Agenda - Council - 01/12/1982 - Laserfiche WebLink

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I I I I I I I I I I I I I I I I I I I 3. After the committee determination of policy change, the proposals shall be communicated to the League membership prior to Board action. 4. Board action shall constitute League policy. VI-5. Municipal Bonds (A) The traditional way of financing most local public improvements and facilities has been through the issuance of bonds, and this is likely to continue for the foreseeable future. Conse- quently, if the needs for local improvements are to be met at a reasonable cost, it is imperative that a broad market be maintained for municipal bonds at the most favorable interest rates possible. Federal legislation. The exemption from federal income taxes of the interest on municipal bonds has been and continues to be the key factor in maintaining a healthy market for municipal bonds. This tax-exempt status of state and local issues not only maintains a separate market for them but also recognizes the right of state and local govern- ment to manage their fiscal affairs independently. In recent years, however, some knowledgeable people have become concerned because of their belief that the traiditonal market for state and local bonds will not be able to satisfy the rapidly growing need for capital for public purposes. Concerns have also been raised about existing methods of tax avoidance, including the tax- exempt interest on state and local bonds. These two concerns have resulted in several bills in Congress to establish programs to lend money to municipalities by purchasing their bonds and/or make interest on state and local bonds taxable. While the motives behind these proposals may be laudable, it does not appear that a convincing case has been made for such a radical change which could damage the independence and viability of state and local government. Therefore, the League strongly urges that the tax-exempt status of state and local bonds be maintained. Also, the League is opposed to any federal legislation which would regulate the issuance and sale of municipal bonds, including registration or filing with the Securities and Exchange Commission. Bond interest ceiling. Because interest rates in the bond market fluctuate in response to economic forces, it seems unrealistic that a maximum in- retest rate be imposed upon all §overnments. The League recommends that any limitation on all general obligation, revenue bonds and industrial revenue bonds of the city be repealed and that the interest rates be determined by the market. The League also recommends that the ceiling in any present application of the usury statutes to the rate of interest that can be charged on special assessments be removed. The League further recommends that the negotiated amount of the sale of bonds be raised from $200,000 to $300,000. Bond code amendments. The League supports amendments to the bond code and tax laws that will clarify the authority of local governments and assist them in obtaining credit. Municipal bond sales control by the state. Legislation proposed in the 1980 session would have made the State Attorney General Bond Coun- sel for all municipal bonds and placed authority for selling all bonds with the State Investment Board. This could lead to increased bond costs and lengthy delays in bond issuance. It would take the Attorney General's Office several years to obtain the background and reputation necessary for their opinions to be accepted by bond buyers. The marketability of the bonds could be adversely affected, and taxpayers would bear the burden of higher interest rates. This would be a step in the direction of government bureaucracy taking over a function of private enterprise which is competent and is working at a time when the public trend is demanding less government in- stead of more. VI-6. Tax-Exempt Property (B) One of the glaring inequities in the Minnesota tax system involves local services that are provided free to tax-exempt property owned or used by the state, counties, cities, regional governmental bodies, and by certain governmental organizations. It is widely acknowledged that such property bene- fits directly from governmental services such as police and fire protection and street services pro- vided by cities. Since there is no legal basis, how- ever, for claiming reimbursement for the cost of such service, they are borne by the local tax- payers. Furthermore, such property is concen- trated in certain cities, resulting in a heavy cost burden upon those cities. The League recommends that this problem be corrected by legislation requiring state, county, city, regional government owners of tax-exempt property to reimburse cities for the cost of police, fire and street services. VI-7. Assessment Equalization (B) Unequal property assessment both within and - 27 -