Increase
Funding for
The MICA Board
of Directors urges the Legislature to increase funding for county program
aid.
After cuts of $35 million in 2003 and another $80
million in 2004, county program aids were partially restored to a certified
funding level of $205 million in 2005.
That is still $21 million below what counties were certified to receive
in 2003 and the funding is no longer indexed as it was in the past. So counties will be totally dependent on
property tax increases to fund program cost increases in the future. The 2008 Legislature should increase
program aid funding by re-indexing it if monies are available.
Oppose
Levy Limits, Property Tax Freezes or Reverse
Referendums
The MICA Board
of Directors urges the 2008 state Legislature not to enact any levy limits,
property tax freezes or reverse referendums on proposed property tax
increases.
State-imposed levy limits,
property tax freezes or reverse referendums on levies restrict the taxing
authority of counties. These
restrictions are unresponsive to local circumstances and sometimes force
counties to borrow funds to meet financial obligations when pay-as-you-go would
be more fiscally prudent. Levy
limits were removed in 2005 after being in place for three years. The
result, contrary to the restrictions’ proponents, was not an explosive increase
in county levies. Instead, counties
levy increases were among the lowest of the several levels of government,
trailing the increases of cities, special districts and school districts. One objective of the 2001 reforms was to
reduce the state’s perceived role in determining local property taxes and
reinforce the fact that the property tax is a local tax for which local
officials are accountable. As long as the state imposes levy limits, property
tax freezes or reverse referendums, however, the property tax is neither local
nor accountable.
Oppose
Cost Shifts to Counties
The MICA Board
of Directors urges the 2008 Legislature
to either fund the cost of state mandates or eliminate them.
Over the last four legislative sessions, counties have been required to house some of the state’s prisoners, pay for an increasing number of civil commitment holds for sex offenders and pay for a portion of the health care costs of the developmentally disabled, mentally ill and under 65 individuals, in the later instances despite having given up state aid to pay for the costs of these services in the early 1990’s. Most of these mandates enacted during the state’s 2003-2004 budget woes have not been undone.
Compounding counties’ frustration with unfunded mandates, the state Legislature passed a law in 2005 allowing local governments to notify the state auditor of mandates they thought worthy of repeal or reform. The auditor’s office was required to list the mandates on its Web site. One hundred nineteen mandates were submitted by one or more counties. For all that effort, counties were rewarded not with repeal or reform of the submitted mandates, but rather the 2006 and 2007 Legislature enacted several new mandates. Four new mandates alone will ultimately costs counties over $21 million a year.
Repeal Maintenance of
Effort (MOE) Requirements
The MICA Board
of Directors urges the 2008 Legislature to repeal maintenance of effort
requirements that are counter-productive to cost-cutting efforts that have been
encouraged by the Legislature and Administration.
There are at least 12 maintenance of effort requirements
in current law dictating how much counties have to spend for particular programs
or services. With these laws, the
Legislature is literally telling counties how much to spend or, in some cases,
to increase their spending. One MOE
for ongoing, existing programs – the one for libraries – was temporarily relaxed
by the 2003 Legislature but it was reinstated in its prior form in 2005. A new MOE was added in 2006 requiring
counties to fund mental health services at a minimum of the average of the 2004
and 2005 funding level. The
Legislature cannot have it both ways.
Either give counties the legal authority to actually reduce their
expenditures or stop criticizing them when they increase expenditures and the
property taxes to support them to meet the requirements of state law.
If the legislature cannot repeal the maintenance of
effort requirements, it should at least modify the current library maintenance
of effort requirement. Under
current law beginning in 2006 if a county (or a city’s) spending for libraries
is not equal to or in excess of the amount it spent two years’ previous (in
addition to meeting certain per capita or minimum tax effort requirements), the
library loses its entire state grant and can no longer participate in
MELSA. The penalty should be
changed so the grant is simply prorated in the ratio of the county (or city’s)
current year funding to the level of funding in the second prior year if the
county or city is not going to meet or exceed spending in the second prior
year. Further, the Legislature
should review the metal health MOE with an eye towards eliminating it,
particularly if any further mental health services restructuring occurs.
Support
Restructuring of Market-Value-Based Credits
The MICA Board
of Directors urges the 2008 Legislature to restructure the market-value-based
credits so homeowners and farmers do not suffer disproportionate tax increases
and local governments with stable tax rates are not shown on the tax statement
as increasing their tax merely because another jurisdiction increased its tax
rate.
For most owner-occupied homes and many owner-occupied
farms, the percentage increase in net property taxes will always be greater than
the percentage increase in the tax rate or gross tax (before the market value
based credit) on the property. The
reason this occurs is the present manner of computation of the
market-value-based credits.
The increase in net tax (after the credits) for most
homeowners and many farmers will be more than the percentage increase in the
gross tax (before the credits) because the credits do not increase with the
property’s gross tax and, for homes and farms with market value increases, the
credits actually decline. This
makes homeowners and farmers suffer greater percentage increases in their tax
than most other property owners.
This phenomenon further complicates the ability of homeowners and farmers
to understand local spending decisions and is not fair to them. It should be remedied with a
restructuring of the credits.
The problems with the market value based credits are
compounded by the manner in which the credits are allocated among local
governments’ individual taxes.
Currently, the credits are allocated in proportion to each local
government’s tax rate or resulting gross tax (before the credit.) When one local government’s tax
rate and resulting gross tax goes up, its share of the market value based credit
increases reducing all remaining local governments’ share. On the property tax statements and truth
in taxation notices, the local governments receiving a reduced share of the
market value based credit due to this phenomena are shown as increasing taxes
(when compared to the required listing of the prior year’s tax) even though
their spending, levy and/or tax rate may not have changed one
iota.
Oppose
State and Local Spending Caps
The MICA Board
of Directors urges the Legislature to defeat a proposed constitutional amendment
that, if enacted, would impose state and local spending caps.
In 2004, legislation was introduced to place a
constitutional amendment on the ballot that would impose spending and revenue
caps on state and local governments.
Patterned after a Colorado constitutional amendment, the measure would
have limited increases in state spending to the rate of inflation plus
population growth, city and county spending to the rate of inflation plus the
change in tax base resulting from new construction and school district spending
to the rate of inflation plus the change in enrollment. Any revenues in excess of the caps must
be refunded to taxpayers.
Both state and county governments have shown themselves
to be responsible stewards of taxpayer dollars by significantly reducing state
and local government spending as a percent of personal income since 1996. They have also shown themselves to be
responsive to changing economic circumstances by limiting expenditure growth or
actually reducing expenditures during the most recent economic downturn. The proposed spending caps might have
actually undermined such efforts since, under the caps, spending reductions in
any one year also permanently reduce future years’ spending caps. Knowing that result, legislators and
commissioners might have been more reluctant to reduce expenditures than they
actually were. The caps are also
very inflexible, not allowing county governments to respond to local needs and
circumstances or changing demographics.
Particularly frustrating is the fact that the caps would freeze funding
at current levels absent authorization by referendum. Thus, the state’s chronic under funding
of transportation would be permanently set at current levels. Recent major initiatives like MNCare and
the state takeover of K-12 education funding would have never occurred because
of the inflexibility of the proposed caps.
Instead of shackling state and local government with
inflexible, formula-driven caps, the Legislature should consider alternatives
like the current price in government law that allows the Legislature to set a
revenue cap every two years tied to the state’s economic vitality after
appropriate debate about the current needs of the state.
Allow
Internet Publication in Lieu of Published Notice
The MICA Board
of Directors urges the 2008 Legislature to modernize publication requirements to
allow counties the option of distributing required notices via the
Internet.
Counties are required to publish board minutes,
financial statements, budgets and truth-in-taxation notices in addition to
numerous miscellaneous notices. The
costs of these notices literally run in the $10 of thousands annually. Utilizing the Internet via posting on
county web sites and distributing notices via e-mail provide a cost-effective
alternative to current publication requirements for those counties that opt to
do so. Summary notices in local
newspapers along with supplemental mailings could address concerns about those
without convenient Internet access.
The resulting savings would assist counties in meeting the Legislature’s
push to cut spending.
Repeal
Sales Tax on Local Government Purchases
The MICA Board
of Directors recommends that the Legislature exempt essential county purchases
from the state sales tax. If the
Legislature cannot exempt all county essential purchases from the state sales
tax, it should exempt construction materials for county facilities from the
tax.
Extending the sales tax to the cost of materials and
services purchased to provide essential county services places an even greater
cost on property taxpayers, a cost not related to ability to pay. Of particular concern is the sales tax
on construction materials used to build, remodel or expand county facilities
like court facilities and jails.
Imposing the sales tax on construction materials used to build, remodel
or expand court facilities and jails seems particularly inappropriate when the
facilities serve a state function like court operations in the case of the
former and a critical public safety function in the case of the
later.
Support
Local Option Sales Taxes For Counties
The MICA Board
of Directors urges the 2008 Legislature to allow counties the option of using
local option sales taxes for either capital improvements or operating
expenditures upon either authorization via a local referendum or the
Legislature’s enactment of a special law.
One county and several cities currently levy up to a 1%
local option sales tax in addition to the state 6.5% sales tax. In addition, the last ½% increase of the
state’s sales tax was required to be ratified by the 87 county boards even
though the counties did not directly receive any of the increased revenue. Current law restricts the tax to
funding capital improvements although the City of
Authorize
Host Fee for Municipalities Where Aggregate
Production
Facilities are Located
The MICA Board
of Directors urges the 2008 Legislature to maintain existing law with regard to
the valuation and taxation of property containing aggregate and not to change
the existing distribution of the aggregate production tax. To incent municipalities to allow the
production of aggregate within their boundaries, the Legislature should
authorize a host fee to compensate the municipalities for costs associated with
those facilities.
The availability of inexpensive aggregate for the
construction industry is a critical issue for the
Oppose
Inverse Condemnation
The MICA Board
of Directors urges the legislature to oppose efforts to authorize the inverse
condemnation of private property whose owners contend they are adversely
affected by government regulation.
Recently, the solid waste industry has pushed
legislation that would require local governments to condemn their businesses if
they were adversely affected by “organized hauling,” where the local government
designates or negotiates with a specific hauler to provide solid waste disposal
services to its residents. The
reason a local government may wish to set up organized hauling is two-fold. First, it can save money for its
residents. Second, it allows
counties to meet their state-mandated obligations to manage solid waste in an
environmentally sound manner. No
county is presently using organized hauling but they need that option, if only
to get the solid waste industry to negotiate acceptable disposal practices and
to maintain the economic viability of the incinerators and RDF facilities that
the counties built in response to state mandates.
Increase
Service or Dispensing Fee
or Make Alternative Funding
The MICA Board
of Directors urges the 2008 Legislature to increase service or dispensing
fees or provide other alternative
arrangements so counties acting as fiscal agents can recover the costs of credit
or debit card or electronic or wire fund transfers transactions when others are
receiving some or all of the proceeds.
Counties are authorized to accept payments by credit or
debit cards or all forms of electronic or wire transfer. They are authorized to add a service
charge to such transactions to recoup their costs for providing the convenience
of these alternative forms of payment.
Unfortunately, the credit card industry resists the use of service
charges making this manner of recovering a county’s costs impractical. While the changing nature of commerce
likely makes it inevitable that counties will have to bear the costs of credit
or debit card or electronic or wire fund transfers in those instances when the
county is the sole recipient of the funds paid, it is unfair to ask counties to
bear all those costs when it is acting as the fiscal agent for others such as
the state for deputy registrar transactions. In those instances, the service or
dispensing fee should be increased to cover the cost of the credit, debit card
transaction or electronic or wire transfer. Alternately, the recipient agency can
pay the credit or debit card costs directly via contractual arrangements with
their credit card processor and provision of suitable hardware and software to
the local government agent.
Increase
Notary Fees
The MICA Board
of Directors urges that the 2008 Legislature increase the maximum notary fee to
better reflect costs associated with the required State of Minnesota commission
fees for Notary Publics.
The State of
Oppose
Changes in Electric Industry Personal Property Taxes
The MICA Board
of Directors opposes a reduction in the personal property tax levied upon
utility companies without adequate, stable and certain compensatory
revenue.
Rule changes have dramatically reduced the personal
property taxes of electric utilities.
In the absence of adequate and stable compensatory revenues, other
taxpayers will be forced to pay more in local taxes. The host communities must be insulated
from these adverse impacts by either increasing the class rates applicable to
utility property or by creation of a compensatory state
aid.
Make
the Appointment of County Agricultural Inspectors
and the Delineation of
Their Duties Optional
The MICA Board
of Directors urges the 2008 Legislature to make appointment of county
agricultural inspectors optional and to allow the county boards to delineate
their duties.
The 2003 Legislature eliminated the Minnesota Department
of Agriculture’s weed inspection duties to reduce the state’s costs. Whether due to an oversight or it was
intentional, the mandate that a county appoint an agricultural inspector remains in law
as well as his or her duties. Just
like the state, the counties should be relieved of this mandate. The counties should be allowed the
option of appointing an agricultural inspector and granted the
sole authority to determine the agricultural inspector’s duties if the
board appoints one.
Restrict
Tax Increment Financing
The MICA Board
of Directors recommends that:
·
Each level of
local government has the authority to separately determine whether it will make
a contribution to any proposed tax increment
district
·
New
net-tax-capacity-based debt service levies be applied to all captured
value
·
An overall
limitation on the percentage of tax capacity that can be captured by tax
increment districts within each city be
established
As county governments, school districts, and the state
government all contribute to tax increment-financed development, the former
through lost tax base and the latter through education aid and property tax aids
and credits, each should have the right to determine whether this contribution
is in the best interest of their taxpayers. Cities vary widely in their use of
tax increment financing as a development tool. A number of cities have more than 15
percent of their value captured within tax increment districts, while other,
very similar cities, do not use tax increment financing at all. Overuse of tax increment financing poses
the risk of significant failure and consequent increases in
levies.
Restrict
Economic Development Property Tax Abatements
The MICA Board
of Directors recommends that the economic development property tax abatement
provisions adopted in 1997 be limited so as to become an alternative, rather
than an addition, to tax increment financing, except when the abatement is being
used to fund public infrastructure approved by the county.
The Legislature has enacted provisions that allow local
governments to refund all or a portion of the taxes paid on nearly any property,
including existing property, for periods of up to 10 to 15 years. The abatements were originally proposed
as an alternative to tax increment financing, not as an additional tool that
local governments could pick and choose as the need suits them. However, actual experience since the
abatement's adoption finds cities still continuing to use TIF as a development
tool in addition to the new abatement authority. The combination of a TIF district here
and a tax abatement program there has put additional pressures on the
jurisdiction's other taxpayers. The
"there is no free lunch” rule applies to the abatement as well as TIF in that
other taxpayers pay the taxes that otherwise would have been paid by
developments included in TIF districts or whose taxes are
abated.
Fund
Property Tax System Costs
The MICA Board
of Directors recommends that the Legislature provide for reimbursement of data
processing system costs associated with changes to the property tax system on a
permanent basis and in accordance with actual costs incurred.
Consolidate
Aid Reporting Requirements
The MICA Board
of Directors recommends the Legislature consolidate the reporting requirements
for the various aid programs administered by the state.
Counties receive aid from the state under a variety of
different programs and from a number of different agencies. Almost every one of these aids has their
own reporting requirements. For
example, in the social services area alone, counties receive 34 different
aids. Twenty-seven of those aid
programs have their own reporting requirements. With regard to the aids administered by
the Department of Human Services, much of the reported information duplicates
that required in comprehensive annual reports submitted by the counties. Thus, the time and effort spent filling
out the reports associated with the individual aid programs are redundant and a
nonproductive use of county staff time.
Consolidation or elimination of the individual aid programs' reporting
requirements would save money and free county staff
f
or more productive efforts.