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

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league of minnesota cities May 5, 1980 TO: FROM: RE: City Officials Pete Tritz Revenue Sharing - Proposed Formula Changes A memo was sent to all cities on April 21 concerning the Carter Administration's proposals for changes .in the revenue sharing distribution formula° Since then, the Administration has proposed two additional changes. As noted in the April 21 memo, the Administration proposes an additional $500 million in funding for the local government share. The new proposal is to allocate this among states accordin§ to the amount of financial aid the state has been transferring to its local governments. Minnesota would do comparatively well under this proposal; it would result in there being an additional $16,190,000 for distribution to the local governments in Minnesota. (Only New York, Wisconsin, and the District of Columbia would receive a greater per capita share of this additional funding.) Under the existing formula, the local, share is first allocated to county areas, and each county area allocation is then divided among the county government, and the cities and towns of the county.. The Administration now proposes to eliminate the initial step of first making an allocation to the county areas; instead all jurisdictions in the state would compete directly against all other jurisdictions in the state. (This is commonly referred to as "de-tiering"?) The allocations would still be based on' the same three factors of population, tax effort, and per capita income as explained in the April 21 memo° The Treasury Department has calculated the distribution which would result from these proposed formula changes. The "de-tierin§" proposal does not appear to cause major shifts in the pattern of. distribution of funds, although cities whose per capita income is lower and tax effort is higher than their county average tend to benefit somewhat, while cities with a higher per capita income and/or a lower tax effort than their county average tend to do not as well. Cities in Hennepin County whose per capita income is below $5,549 (115% of the. state per capita income) tend especially to benefit from de-tiering. (Hennepin County is the only county whose per capita income exceeds 115% of the state average. Under the President's proposal without de-tiering, this would reduce the amoun~ allocated to the county area, thus reducing what is available for distribution to the cities in the county. De-tiering eliminates the effect of the 115% limitation on the lower-income cities in the county°) (OVER) building, 41~0 cedar street, saint paul, minnesota 551 01