Agenda - Council - 02/24/1981 - Laserfiche WebLink

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-2- THE POLITICAL CONTEXT The cities' position in this controversy is complicated by several factors. First, the Governor's budget does contain some property tax relief. This is achieved largely because 1) the homestead credit program would be funded to allow for picking up 58[, up to a maximum of $650, of homeowners~ property tax bills and 2) the school aids program is receiving a significant increase in funding, which should hold down school property tax increases. The Governor has recommended "an increase of $458 million or 22 percent over the aid allocated in the current biennium. This increase is ~of the $89 million a year. ! have also recommended to restore the base level of aids to compensate for the reduction necessary in the current fiscal year." Thus the average homeowner may not see much of an overall effect on his or her taxes - the "bottom line". Note that other types of property owners will certainly be hit hard by city and county tax increases, and all taxpayers will notice dis- proportionate jumps in the city portion of the levy. Second, this is a highly political issue, and the cities are caught between the IR's calling for more local belt-tightening or local decisions on taxing at the city level and the DFLer's, skeptical about increased burdens on the property tax. The budget is carefully crafted to avoid at least the appearance of any state tax increases, and there has been much legislative wrangling as to whether the budget should be considered to require a tax increase or not. If legislators stick to their opposition to any sales or income tax increases, the only way cities can hope to gain is by a legislative change in the priorities set by the Governor's budget - for example, away from schools and toward cities. It is thus crucial for city officials to make a strong and bipartisan demand for fair treatment from the'Legislature. If such an outcry is not forthcoming, cities will be in a much worse position than last fall, when they had to cut expenditures or raise taxes to make up for the Governor's cuts in state aid. WHAT CITY OFFICIALS SHOULD DO Use the information and table supplied herein to prepare a similar estimate of the proposed budget's impact on your city and your taxpayers. Is an increased property tax levy'likely? How much of an increase? Or would the city cut back on services such as: reducing park or library services; deferring replace- ment of equipment; cutting back on street and bridge repair; laying off employees; not replacing employees who resign or retire, etc.? Determine the effect of the revised payment schedule on your city. In particular, would your city be forced to borrow in order to meet expenses during the first six months of the year? Will you lose interest income? How much? The'clear implication of the Governor's budget is that city expenditure increases have not been justified, and that cities need to tighten their belts and "cut the fat out" of their budgets. If cities do that, the argument goes, then the aid freeze will not require property tax increases. Do you agree with this statement as it relates to your city? If not, tell the League briefly what your city has done the past several years to hold down expenditures. Will you continue to be able to "hold the line" for 1982 and 1983 without raising taxes?