makes the transit split, 35 percent for metro transit and five percent for Greater Minnesota transit.
The House bill does not include new funding for roads or an increase in the transit sales tax. The bill restores transit operational funding for the Met Council to the base amount of $129 million for the biennium. The House bill includes $20 million for the Transportation Economic Development (TED) account, which funds transportation improvement projects with a positive economic development impact, and $100,000 for a comprehensive transit way study from the Met Council on how to accelerate the build out of the transit system in the metro area. The House bill also expands county authority to impose a $10 wheelage tax to all counties and allows an increase up to $20 per vehicle starting in 2018.
The Senate bill is being heard in the Senate Finance committee today and will be heard in the Tax committee next week. The House bill was heard in the Tax committee earlier in the week and is in the Ways and Means committee today. Both bills are expected to be heard by the full House and Senate sometime next week.The Governor has indicated he is unlikely to support the alterations to the gas tax as proposed by the Senate.
If you have any questions or comments, contact Todd Olson at 651-215-4003 .
Street Improvement Districts Bills Progressing
Legislation authorizing cities to implement street improvement districts continues to advance but with some significant differences between the House and Senate bills.
The language included in the House Tax bill allows cities to establish a municipal street improvement district to defray part or all of the costs of improvements and maintenance with fees charged to all parcels in the district. Cities are prohibited from including properties in more than one district per property. The Tax committee added an exemption for all properties that are constitutionally exempt from paying property taxes from having to pay fees in a street improvement district and limits any property from bearing more than twice the cost it would pay if the mechanism used to apportion the fees were uniform across all classes.
The city may elect to apportion the cost based on market value, tax capacity, front footage or area. The length of the life of the district and the means by which a city puts the district in place are left unchanged from the original bill.
The Senate language is moving forward as part of the omnibus Transportation finance bill and has also undergone some changes. The Senate version exempts charitable nonprofits - a narrow definition of nonprofits that includes food shelves but not churches, hospitals, colleges or schools - and the use of the districts are limited to street maintenance. The omnibus Transportation bill is scheduled to be heard in the Tax committee on Monday. If you have any questions or comments, contact Todd Olson at 651-215-4003 .
Mississippi River Critical Corridor Rule Writing Authority Expiration Repeal
Legislation to extend rule writing on the Mississippi River Critical Corridor that expired in 2011 was included in the House Legacy Sales Tax funding bill. The amendment repeals the expiration that closed the timeline within which the rules were worked on in 2010 which would allow the DNR to continue work on drafting the rules. A number of other changes were made in the amendment to the original law that gave the DNR the authority to write the rules in 2010 that are better for existing and future development and redevelopment adjoining the river. Gone from the law is all of the restrictive language dealing with the definition of bluffs and slopes. The new authorization includes further protections for recreational, commercial, industrial and residential resources and requires consideration for future development and redevelopment within the guidelines and standards.
Metro Cities along with a host of affected cities were working with the DNR on drafting the rules in 2010. The DNR released preliminary rules governing the critical area from Dayton to Hastings but they were never completed. Twenty cities, and four townships, would fall under the jurisdiction of the Critical Corridor rules. Cities have been conforming to an executive order since 1976 that established the critical area.
The concerns cities raised throughout the process in 2010 focused on finding balance between protecting the aesthetics of the river and assuring current economic uses are maintained and that redevelopment of parcels adjoining the river do not become overly constrained. The stretch of urban river that flows through the critical corridor has been uniquely balanced through the recognition of its environmental, cultural and economic benefits to the area.
The new rules, if the DNR receives authorization to continue to work on them, must strike a balance within that preserves, enhance the environmental, cultural, recreational, and economic functions of the Mississippi River and adhere to the new requirements in the authorizing language. Metro Cities would continue to support balancing these sometimes competing interests while recognizing the existing framework developed over the last 30 years to protect and utilize the river.The language is scheduled to be considered as part of the Legacy bill on the House floor on Saturday.
Please contact Todd Olson at 651-215-4003 for more information.
Groundwater Fees
The House Environment finance bill passed off the House floor this week and includes a provision that raises water appropriation fees to varying degrees on water users in need of a DNR permit to a total of $6.8 million. Municipal water suppliers would see an increase from $10 per million gallons to $15 per million gallons while agricultural users would increase to $35 per million gallons and non-agricultural users would increase to $75 per million gallons.
Residential users not subject to water appropriation fees, primarily single residential wells, would not be subject to the fee. Water utility providers subject to the fee would either have to absorb the fees in their budget or pass on the fee to users through a rate increase. Those on a municipal system would see an increase that could vary greatly from year to year depending on how much water a household uses including for lawn watering. If a family of four uses 100,000 gallons a year, their rate would increase by $1 per year.
Large water users, farmers and water intensive businesses would be subject to much higher fees in the hundreds and thousands of dollars per year range under this legislation. The fees are collected by the DNR and would be dedicated to the following uses: