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ExecutiveSummary:StudyoftheMetropolitanAreaFiscalDisparitiesProgram <br />FortheMinnesotaDepartmentofRevenue <br />Overburden <br />Theoverburdenquestionhasdifferentanswersdependingontheunitofgovernment.Forsomelevels <br />ofgovernment,asevaluatedinthisstudy,certainlandusesdonotcovertheircostswhenlookingat <br />themasdiscretelanduses.Forexample,retaildevelopmentdoesnotgeneratesufficientdirect <br />revenuestocoveritsdirectcostsatthecitylevelbothwithandwithouttheFiscalDisparitiesProgram <br />forbothnetcontributorsandnetrecipients.Forotherlevelsofgovernment,theresultforretail <br />developmentisflipped.Theoverburdenquestiondependsnotonlyonthelevelofgovernment,butthe <br />localityitself.Levelsofservice,tolerancefortaxincreases,andthetypesofservicesprovidedareall <br />contributingfactors.Itisinterestingtonote,however,thattheLocalGovernmentAid(LGA)formula <br />includesaservice{“;;7­|component. <br />Anotherrelatedpointisthechangesinschoolfundingoverthe40yearhistoryoftheprogram.While <br />schoolfundingiscomplexandananalysisofitsrelationshiptoFiscalDisparitiesisbeyondthescopeof <br />thisstudy,onepointmadeisthatattheinceptionoftheFiscalDisparitiesprogram,themajorityof <br />fundingforschoolswasfromlocalpropertytaxes.Therefore,thoselocalitieswithhighpropertytax <br />wealthwertomoreeasilyfundschooloperatingandcapitalneeds,andinparticular,those <br />eable <br />communitieswithalargenonresidentialtaxbasewouldbeinamuchbetterfiscalposition.Criticsnote <br />thatbecauseschoolfundinghasshiftedfromprimarilybeingfundedfromlocalsourcestostatesources <br />thattheneedforredistributionofthimportanttodaythanitwas <br />ecommercial/industrialtaxbaseisless <br />priortothatshift. <br />BusinessLocationDecisions <br />Businesslocationdecisionsaredrivenbyarangeoffactorsfirstdrivenbythetypeofindustryor <br />business(e.g.,manufacturershavedifferentlocationneedsthanretail)aswellassizeofthefirm, <br />locationdecisionstage,stageoffirmlifecycle,andeconomicenvironment. <br />Becausetherearesomanyinterrelactionprocess,itisnotfeasibletoisolate <br />tedvariablesinasitesele <br />anyoneelementforpurposesofthisstudy.Evenifthisweredoneasanacademicexercise,therealityin <br />aregionliketheTwinCitiesisthatotherqualitativefactorsuniquetoeachlocalityarelikelytoinfluence <br />thedecisionandnotbequantifiable.ArecentreportbytheItascaProjectidentifiedseveralstrengths <br />andweaknessesoftheMinneapolisSt.Paulregionrelatedtobusinesslocationdecisions.Amongthe <br />findingsisadiscussionoftaxstructure,andthe©;mzš“x­highrelativetaxburdenwhencompared <br />nationallyandthedisadvantagethitroregionwhencompetingnationallyand <br />sputstheMe <br />internationallyforbusinesslocationsandrelocations.However,thefocusoftheirtaxdiscussionis <br />primarilyonstateandfederaltaxes,whichaccordingtothereportalreadyputstheregionatarelative <br />15 <br />disadvantageevenbeforeaddingthelocaltaxburden. <br />15 <br />ItascaProject,{/w©·z“maNewCourse:RestoringJobGrowthintheMinneapolisSt.Paulw;mzš“r|April2010. <br />38 <br /> <br />