Agenda - Council - 08/28/1990 - Laserfiche WebLink

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Fiscal Disparities 21 Recommendation 3 would be stronger, and developing communities would be allowed to retain more of the resources needed to establish a tax base. Lowering the contribution rate, perhaps in graduated steps, would not change the relative status of communities. Cur- rent gainers would remain gainers, and losers would remain losers. Furthermore, with an anticipated doubling of the contributions pool by 1995, the reduced rate could be linked to the'expected pool increase so that amount of tax redis- tributed would be held approximately constant. Figures 11 and 12 (next page) project how the Fiscal Disparities pro- gram would operate under current law and under a com- pensating contribution-rate regime. The estimated 1995 effects of any contribution-rate reduction can be determined by reducing estimated net tax-capacity gains or losses for that year (see Figure 8. page 13). For ex- ample, if the contribution rate were reduced to 30 percent from the current 40 percent by 1995,.new estimated gains or losses would be 75 percent (30 percent divided by 40 percent) of the old gains or losses. That is, each amount in column 3 of Figure 8 would be reduced 25 percent. Compensate for'different assessment levels when computing contributions. This would solve ihe problem where commu- nities are penalized for having high assessment levels. Con- tributions would no longer depend on both commercial-industrial growth and local assessment practices, and' the result would be a more equitable Fiscal Disparities program. An assessment percentage that keeps the contributions pool the same size or smaller should be chosen. Hennepin County overall would then lose less in tax capacity. The effect on Hennepin cities would depend on their assessment practices. Recommendation 4 Eliminate the contribution exemption for cities designated re- development areas under the Public Works and Economic De- velopment Act of 1965. There is no sound reason why South St. Paul, the only city granted such an exemption, should receive this favored status. If the exemption were eliminated, it is recommended that Sou.th St. Paul be given a more cur- rent base year from which to determine commercial- industrial growth.