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<br />CASE
<br />
<br /> GROSS EARNINGS TAX
<br /> By: Ryan R. Schroeder, City Administrator
<br />
<br />Background: ~
<br />
<br />Early in 199'1 duri ag goal setting discussions, Staff suggested review of a franchise fee or gross
<br />earnings tax! a~ a ~iaethod of stabilizing revenues given our rapidly diminishing propensity for
<br />continuance 0t~the Isles tax transfer from the State of Minnesota. Subsequent to these discussions,
<br />an ordinan¢¢~rol: ~sal was brought before the Council. It was denied with members Beyer,
<br />Gilbertson artdCi{ h voting no but it was suggested by Councilmember Beyer that the topic be
<br />brought bael{ for ti e 1992 budget discussions. During preparation of the budget for 1992, it was
<br />determined th~l the City of Ramsey would have sufficient revenues in 1992 to avoid initiation of a
<br />gross earningsitax Itt that time and, therefore, Staff did not bring it back to the table. During our
<br />recent levy se~ing meeting for the 1993 budget, Staff was directed to propose a gross earnings
<br />ordinance atittie geptember 22, 1992 meeting. This ordinance is enclosed for your review. As
<br />presented in e~lie~' discussions, it has been estimated that a 3% gross earnings tax on revenues
<br />received by Ari~oka Electric Cooperative and Midwest Gas would result in revenues received by the
<br />City in exceSSiof 4150,000,00. Since that estimate was made we have received documentation
<br />from the two': ffliliti~s as to their gross revenues for the period December 1990 through November
<br />1991. Upon tl~se ~evenues, we have estimated the following earnings by implementation of a tax
<br />ranging from ~% t6 5% on total revenues of the utilities, or in the alternative, a tax ranging from
<br />2% to 5% Or~ 0nlylresidential properties. We have discussed with Midwest Gas the option of
<br />collecting a grgss e~-nings tax only between the months of April and October. The result of this
<br />against reSid~ial property would be a reduction of about 50% in the revenues received by the
<br />City. [ REVENUES
<br />
<br /> PERCEN.~
<br /> 5:0[
<br /> 4.0
<br /> 3.0
<br /> 2;5
<br /> 2,0
<br />
<br />RESIDENTIAL {ONLY
<br />
<br /> 4;0 ~
<br /> 3.0
<br /> 2.5
<br /> 2.0
<br />
<br />I AEC MIDWEST TOTAL
<br />$217,273 $90,838 $308,111
<br />173,818 72,670 246,488
<br />130,364 54,118 184,482
<br />108,637 45,419 154,056
<br />86,909 36,335 123,244
<br />
<br />$165,492 $74,074 $239,566
<br />132,394 59,258 191,652
<br />99,295 44,~4 143,739
<br />82,746 37,037 119,783
<br />66,197 29,629 95,826
<br />
<br />As of December 1'~, 1991, the City was aware of eleven cities in the area who were assessing
<br />either a gross ~n[Is tax or a franchise fee. We have not attempted to update this information but
<br />we are aware :of add~itional cities that either considered it last year or are considering it this year.
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