07-08-1996 Council Packet - Laserfiche WebLink

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CiTV Finance In Mcs -ntsota There were a number of hotly debated issues during the 1995 legislative session with potentially negative consequences for city government. The issues debated included reverse referenda requirement for city levy increases, salary caps for local officials, a property tax freeze, taxation of municipal bond interest, further restrictions on use of tax increment financing, tax redistribution, and like measures. For the most part, these proposals did not make it into law but they reflect the mood of state legislators and give insight into future legislative initiatives. A recent report entitled “Within Our Means", issued by Minnesota Plattning also sounds an alarm that warns many more tough choices are ahead for all levels of Minnesota government in the foreseeable future. To quote from this report, “The painful truth is that budget cuts and spending freezes will be necessary begiiuting in fiscal year 1998, and these cuts will not be available for fixing future budgets. The outlook for at least the next six years after 1999 is cut, upon cut, upon cut.” Add to that the general skepticism the public seems to have with anything related to “government", and the management of city finances becomes more challenging than ever. It is more important than ever that cities plan for an uncertain future. Having access to good financial planning skills and data will be critical. The following topics highlight a few issues which may assist you in managing your city. Legislath -e ACTIMTY The following is a brief summary of the current legislative issues and changes relating to city government in Minnesota. Corporate Welfare - Compani s receiving tax breaks through a tax increment financing district must show a net job growth within two years regardless of the dollar value of the tax break. The agency that provides the assistance will negotiate job and wage goals with the company which must be met within two years of receiving the assistance. Summary’ Budget Publication Requirements - Cities in the metro area now have the option of publishing their sum/nary budget statement in a city newsletter or other city mailing sent to all households in the city, instead of the official newspaper or qualified newspaper of general circulation. Aid Reduction to Local Govermnents - Cities, counties, towns, and special taxing districts will share in a cne-time $16 million cut in HACA in 1996. Economic Development - Tax Increment Financing - Development authorities will be able to exempt districts from the LG/A/HACA penalty’ by making an election at the time they approve the TIF plan. The exemption is made possible by making a local contribution to the district equal to a specified percentage of the annual increment revenue, depending on the type of district. Such contributions need to be made out of the development authority’s unrestricted money, and cannot be made, directly or indirectly, with tax increments or cenain developer payments. The maximum contribution by the development authority is limited to 2% of the adjusted net capacity of the city. Development authorities may also request contributions from the county, school district, or other units of government. -1-