Agenda Packet Cc - regular meeting 8/28/1989

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plus separate programs repealed are all school aid and county social service programs. Of special note to cities are the repeal in 1992 of Fiscal Disparities, TIF, and transition aid ar.d in 1994 park acquisition and maintenance grants, economic development programs, wastewater treatment grants, all transit subsidy including the MTC, and all Metropolitan Waste Management and landfall abatement programs. The administration staff keeps testifying that the purpose of the repealers are only to insure program and policy review, however, many of the repealed programs are already reviewed annually by the legislature. With the exception of the Intent to Review and possibly the Study Commission, this article appears to be dead. Local Option Fee:./Taxes. Article 7 of the bill provides at local option, the ability to establish utilit" franchise fees, unlimited Hotel/Mor.el sales tax, +_a to half the local tax rate (mill rate) fee for service on Lax exempt proue:ty other than constitutionally exempt property (churches, schools) and a one percent piggyback local sales tax. Testimony was mixed on local option taxeE: but did suggest that the result in the metro area could be drastic disparity in tax rates from one city to another. The AKM does not have policy on 'local option sales tax but did request the Legislature and Revenue to produce analysis on the effect of -his proposal cn the Metro Area. It appears that this en%ire article is dea on arrival. Local Government Aid. The LGA formula is drastically changed. It is basically a modified tax base equalization formula with limitations based on spending and property wealt;i. The initial formula is: f of aid -.75 (1989 levy base - 97. of adjusted net tax capacity) Thp levy hase cannot exceed $900 per household, a ' is zero if 1" of the adju-,ted uet tax capacity exceeds $32 per household, and _„_tial aid cannot exceed 120% of 1989 LGA. The initial aid amount is the same as the vetoed bill at $428 million but is reduced by $100 million by transfer of 5.5"� of adjusted net tax capacity to school districts, thus, city/town levies increase by 5.5 tax rate (mills) while the school levy decreases by a like amount. To achieve the full 5.5 tax rate increase in a few cities and most towns, part of the transition aid (or HACA as some call it) is also reduced. Additionally $27 million dollars of city/town transition aid is transferred to schools for a total of $152 million of aid/credit transfer to schools For 1990, city revenue generally will equal the vetoed bill except for the 5.5: shift. If LGA is greater, transition aid will be reduced and conversely, if LGA is less, transition aid will be increased. In the future, however, LGA will increase at a total'pot' rate of about 5" with a maximum individual increase o: 120Z over previous year. Many cities will remain zeroed and many will rec 4ve no increases in LGA and some will lose LGA since 'grandfathering' is elimianted. Correspondingly, all cities will lose transition aid at the rate of one half percent of tax capacity per year unless the 1;-a1 tax rate is less than 90-of the state average in which case the reduction is 27. of tax capacity. The LGA formula will be adjusted in future years to distribute the 'pot' which will grow by the CPI plus the state percent of household growth.