Agenda - Council - 07/28/1981 - Laserfiche WebLink

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i �., A greater shift in the percentage distribution of aid from the "high tax effort" to the "low tax effort" cities and towns occurs when either the inflation rate or the funding level is allowed to vary. A decrease in the inflation rate seems to benefit the "low tax effort" cities and towns the most. This can be explained by the fact that few of them have their aid based on their preliminary or maximum state aid factors, while the "high tax effort" group, which has more cities and towns whose aid is based on their preliminary or maximum state factors, have a slower growth in their local revenue bases. An increase in the funding level also appears to benefit the "low tax effort" cities and towns the most, since there is more excess aid to redistribute to that group. The actual results show that the formula is successful in reducing the importance of the mill rate in the determination of Local Government Aid increases. Large increases in mill rates provide little "reward" for most cities and towns under the new formula. However, a city that has the opportunity to advance from one minimum state aid factor bracket to the next one (in other words, it is near the borderline of two brackets) has a theoretical "incentive" to increase its average equalized mill rate. 8) When the levy limit cities and towns are identified as either "fast growth" or "slow growth" cities and towns on the basis of their population growth rate, a modest shift in the percentage distribution of aid between the two groups is observed. It appears that when the funding level is allowed to vary, an increase in the funding level benefits the "fast growth" cities and towns. This can be explained by the fact that a higher percentage of the "slow growth" - cities and towns (including the city of Minneapolis) have their aids based on I* is r 7