Agenda - Council - 05/26/1981 - Laserfiche WebLink

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-2- budget. Property tax revenue has grown by an average of 34.5% per year, and has not been subject to levy limitations because the city was exempt from this law based on its 1970 population. During the next decade, however, the city will be subject to levy limits based on the 1980 census results. Therefore, the levy limit legislation will be the determining factor in prdJecting this revenue source for the next five years. Local Government Aid also makes up a significant portion of the operating budget, at 16%. This revenue source has been increasing at a rate of 20.2% per year, although it appears at present that this source may stabilize and will not continue to increase. Levy Limitations The current levy limit law limits the growth of the per capita "levy limit base" to 8% per year. The "levy limit base" is the total of the property tax levy plus the local government aid. Limiting the growth of the base has presumably provided a way for the state to ensure that an increase in local aid will have the effect of reducing the relative amount raised by property taxes. Since it is expressed in "per capita" terms, there is some built in allowance for growing communities beczuse the levy limit base is divided by the previous year's population to get the base per capita, this figure is increased by 8% and then multiplied by the current or most recent population estimate to arrive at the levy limit base. Prior to 1981, the increase ~n the per capita base was limited to 6% and during the period 1975-80, Ramsey's population grew by an average of ?.4% therefore, if' Ramsey had been subject to levy limits, the levy limit base would have been allowed to increase only about 13% (6% plus ?.4%) per year. Looking at the increase in the total of Ramsey's local aid and property taxes from 1978-81, the average increase was 32% per year, the bulk of which was made up by property taxes. Since~-the amount raised by property taxes is directly related to the need for funds to provide the necessary services, the 13% increase allowed under levy limits would clearly have been inadequate to meet Ramsey's needs. e Levy Limit Base Projections A projection of levy limit base is.-ontained in Figure 4. It was derived by taking the sum of the 1981 Tax Levy and Local Aid(S829,835) and dividing it by the 1981 projected population to get the per capita figures. For each subsequent year, the per capita levy limit base is increased by 8% and multiplied by the projected population under the high, medium and low