2003-03-27_PWETC_AgendaPacket - Laserfiche WebLink

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For example, under current law, improvement bonds paid at least 20 percent through special assessments with the balance paid through property taxes would not require voter approval. If this type of bond is issued and no binding contract to spend the proceeds is entered into by the city prior to May 1,2003, then no special levy authority would be granted to pay the new debt service levy in 2004. The only exception might be that a city could ask voters for general authority to exceed its levy limit by a specific dollar amount at a special or general election on or before the November general election. This option may be difficult to use in some circumstances because cities will not be notified of their levy limit by the Dept. of Revenue until Sept. I. Some cities may be reluctant to ask for, and some citizens may be reluctant to approve, authority to exceed an unspecified levy limit. In 2005 and beyond, cities would not be covered by levy limits and, therefore, could increase their levy to pay for new debt or other needs. Any increase in the levy, however, could be rejected by the voters after the final levy is certified in December through a reverse referendum procedure. If voters successfully challenge a levy increase, the city's property tax levy would be limited to the previous year level; therefore, any additional debt levy required by the city would have to come from the existing property tax levy. The Senate plan The Senate property tax freeze is perhaps best understood as an attempt to limit local government property tax levies to the 2003 level for the next two years. To achieve that freeze, the bill would generally prohibit the issuance of new debt, including installment purchases and lease purchase contracts after March 31, 2003, if the obligations would require a new levy first coming due for taxes payable in 2004 or 2005. There is some confusion surrounding the March 31 effective date. The original bill contained a May 31 date and the tax committee adopted an amendment that changed the date to March 31. However, the amendments reported to the Senate floor did not contain the date change. We understand that the author will officially make the date change to March 31 in the rules committee or on the Senate floor. An exception in the bill would allow the issuance of new debt if the city's total debt service levy for 2004 and 2005 does not increase above the 2003 amount. This situation would most likely occur where an existing obligation is retired in 2003, which would have otherwise reduced the city's debt levy in 2004. Two other exceptions also apply: refunding bonds, which would presumably reduce debt service costs, would be permissible; and, obligations that a municipality finds will not require any additional levy in 2004 or 2005 (i.e., those funded through non-property tax sources, such as pure revenue bonds). The bill would create a set of transition rules that would allow bonds sold pursuant to an agreement with a purchaser or an underwriter entered into before April I ,2003. In addition, bonds sold by a municipality to finance projects required to be funded by the federal government or state government, and bonds to fund a contract with a builder or supplier entered into before April I, 2003, would be permissible. Unlike the governor's proposal, the Senate plan does not seem to allow even voter approved new debt. Issues raised by the proposals Cities and public finance professionals have raised concerns about the impact of these proposals on pending projects, particularly those planned to fund upcoming improvement projects. . City officials have complained that these proposals would disrupt projects that have been in their city's long-range planning for years. Capital projects often take several years to get through planning, design,