2001-11-28 CC - Laserfiche WebLink

Home Browse Search

LMC 145 University Avenue West, St Paul, MN 55103-2044 Phone: (651) 281-1200 (800) 925-1122 TDD (651) 281-1290 LMC Fax: (651) 281-1299 LMCIT Fax: (651) 281-1298 , Web Site: http://www.lmnc.org Lzague 0/ MinneSota Cioes Cities promoting e:ccslJencB 2001 Omnibus Tax Bill: Frequently Asked Questions Q: What was the policy rationale that is driving the 2001 property tax reforms? A: One way to describe the tax outcomes is that the' Governor and the many legislators wanted the property tax to be more of a locally determined tax. Given that school property taxes have largely been Set oy the state, ~e takeover of generaleducation levies became a cornerstone of the governor's plan, the House tax bill and the [mal tax package. On the other hand, given that city services are primarily determined by city councils, the governor and legislature found that these services ~E.9Eld be more fully ~.E-orted by the p!:9perty tax. In other words, by removing a large share of school funding from the property tax, cities and counties would be more able to tap the prope[!y tax to f!:mJi their services. - ---- Q: Isn't this rationale flawed by the existence of levy limits and the new state property tax? A: Yes, the fact that levy limits were included in the final tax package means that cities will not be able to fully exercise their discretion about service levels and property taxes. In addition, although the new state property tax is only paid by commercial, industrial and cabin property owners, it is certainly not a local tax. Q: Wasn't simplicity one of the goals of property tax reform? A: Simplicity may have been an initial goal of tax reform but the final tax package arguably does little to simplify the system. . . Q: The Legislature and Governor have estimated that most taxpayers will see their overall property tax bill reduced. Do these estimates reflect the fact that many cities will have to increase their property tax levies to replace lost state aids? A: The estimates assume that cities will replace, dollar-for-dollar, lost state aid with increased property taxes. In other words, even with these increases in the city,share of the property tax bill, taxpayers are expected to see a tax reduction in 2002. Q: Will the levy limits enacted in the tax bill allow the city to replace lost state aids? A: Yes, cities covered by levy limits (those over 2,500 population) will be allowed to replace lost state aids with property taxes. In a sense, the term levy limits are somewhat of a misnomer. A more accurate term might be revenue limits. Levy limits are essentially based on the total ofthe city's property tax and state aids from the previous year. To the degree that state aids are reduced or eliminated, the allowable property tax levy authority increases. Conversely, if state aids increase, levy authority is reduced.