01-10-1994 Council Packet - Laserfiche WebLink

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In 1993, counties are alk>wcd to hold payments made on or before May 1 5th until July 6. Although cities may petition to receive up to 70 percent of these lax rev'cnucs by June 31, this still allows counties to accnie interest on city tax receipts for over a month. With the October 15 payment, the counties can hold the funds until November 30 , there is no opportunity for earlier paymerrt to cities. These delays benefit the counties and result in lost cash flow benefit for cities. C. The Legiilalurt should rtpeal authority for counties to assess a separnte charge to administer special assessments. The 1993 Legislature has given new authority to counties to impose unlimited charges to administer special assessments. This new fee brings into question what county functions are paid for by a county’s gcr»ral fund levy, including the general administration of all such taxes and fees. This new fee results in higher taxes for city residents, who are also county residents and pay county taxes. This authority allows counties to impose unregulated and unnecessary fees for duties which should be included in the overall costs of county government. This new authority is also contrary to the current efforts of cities to become more cost efficient. There is no opportunity for cities to chose to ao.ninister special assessments in the most competitively economical manner (eg. duties performed by the city, a private contract, etc.). RS>7. Citr Fund Balai (B) The Legislature should not attempt to control or restrict city fund balances. These funds are necessary to maintain the fiscal stability of city governments, provide adequate cash flow, allow purchases of capital goods and infrastructure, and to maintain favorable bond ratings. There are many financially sound reasons for cities to have adequate cash balances, including the following. • The funds that a city has on January 1 must finance their expenditures for the first six months of the year. A city’s primary sources of revenue, property taxes and state-shared revenues, are not received until June and July - six to seven months into the city fiscal year. Just as the state has asserted its need to maintain an adequate cash reserve account, a city must have a fund balance for its operating expenditures to avoid interfiind or commercial borrowing. However, unlike the state government, cities do not receive monthly revenues from numerous sources (such as sales taxes, personal and corporate income taxes, and various fees and charges to other governments). The alternative is costly borrowing, which is not in the interest of local taxpayers or the state. • Some cities also use their fund balance tor major capital purchases or infrastructure. By gradually accumulating revenue over a period of years, a city can save its taxpayers the expense of issuing debt and incurring a large expense in one year. Cities explain this process of “saving" for major purchases, such as fire equipment, to their taxpayen and the state when cities “designate" their fund balance for such a purpose. • Cities need to maintain some fund balance to meet emergency or unanticipated expenditures created by situations such as natural disasters, lawsuits, and premature breakdown of vital equipment. Cities are not allowed other revenue raising authority to address these issues during their budget year. • Bond rating firms require proof of financial liquidity and a demonstrated ^ ability to service debt in order to receive a Lcuguc of Minncsotn Cities