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Agreement includes LGA formula update and $80 million appropriation, as well as a sales tax exemption for cities and counties.
(Published May 17, 2013)
On Thursday evening, Governor Mark Dayton and legislative leaders announced a second, more detailed agreement on the omnibus tax bill. The agreement includes a fourth-tier income tax bracket for married filers with incomes in excess of $250,000, corporate income tax changes, tobacco tax increases and an expansion of the sales tax base to additional items such as warehouse and storage services. The bill will not include an income tax surcharge to repay the remaining $860 million in school shifts nor will it include a reduction in the overall sales tax rate.
The tax conference committee is meeting throughout the day on Friday to iron out the details of the bill so stay tuned. We will draft a more complete description of the agreement as details are released over the weekend. Follow @GaryNCarlson on Twitter for weekend updates.
Impacts On Cities
The bill includes a variety of provisions that will be of interest to cities. Under the agreement details that have been released so far, cities and counties will be exempted from the state sales tax for purchases made on or after January 1, 2014 and the LGA formula will be updated and the appropriation will be increased by $80 million beginning with the 2014 distribution. At this point, it does not appear that the LGA appropriation will be increased in future years to account for inflation or population growth.
Levy Freeze Component
One unexpected addition to the agreement unveiled last night is a one-year levy freeze that would be imposed on cities and counties. The initial plan revealed to the League would have allowed levy increases for debt service increases for existing and new debt. The League and other city and county representatives met with Senator Skoe and Senator Rest last night to express serious concerns with the freeze proposal. We are continuing to work on modifications to the freeze that would allow some growth in the levy authority for cities and counties and hopefully we will be able to moderate the freeze language.
Questions? Contact Gary N. Carlson at (651) 281-1255 or firstname.lastname@example.org
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