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optional Sales Tax <br />May 31, 1991 <br />Page 2 of 3 <br />A. Impact of monies on the City of Orono Organization - <br />As noted in Attachment C, the City of Orono would receive <br />about $91,000 for 1992 and possibly $260,000 in 199 3 (depending <br />upon final formula that is to be worked out). This money is to <br />help off-set. in Orono, the reduction in classification rate from <br />3 down to 2 1/2 percent in 1992 and 2% in 1 993 for any homes over <br />$115,000. If the local option sales tax is not approved, then <br />persons with 3% will be decreased, but the additional monies <br />would not be put into the system and would effectively raise the <br />tax capacity rate in Orono by just under 1 tax rate percentage <br />for evervone in 19^2, <br />B. Impact on Citizens in Orono - <br />In addition to the increase of the City's local amount, <br />failure of adoption of this at the County basis will raise the <br />tax capacity rates of other taxing units in Hennepin County. <br />Preliminary estimates have indicated that this increase up to 5% <br />in property taxes for an Orono resident. <br />C. Impact on Sales Tax - <br />As indicated if adopted, sales tax would stay at the new 6 <br />1/2% rate with the 2% of the monies going into local government <br />trust fund. If, however, it is not adopted on the County level, <br />the sales tax would then drop to 6% with the 1 1/2% between 6 and <br />4 1/2% still being sent to the trust fund. This money however <br />would be distributed to cities and counties that had adopted the <br />additional 1/2%. <br />The trade off is really sales tax dollars for property tax <br />dollars. The distribution is not based on sales tax collection <br />in a community. The distribution for 1993 has not yet been set. <br />ALTERNATIVES - <br />1. Adopt a resolution. <br />2. Amend and adopt. <br />3. Decline to adopt a resolution. <br />4. Await a County determination before taking any action. <br />5. Table for further discussion. <br />RECOMMENDATION - Even though the County is requesting a <br />resolution of support indicating the County Board will not adopt <br />a resolution if they do not receive a majority of cities <br />supporting, there is nothing in the law that requires the City to <br />J