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2005_0620_Packet
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2005_0620_Packet
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Roseville City Council
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ATTACHMENT 6 <br />Overview Memo re: Local Sales and Use Tax <br />The Department's findings show that relative to the typical city, cities with local sales taxes tend <br />to be � dependent on local property taxes and other local funding sources. But this does not <br />suggest that property taxes are lower in cities that have local sales tax. Generally speaking, cities <br />that have a local sales tax also have higher property tax rates when compared to cities with <br />similar population. The likely reason is that cities with a local sales tax also have greater <br />demands for services that extend beyond their borders — the byproduct of being a regional <br />service center. <br />Summarv of the Polic. I� <br />The report outlines various policy issues related to the enactment of local option sales taxes. In <br />summary, the report drew upon previous writings submitted by the National Conference of State <br />Legislatures, whom in their 1997 report 'Critical Issues in State-Local Fiscal Policy, a Guide �a <br />Local Options Tuxes' offered the following: <br />Local option taxes allow local people to have more control over tax decisions and <br />improve local flexibility to meel regional service needs. However they may create local <br />accountability problems, hanzper state flexibility and impose additional administrative <br />and compliance costs on businesses and individuals. They �Fn.� also affect the balance <br />and fairness of the state-local system and create harmful competition between local <br />governnzents. <br />Reviewin� Pub�ic Comments <br />As part of their study, the Department of Revenue conducted public meetings in 2003 to solicit <br />comments on local sales taxes. Meetings were held in Brainerd, Rochester, and St. Paul. <br />Attendees included; city and county officials, legislators, individual citizens, business <br />organizations, and associations representing cities and counties. <br />As is noted in the report, the comments were generally centered on criticism of the current <br />process, appropriateness of a local sales tax as a component of state and local revenues, and <br />issues raised by the prospect of wider local authority for sales taxes. <br />Criticism and discontent were observed with respect to the process of authorizing local sales <br />taxes. The lack of consistent and objective criteria, meant some cities were granted approval <br />whereas others were not, and not always for consistent reasons. Concern was also raised that the <br />approval process was driven by politics rather than by merit. <br />Although no unanimity was reached on the appropriate role of a local sales tax as a revenue tool, <br />it was acknowledged by many that larger communities with a relatively strong economic base are <br />better able to raise Local monies than their smaller counterparts. And that this basic fact should <br />be a consideration in granting approval for a local option sales tax. <br />Public comment was also received with respect to requiring wider local authority before granting <br />approval of local sales taxes. It was suggested that for local taxes that would be paid primarily <br />by those who live outside the taxing jurisdiction, the referendum ought to be a regional one <br />rather than confined to the taxing jurisdiction. <br />ATTACHMENT 6 <br />Overview Memo re: Local Sales and Use Tax <br />
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