Agenda - Council - 05/27/1980 - Laserfiche WebLink

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pensate for increased local government costs. Because of the continually changing factors which impact on the formula and sensitivity of the formula to these changes, the diverse needs of cities, and the complexity of the formula itself, it is important that there be continuous study and monitoring of the formula. The League recommends that the legislature appropria'te funding for this purpose. It further recommends that the League be included in this activity. It shall be League po]icy that any changes in the formula initiated by any city or group of cities be made only through League process. This process shall be: Any initiative for change shall be addressed to either the Revenue Sources Committee or the Board of Directors of the League of Minnesota Cities. If the Committee or Board believes a change may be warranted, a technical committee, task force, or the Committee or Board may pursue a study of the impact of the proposed change. The committee selected must contain a representative cross-section of League member cities as determined by the Board of Directors. bo Within the technica. I study committee, the membership shall include a finance officer and other technically competent resource people. This committee shall report to the appointing body. 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. Municipal bonds The traditional way of financing most local pub- lic improvements and facilities has been through the issuance of bonds and this is likely to continue for the foreseeable future. Consequently, if the needs fo~ 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- ments to manage their fiscal affairs independently. In recent years, however, some knowledgeable people have become concerned because of their belief that the traditional market for state and local bonds will not be able to satisfy the rapidly growing need for capital for public purposes. Con- cerns 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 pur- chasing 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 indepen- dence and viability of state and local government. Therefore, the League strongly urges that the tax- exempt status of state and local bonds be main- tained. 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 Commis- sion. Bond interest ceiling. Because interest rates in the bond market fluctuate in response to economic forces, it seems unrealistic that a maximum interest rate be imposed upon all governments. The League recommends that any limitation on all general obligation and revenue bonds of the city be repeal- ed 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 fur- ther recommends that the negotiated amount of the sale of bonds be raised from $200,000 to $300,000. -3-