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REQUEST FOR COUNCIL ACTION Date: 03/19/12 Item No.: 13.e Department Approval City Manager Approval Item Description: Discussion of Fiscal Disparities and Retail Impact Studies B ACKGROUND 1 Councilmember McGehee has requested that the City Council discuss two reports that she 2 recently became aware of; a study completed last month by Tischler Bise regarding the 3 Metropolitan Fiscal Disparities Program and a report prepared by Civic Economics entitled “A 4 Guide to Retail Impact Studies”. Below is a brief summary of each report. 5 Study of the Metropolitan Area Fiscal Disparities Program 6 This report was prepared at the request by the Minnesota Department of Revenue and is the first 7 comprehensive study of the fiscal disparities program conducted since the program was initiated 8 in 1971. As the City Council is aware, the fiscal disparities program requires metro 9 municipalities to contribute 40% of the commercial/industrial growth that has occurred since 10 1971 to a regional pool. Based on that formula, Roseville contributes about $6.1 million 11 annually. 12 The study, among other things, analyzed the potential “overburden” on contributing communities 13 and looked at what the impact would be if the fiscal disparities program were eliminated. Even 14 though Roseville is a contributor under the Fiscal Disparities program, if the program were 15 eliminated the overall tax rate for Roseville would rise slightly (0.51%). While the City tax rate 16 would be lowered (from 29.31% to 25.89%), the County, School, and special district tax rates 17 would rise. If fiscal disparities were discontinued, all cities would see a tax rate increase, with 18 St. Paul seeing the largest at 12% 19 The study looked at a developed city that is a contributor to the fiscal disparities program. It 20 found that with fiscal disparities, that only higher end homes $350K+, Office, Industrial paid for 21 the services they received. (In fact they generated a surplus of tax revenue). Average and lower 22 single-family homes, multifamily, and retail generate more costs for service than the taxes they 23 generate. 24 Under the same scenario and with fiscal disparities eliminated, the results would mostly stay the 25 same, but the gap between revenue and costs would be lessened in multi-family and retail. 26 It is unclear if the study will lead to any changes to the Fiscal Disparities program. It can be 27 expected that there may be some legislation introduced in the state legislature, but given that the 28 programs benefit most of the metro area communities and that the elimination of fiscal 29 disparities would not bring a tremendous amount of tax relief, it is probably unlikely that any 30 legislation will pass. 31 Page 1 of 2