Agenda Packet Cc - regular meeting 8/28/1989

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As can be seen, cities with higher property wealth and/or low tax rates will lose LGA and receive less transition aid at a faster rate. Whereas, cities with lower property wealth and higher spending or tax rate will gain LGA and lose transition aid more slowly. It appears that in the name of reform, the administration has still fouud a way to insure that 'the more you spend, the more you get', except that the LGA formula itself is separated from spending. The AMM opposes the aid/credit shift to schools for two reasons. First, there is no control to limit school spending or future lesislati,re foundation, base increases that could offset the 5.5% tax capacity rate reduction. In that case the taxpayer loses and blames the city because that is the unit whose tax rate increased. Secondly, the 1990 prope?ty tax statements will show a comparison of 1989 and 1990 tax rates by unit without explanation. City officials should not have to be in a position of explaining a 5.5 mill increase that came about because of state manipulation. The &M aloi:g with others has requested the Legislature and Revenue to produce analysis on the future workings of the new LGA formula and transition aid. Classification Rates. As in the vetoed bill, classification rates are reduced for certain classes of property and the resulting local tax loss is replaced by increased transition aid to offset tax shifts to other classes of property. The primary beneficiaries of rate changes are mid and 'nigh valued homes, rental property, and C/I property. The Governors bill provides slightly less relief for homes and rental property and more relief for C/1. The number of different classification rates are reduced to 9 in 1990, 4 in 1995 and 3 in 1999. Future rate changes of note include a maximum limit of 2% for homesteads in 1991, 2% for apartments in 1996, and 3Z for C/I in 1999. Attached are two tables showing the comparison of classification rates. One compares current, vetoed bill, and governor proposed rates for 1990 and the other shows the eventual decrease to 3 classes by 1999. Levy Limits. The Levy Limit article is nearly the same as the vetoed bill. The 1989 levy base includes the reserve adjustments granted by the commissioner of Re,ienue except for the amounts not levied. Levy base growth for 1990 is limited to 32 plus one half of the percentage of the greater of household or population growth. Special levies are expanded to include tort judgements, natural disaster expenses, loss of tax receipts due to abatements, plus a number of county program levies. The only difference in levy limits is 0tat the Governor's bill repeals levy limits for cities for 1991 and counties For 1993. Truth in Taxation. This article remains essentially the same as the vetoed bill except the process for budget, notice, hearings, and certifi ns for this year are incorporated as established by the revenue department :. im rules issued June 23, 1989.. Thus, following either current law (1988 t:- or the rules distributed by the revenue department would :omply with the pi- d bill. The Truth in Taxation provisions established for the 1990 budget in the vetoed bill ace identical but delayed one Year. 3