Agenda - Council - 06/09/2015 - Laserfiche WebLink

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LEGISLATIVE UPDATES The 2014 legislative session began with a projected budget excess for the remainder of the biennium of $1.09 billion, later revised upward to a projected excess of $1.23 billion in the February 2014 economic forecast. The Legislature utilized a portion of the projected excess to bolster the state's financial condition; repaying $246 million "borrowed" from K-12 education through previous financing shifts, and using $150 million to replenish the state "Rainy Day Fund" budget reserve. The Legislature also approved increases to future funding for local government aid, and expanded the sales tax exemption approved for cities in 2013 to include joint powers entities and other instrumentalities of local government. The following is a summary of recent legislation affecting Minnesota cities in 2014 and into the future: Local Government Aid (LGA) — The Legislature completely overhauled the LGA formula for fiscal year 2014 and thereafter, creating a three -tiered formula that includes separate "need factor" calculations for cities with populations under 2,500, between 2,500 and 10,000, or over 10,000. The new formula simplified the LGA calculation, and reduced the volatility of the LGA distribution by limiting the amount it may decline in a given year. Under the new formula, the minimum LGA 2014 distribution for each city was an amount equal to their 2013 LGA. Beginning in 2015, any reduction to a city's calculated LGA distribution will be limited to the lesser of $10 per capita, or 5 percent of their previous year net tax levy. For cities that gain under the new formula, the increases will be distributed proportionate to their unmet need, as determined by the new "need factor" calculations. The state-wide LGA appropriation was $507.6 million for fiscal 2014, $516.9 million for 2015, and $519.4 million for fiscal 2016 and thereafter. Sales Tax Exemption — Cities are exempted from paying sales tax on qualifying purchases, effective for purchases made on or after January 1, 2014. Purchases of goods or services by an exempt local government for a publically provided liquor store, gas or electric utility, golf course, marina, campground, cafe, laundromat, solid waste hauling or recycling operation, or landfill will remain taxable. The defmition of "cities" for this statute include both home -rule and statutory cities. The 2014 Legislature extended the defmition of tax exempt local government to include all special district; city, county, or township instrumentalities; economic development authorities; housing and redevelopment authorities; and all joint power boards or organizations. However, this expanded exemption list is not effective until January 1, 2016. Proposed Property Tax Levy Certification Date — The deadline for cities to certify their proposed annual tax levies was extended from September 15 to September 30. Agricultural Homestead Market Value Credit — The rate of agricultural homestead market value was increased to a maximum of $490 at a market value of $270,000 and over. Capital Investment Act Requirements — The Legislature approved capital improvement projects totaling about $1.1 billion under two separate capital investment (bonding) acts. Both require that, to the extent practicable, a public entity receiving an appropriation of public money for a project under these acts must assure those facilities are built with American-made steel. Authority to Inspect Public Buildings and State -Licensed Facilities — A formal delegation process was established that must be used by the state Department of Labor and Industry (DLI) when delegating the authority to inspect public buildings and state -licensed facilities to local building officials. The new provisions did not alter the circumstances under which the DLI is required to delegate this authority in most circumstances, only the process to be followed. However, for certain smaller construction projects designated as "reserved projects," the DLI is now required to delegate inspection authority to any municipality with a designated building official without going through the formal delegation process. -16-