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<br />Q: Our city has a charter provision that restricts our ability to increase taxes that did not anticipate <br />large cuts in state aids. What can we do to replace lost state aids? <br /> <br />A: The 2001 omnibus tax bill includes an override of city charters that in certain circumstances will <br />allow charter cities with restrictive levy limits to replace lost state aids. <br /> <br />Q: Will the future phase-out of limited market value eventually shift taxes to homes? <br /> <br />A: Under state statute, limited market value was due to sunset after taxes payable in 2002. The tax bill <br />actually delays the elimination of the statute by phasing it out over a six-year period. This will increase <br />the taxable value of homes and cabins that currently benefit from limited market value and ultimately <br />shift property taxes to homeowners. Future legislatures will likely have to address any taxpayer fallout <br />due to the impacts of the phase-out of limited market value. <br /> <br />Q: Why will my city receive less LGA in 2002 despite that fact that thelegislature increased the overall <br />appropriation by $140 million? <br /> <br />A: The governor proposed and the legislature adopted several changes to the LGA system that modify <br />the distribution of the LGA appropriation. These changes generally provide more aid to first class cities <br />(Minneapolis, 81. Paul and Duluth) as well as outstate regional centers over 10,000 population. <br /> <br />Although these cities will receive inore state aid, their levy limitations will be lower than it would have <br />been in the absence ofthe aid increase due to the interaction ofIevy limits and state aid. Also, at the <br />close of the legislative session, several key lawmakers indicated that the LGA system, including the 2001 <br />changes, would be the subj ect of legislative review, possibly as early as 2002. In other words, the <br />stability of these increases could be short-lived. <br /> <br />Q: How will tax increment financing districts be impacted.? <br /> <br />A: Many existing TIF districts will experience TIP reductions from 20 to 40 percent. These reductions <br />are due to the combined impact of the state takeover of the general education levy and the property tax <br />class rate changes. Future districts will generate increments largely from the city and county tax rates <br />since a large share of the current school property tax has been eliminated. <br /> <br />Q: Are there any mechanisms to address impacts on TIP existing districts? <br />, ^ 1';~ <br /> <br />A: Yes, there is the TIF grant program with a significantly increased state fmancial commitment, <br />expanded pooling authority, and a new special..deficit authority. Procedures and qualification <br />requirements are fairly complex. Since impacts from this year's tax bill will not be experienced until <br />2002, applications for TIF grants will not be due until August 1,2003. <br /> <br />Q: How will the slowing economy affect the state's ability to pay for commitments in the 2001 tax bill? <br /> <br />A: At this time, it is unclear what impact the slowing economy will have on the state's tax revenues as <br />well as expenditure commitments. The state did set aside additional resources in their rainy day fund to <br />prepare for a slowing economy. However, these resources are generally one-time monies that 1nay not <br />cover a protracted state budget shortfall. If the upcoming state budget forecasts show long term softening <br />in the state's revenues, the governor and legislature will likely have to revisit existing programs, which <br />could include LGA. <br /> <br />September 20,2001 <br />