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League of Minnesota Cities 145 Universl1;)l Avenue West, Sl Paul, MN 55103-2044 (651) 281-1200 . (800) 925-1122 Fax: (651) 281-1299 . TOO:. (651) 281-1290 wwwJmnc.org July 13, 2004 Dear Chief Appointed Officer, The League Board of Directors is asking that you request the Governor and your legislators to immediately resolve the confusion surrounding 2005 LGA amounts by correcting a drafting error from the 2003 legislative session that failed to remove language related to the grandfather provision of the LGA formula. The legislature did not correct this error during the last session and as a result, the Governor has now indicated that the state will certifY 2005 LGA amounts based on the uncorrected statute rather than on the intended changes. If this happens, it will alter about 8 -ID% of the 2005 LGA distribution. Over 600 cities will be affected with some cities receiving more and others less; in some instances the differences are quite significant. The Department of Revenue's estimate showing how your city would be affected is on the League's web site. At a special meeting on June 10, 2004, the League Board unanimously adopted a position supporting the administration of the LGA formula as originally intended by the Legislature. The League Board's position also supports a special session to address the LGA technical correction if it is determined that the Legislature's intent from the 2003 special session cannot be followed. This request was conveyed to both the Governor and legislative leadership, but that has so far not yielded results. The Governor could resolve the issue by directing that the 2005 LGA certification follow legislative intent or the matter could be addressed in special session. If neither happens, some legislators are suggesting that they will fix the formula early in the 2005 legislative session, before distribution could occur under the current law. That is not a desirable solution because it creates unnecessary confusion and uncertainty for all cities, regardless of whether they would lose or gain LGA under the Governor's proposal. Since cities must make budget and levy decisions yet this fall, they will be forced to guess what the legislature might do later in their 2005 fiscal year. This may cause some cities to budget for higher than necessary property taxes, cut services, or both. It may cause other cities to plan for more LGA than they will in the end receive should the 2005 Legislature modifY the LGA distribution. The League's Board felt that this unnecessary ambiguity will create a guessing game for city officials that should not be a part of the local budget process. By way of background, there is no disagreement that the 2003 special session tax bill inadvertently failed to delete a paragraph dealing with the LGA grandfather. In administering the formula last swnmer, the Department of Revenue accepted letters from House Tax Chair Ron Abrams (R- Minnetonka) and Senate Tax Chair Larry Pogerniller (DFL-Minneapolis) requesting that the 2004 distribution follow legislative intent with an apparent understanding that the 2004 Legislature would fix the technical problem_ AN EQUAL OPPORTUNITY/AFFIRMATIVE ACTION EMPLOYER