Agenda - Council - 05/28/1991 - Laserfiche WebLink

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League of Minnesota Cities Cities Bulletin Number 20 May 24, 1991 New city aid cuts are one-tenth of governor's original proposal Local option sales tax dedicated to local aids 1992 levy limit base same as original 1991 base The final tax bill, which the Legislature passed on May 20 and Governor Carlson is expected to sign, contains new city aid cuts of $34 million-S17 million from the Decem- ber 1991 aid payments and $I7 million from the 1992 aid payments. The $34 million of new city aid cuts is one- tenth of the $340 million the governor proposed in his original budget. Each $17 million CUt will be about 1.6 percent of revenue base. While the League succeeded in greatly scaling back the governor's original proposal, the combination of new aid cuts with cuts previously enacted is still significant. The entire package of aid cuts is as follows: * Cut in July 1991 aids, passed in January--2.0 Wa'cent of revenue base (does not repeat in 1992). * Cut m December 1991 aids in new tax bill-- 1.6 percent of revenue base (does not repeat m 1992). * Cut in 1992 aids passed in 1990 session--2.4 percent of revenue base. * Cut in 1992 aids passed in new tax bill--1.6 percent of revenue base. Further complicating this picture are the facts that LGA and HACA (homestead and agriculture credit aid) had some increases built in before the aid cuts started, and that HACA will increase due to state payment for class rate reductions contained in the new tax bill Overall, city, county, and township properly Iix relief payments are estimated to increase from $723 See Aid cuts, page 3 Cities should urge county boards to adopt local option sales tax The League urges cities to pass resolutions and contact their county board members in support of county approval of the new local option sales tax by the July 1 deadline. If a county fails to adopt the 1/2 cenl additional sales tax, the county and its cities and townships will lose ALL of their aids--LGA, HACA, and disparity reduction aid. If a county fails to adopt the Iix, the sales tax rate in the county does not drop to 4-1/2 percent, it stays at six percent Yet all aids within the county are eliminated, and the difference between a six percent and 4-1/2 percent sales tax goes into the local government trust fund as a windfall for all local governments in the other counties. For an average county, failure to adopt the IIx would mean aid losses equal to a two percent sales tax, while saving only 1/2 percent on the sales tax. In every county, the aid loss would be much greater than the sales tax gain. Even for Heunepin County, the aid loss would be 2.4 times as large as the sales tax gain. The ratios of aid loss to sales tax gain for other large counties are 4.7 for Ramsey. 10.5 for St. Louis, 5.0 for Steams, 3.9 for Olmsted, 5.0 for Anoka, and 3.6 for Dakota. If a county fails to adopt the local sales tax by July 1, the govern- ing bodies of the cities and townships within a county can adopt the uax August 1. However, cities should urge their counties to approve the tax, since the short timeline and mis- undemanding of the complex new provisions could result in failure to approve the tax using the city/ township method. Huge aid losses would then occur. Counties are likely to expect city support for adoption of the tax, since the local government trust fund aid payments to cities will be about three times as large as the aid payments to counties. JT