CCP 10-28-2002 - Laserfiche WebLink

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1 reduced. These programs did not share in the gains in the state budget over the past decade and, 2 therefore, should not be cut. 3 4 To balance the state budget last year, the Legislature eliminated more than $200 million 5 in funding for the tax increment fmancing (TIF) district grant program and repealed the LOA 6 reform account. The elimination of the TIF grant program will ensure that TIP district deficits 7 caused by the 2001 tax reforms will translate into higher municipal property taxes in affected 8 cities. 9 10 Cuts in LOA and the market value homestead credit could impact the distributions 11 scheduled for July, October, and December 2003. Cities have established their 2003 budgets 12 based on the amount of LOA certified by the state in August 2002. Once the property tax levy is 13 finalized in December, cities will have no ability to offset these culS with property tax increases 14 until the 2004 fiscal year. 15 16 Response: The League opposes cuts in LGA and the market-value homestead credit 17 reimbursement. Cuts in these programs will result in cuts in city services and long-term 18 property tax increases. If the state needs to balance its budget, it should increase state 19 sources of revenue or cut other state expenditures and not increase local property taxes by 20 cutting city aids. 21 22 FF -4. Sales Tax on Local Government Purchases (GC) 23 24 Issue: In 1992, when the state was experiencing a budget shortfall, the Legislature 25 repealed the sales tax exemption for local government purchases. Local governments now pay 26 state sales tax on purchases like road maintenance supplies and equipment, wastewater treatment 27 facilities, and some public safety equipment This tax currently costs local property taxpayers 28 and ratepayers more than $100 million annually. In addition, proposals to extend the sales tax to 29 services would have the effect of increasing local government costs and property taxes. Because 30 no additional state aids were added to offset the additional cost, this repeal has effectively 31 increased local property taxes to finance state operations. 32 33 Response: The state should reinstate the sales tax exemption for all local 34 government purchases. The exemption must not be coupled with cuts in LGA. 35 36 FF-S. Levy Limits (GC) 37 38 Issue: As a part of the 2001 omnibus tax bill, the Legislature enacted levy limits for 39 cities over 2,500 population for two years. Although the levy limit formula provides some 40 growth for local budgets, levy limits replace local accountability with a state judgment about the 41 appropriate level oflocal taxation and ultimately local services. Additionally, levy limits can 42 have a negative effect on a city's bond rating due to the restriction on revenue flexibility. 43 44 This past year, the levy limit formula produced extremely tight levy limits due largely to 45 the inflation growth measure that estimated the inflation growth in government costs to be less 46 approximately 0.76 percent. This measure of inflation does not mirror the inflation pressures 2 . . .