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Chapter 20 Sources of revenue There are several major sources of revenue for cities. This chapter will discuss these sources. In order to develop and implement a city budget, the council should consider all of these sources. Sources of revenue are as follows: See LMC Information Memo, The League research memo Budget Guide for Cities is revised each year afer Budget Guide for Cities. the legislative session. The publication contains comprehensive, current information on budgeting, the property tax levy, expenditures, revenues, and pension and retirement costs. Taxes Although city revenue sources are more diversified, the property tax accounts for approximately 30 percent of city revenues and remains the primary way to raise city revenues. A city's ability and process to levy property tax is See Handbook, Chapter 22 discussed extensively later in the Handbook. See MN Revenue Sales Tax Fact property tax provides the greatest percentage of city tax revenue, but the Sheet 164, Lncal Sales mid Use Legislature has authorized Minnesota cities to levy and collect taxes on some Tax. utilities, gambling, and lodging as well. Minn. Stat. ~ 459.190 A city may impose, by ordinance, a local lodging tax up to a 3 percent tax on the gross receipts of lodging in the city; 95 percent of the gross proceeds must be used to fund a local convention or tourism bureau for the purposes of marketing and promoting the city. Minn, scat. § 297x.99 The Legislature has also granted some cities the authority to impose their own sales tax. However, there is currently a ban on promoting or expending funds to support special legislation for a new local sales tax until after May 31, 2010. II. Local government aid Minn. scat. ti 477n,ot3 Local government aid (LGA) is a state aid to Iocal governments. LGA has see LMC tnrnrmacion Memos, undergone several changes since its creation in l 971. LGA has replaced most Budget Guide jor C'itier and Local of the individual taxes, such as ci arette, li uor, bank excise, and oss Gorernment Aid 10/ +~ 61 ~ earnings taxes, which the state previously distributed to local governments under various laws. LGA, like other aspects of the state tax system, is now manipulated by the Legislature annually.