Bill includes sales tax exemption for cities, LGA reform and appropriation increase and levy limits. (Published May 20, 2013)
Late Saturday evening, the omnibus tax conference committee completed its work by ironing out the differences between the House and Senate versions of the tax bill (HF 677). Early Monday morning, after nearly six hours of debate, the House approved the bill on a vote of 69- 65. The Senate is scheduled to take up the bill when they reconvene at 11:00 a.m. on Monday, May 20.
The bill includes a number of provisions of interest to cities:
Local Government Aid
Appropriation increased by $80 million beginning with the 2014 distribution
New formula based on legislation introduced by Rep. Ben Lien (DFL-Moorhead) and Sen. Roger Reinert (DFL-Duluth)
The annual appropriation growth factor was not included in the final bill but the appropriation increased by an additional $1.5 million for the distribution in 2015 and another $1.5 million for the distribution in 2016.
Sales Tax Exemption for Cities and Counties
Beginning with purchases made on or after January 1, 2014
Includes most taxable purchases but does not include purchases of goods or services generally provided by a private business which are defined as goods or services including but not limited to those “provided by liquor stores, gas and electric utilities, golf courses, marinas, health and fitness centers, campgrounds, cafes, and laundromats
Requires cities over 500 population to submit to the county the amount of their estimated calendar year 2012 actual or estimated sales tax payments on city purchases to the state. The county will compile this information and include the information to the annual parcel-specific proposed tax statement mailing. In addition, each city and each county would have to discuss the estimated benefits of the sales tax exemption on their 2014 proposed budgets and fees and other budgetary impacts
One of the last amendments to the conference committee report was a one-year levy limit to cities over 2,500 population and counties over 5,000 population
The levy limit essentially limits revenue growth to 3 percent for taxes levied this fall for collection in 2014.
The levy limits include two limited “special levy” authority for 1) most debt service levies and 2) levies for natural disasters. Special levies are outside of the levy limit
Due to the fact that the new, adopted levy limits are in an uncodified section of state law, the levy limit exemption for cities with adopted local performance measurement systems will not apply
The League will provide a more detailed explanation of the levy limit calculation in the near future.
Police and Fire Amortization Aid
$9 million PERA Police and Fire Amortization Aid
$1 million MSRS amortization aid
$5.5 million for volunteer firefighters
The increase in employer police and fire aid was not included from the final bill but the amortization aid will reduce the potential need for future contribution increases.
Market Value Definitions
The bill includes a set of largely technical changes to numerous state statutes to recognize the 2011 law change that repealed the market value homestead credit and replaced it with the market value exclusion
This article included modifications to levy limits for housing and redevelopment authorities, port authorities, economic development authorities as well as debt limits by redefining these provisions to be based on each city’s market value before the effects of the new homestead market value exclusion
Miscellaneous general provisions
Authority to create new Special Service Districts and Housing Improvement Districts was extended through June 30, 2028
Clarification of allowable municipal expenditures associated with local sales tax referendum
Expansion of the tax exempt holding period for land held for economic development purposes. The bill increases the holding period for cities under 20,000 outside the metro area to 15 years. In addition, the bill includes a temporary provision allowing a 15-year holding period for all cities for property purchased from January 1, 2000 to December 31, 2010
TIF adjustment to original net tax capacity to compensate for the effects of the homestead market exclusion
Cloquet Fire and Ambulance District modifications
St. Cloud-area cities sales tax use expansion and duration extension
Marshall food and beverage tax use extension
Mahnomen tax base aid increase
Moose Lake reimbursement for cost of connecting state facilities to city sewer system
Proctor sales tax validation
Use of TIF for improvements and equipment for decorative or aesthetic purposes
TIF four-year rule
St. Cloud TIF
Dakota County/West St. Paul TIF
Glencoe TIF extension
Apple Valley TIF
Ely TIF extension
Rochester Destination Medical Center
The League will continue to update and summarize provisions of the tax bill in the coming weeks in the Cities Bulletin.
The LMC Intergovernmental Relations (IGR) staff is focused on legislative advocacy for cities. Feel free to contact any IGR member with questions, concerns, or suggestions about legislative issues and League policies.