01-14-1985 Council Packet - Laserfiche WebLink

Home Browse Search

FEDERAI. I.ECISLATION PROPOSED POLICIES FL-1. GENERAL. REVENUE SHARING The League_ supports the reauthorization of General Revenue Sharing by the 99th Congress at an increased level of funding. The league opposes inclusion of energy severance taxes in the calculation of fiscal effort attributed to the states in the determination of GRS allocations. Congress and the administration should resist the temptation to use GRS as a lever to obtain other governmental reforms at the local level. Revenue sharing should be a flexible, decentralized program free of bureaucratic entanglements. The League is not encouraged by the direction thus far of the U.S. Treasury's study of the program, which, to date, has focused on the cost to the Treasury of deductibility of state and local taxes.The League opposes any effort to further restrict or eliminate tax- exempt bonding authority for cities or the removal of deductibility of state and local taxes on federal income tax returns in order to obtain continued adequate levels of funding for General Revenue Sharing for cities. Neither does the League favor the creation of a Taxable Bond Option as a substitute for the continued authority of cities to use tax-exempt municipal bonds. The League understands that the federal government is considering budget revisions that cut programs of interest to cities. The League is quite clear, however, that the General Revenue Sharing Program is of vital importance to all Minnesota cities. These cities utilize GRS to account for a significant portion of their budgets. Since, in most instances, those funds are a part of the city's operating budget, reductions in GRS leave cities no choice but to raise taxes or reduce city services and personnel. Neither alternative is an acceptable method of dealing with the increasing needs of city residents for those services given the loss of other urban assistance programs. FL-2. MUNICIPAL_ BONDS The League supports the maintenance of the tax-exempt status of state and local bonds. The traditional way of financing most local public improvements of facilities has been through the issuance of bonds, and this is likely to continue for the foreseeable future. Consequently, if the need for local improvements is to be met at a reasonable cost, it is imperative that a broad market be maintained for municipal bonds at the most favorable interest rates possible. The exempts( :om federal income taxes of the interest on municipal bonds has been and co;" cs to be the key factor in maintaining a healthy market for municipal bonds +is tax-exempt status of state and local issues not only maintains a sepai..Le market for them but also recognizes the right of state and local government to independently manage their fiscal affairs. In recent years, however, some have become concerned that the traditional market for state and local bonds will not be able to satisfy the rapidly growing need for capital for public purposes. Concerns have also been raised about existing methods of tax -50-