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The basic public finance rationale for <br />diversification of local tax systems is rooted <br />in the fact that economists generally agree <br />that there is no perfect tax. Each tax has <br />unique strengths and weaknesses and the <br />more intensively any single tax type is used, <br />the more obvious its shortcomings become. <br />For example, the property tax is generally <br />regarded as being very stable throughout the <br />economic cycle and it is considered to be a <br />relatively easy tax to administer and enforce. <br />However, when property tax burdens <br />become too high, there may be negative <br />consequences for other public policy <br />objectives such as business development and <br />home ownership. <br />In addition to avoiding the problems created <br />by excessive reliance on any single tax, a <br />balanced and diversified revenue system for <br />Minnesota cities may create a more <br />favorable business climate and provide for <br />greater stability of revenues to the recipient <br />government unit throughout the course of <br />the economic cycle. <br />Under Minn. Stat. § 297A.99, the <br />Legislature has created a set of local sales <br />tax rules and a defined process by which <br />cities and other political subdivisions can <br />impose a general local option sales tax. <br />Although the statutory process requires the <br />city council to adopt a resolution supporting <br />the local sales tax and also requires the city <br />to seek voter approval of the sales tax at a <br />general election, the process continues to <br />require the final authorization of the local <br />sales tax by the Legislature through the <br />passage of a special law. Since 2011, seven <br />additional cities have successfully sought <br />legislative authorization to impose new local <br />sales taxes. As a result, there are now 31 <br />cities that currently are authorized to impose <br />a general local sales tax. <br />Response: Cities should be able to <br />diversify their sources of revenues. The <br />League of Minnesota Cities continues to <br />support a statutory change that will allow <br />a city to enact a local sales tax for public <br />improvements, including but not limited <br />to those specified in the 2011 legislation: <br />a) Convention or civic centers; <br />b) Public libraries; <br />c) Parks, trails, and recreational <br />facilities; <br />d) Overpasses, arterial and collector <br />roads, or bridges, on, adjacent to, or <br />connecting to a Minnesota state <br />highway; <br />e) Railroad overpasses or crossing safety <br />improvements; <br />f) Transportation infrastructure <br />improvements, including construction, <br />repair of roadways, bridges and <br />airports; <br />Flood control and protection; <br />Water quality projects to address <br />groundwater and drinking water <br />pollution problems; <br />Court facilities; <br />Fire, law enforcement, or public safety <br />facilities; or <br />k) Municipal buildings. <br />g) <br />h) <br />i) <br />j) <br />Local sales taxes would follow the process <br />outlined in Minn. Stat. § 297A.99 but <br />without the need for the approval by the <br />Legislature and governor through the <br />passage of special legislation. The League <br />supports allowing the referendum to be <br />conducted at either a general or a special <br />election. <br />State law should also be modified to <br />generally authorize any city to impose <br />other types of taxes such as a local payroll <br />tax or an entertainment tax with the <br />adoption of a supporting resolution by the <br />city council and after approval by the <br />voters at a general or special election. <br />League of Minnesota Cities <br />2016 City Policies Page 104 <br />