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HomeMy WebLinkAboutManagement Report Updated Appendix 8-8-91 VOTO, TAUTGES, REDPATH & CO., LTD. CERTIFIED PUBLIC ACCOUNTANTS \ Birch Lake Professional Building • 1310 E. Hwy. 96 • White Bear Lake, MN 55110 • Fax (612) 426 -5004 \ • Phone (612) 426 -3263 i D V - ROBERT I CPA ROBERT G. . TAUTGES, CPA JAMES S REDPATH, CPA t9 91991 D. KENNETH GEORGE CPA I f DAVID J MOL, CPA CITY OF OAK PARK HEIGHTS August 8, 1991 Judy Holst, Finance Director City of Oak Park Heights 14168 North 57th Street Stillwater, MN 55082 Dear Ms. Holst: The 1990 Management Report and Recommendations included an Appendix that describes the State actions which affect funding of Minnesota cities. We are forwarding a revised appendix updated for actions of the 1991 legislative session. If you have questions or require additional information, please advise. Sincerely, VOTO, TAUTGES, REDPATH & CO., LTD. /obeG. Tautges, CPA RGT /clg Enclosure MEMBERS OF AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS • PRIVATE COMPANIES PRACTICE SECTION MINNESOTA SOCIETY OF CERTIFIED PUBLIC ACCOUNTANTS GOVERNMENT FINANCE OFFICERS ASSOCIATION • MINNESOTA ASSOCIATION OF SCHOOL BUSINESS OFFICIALS APPENDIX A Page 1 of 12 CITY OF OAK PARK HEIGHTS MINNESOTA YEAR & INITIAL YEAR STATUTE ESTIMATED REFERENCE STATE LEGISLATIVE ACTION IMPACT 1991 MS 275.51 #31 Authorized contingent addition to the levy limit by the If local sales and use Subd. 7 amount of lost aid of local governments located in a County tax is adopted there where the local sales and use tax was not enacted. will be no impact. 1991 MS #30 Further reductions in local government aid for aids Statewide decrease in 477A.0132 payable in 1992. Estimated reduction percent is 4.034% of 1992 LGA of $43 Subd. 1 and 2 1992 revenue base. Revenue replaced by property tax levy million. City of Oak authority. Park Heights decrease $48,000. This decrease will reduce levy related aids as the City does not receive LGA. 1991 #29 Approved LGA cut for December, 1991 aid payment. Statewide reduction MS 477A.0132 Cut is estimated to be 1.6% of 1992 revenue base. Aid cut of $16.7 million. Subd. 1 and 2 not replaced with levy authority. City of Oak Park Heights reduction $19,100. This decrease will reduce HACA as the City does not receive LGA. 1991 #28 Adjusted the HACA base as the 1991 certified HACA Statewide estimates MS 273.1398 1. esss any 1991 permanent HACA reductions. not yet calculated. Subd. 1 City of Oak Park Heights - no impact. Prepared by Voto, Tautges, Redpath & Co., Ltd. July 15, 1991 APPENDIX A Page 2 of 12 CITY OF OAK PARK HEI GHTS_ MINNESOTA YEAR & INITIAL YEAR STATUTE ESTIMATED REFERENCE STATE LEGISLATIVE ACTION IMPACT 1991 HF 1698 427 Authorized the establishment of a local option sales tax Because it is likely Art. 2 Section 6 of 1/2% on all retail sales in the County. If the County does that most Counties not authorize the additional 1/2% sales tax, Cities and Towns will approve the local within the County which have a majority of the population option sales tax, may override the County action by sending copies of there will likely not approving resolutions to the County Auditor by August 1, be a competitive 1991. disadvantage within the State of Minnesota. The increase of 1/2% in sales tax however, provides a possibly greater competitive edge for surrounding States. 1991 BF 1698 #26 If any County does not approve the local option sales If the local option Section 5 tax of 1/2% there would be no payments made to the local sales tax is not government trust fund to the County or to City, Town or passed, the City of Special Taxing Jurisdictions located in the County. (See #30 Oak Park Heights for increased levy authority). would lose $48,400 of State aid beginning in 1992. Prepared by Voto, Tautges, Redpath & Co., Ltd. July 15, 1991 APPENDIX A Page 3 of 12 -CITY OF O PARK HE IGHTS. MINNESOTA YEAR & INITIAL YEAR STATUTE ESTIMATED REFERENCE STATE LEGISLATIVE ACTION IMPACT 1991 BF 1698 #25 The local government trust fund is authorized to make There should be no Art. 2 Section 3 the following payments to Counties, Cities, Towns and impact on the City of special taxing districts: Oak Park Heights or other governmental 1) HACA jurisdictions if revenues reach 2) Disparity Reduction Aid forecasted levels. If however, revenue is 3) Local Government Aid and Equalization Aid less than anticipated, there likely will be reductions in HACA 4) Increased HACA Guarantees and local government aid. The HACA 5) Supplemental Homestead Property Tax Relief reductions, if made during the year, will 6 cause property tax Disparity Reduction Credit collection rates to be reduced. This is an 7) 25% of the State Aid for County Human Services extremely unfavorable bond 8) Attach Machinery Aid, a fee for the Commissioner of indicator which is Revenue to administer the local option tax ($852,000 already impacting for 1992 and $660,000 for fiscal year 1993). Minnesota Local Governments based 9) Other fees to the Commissioner of Finance and to the on 1991 reductions Advisory Commission on inter - governmental in HACA. Note: relations. The tax rate "buy down" will increase HACA. If revenue is insufficient to pay each of the above amounts, the Commissioner of Revenue is authorized to reduce the payments of the first four items (HACA and LGA). Prepared by Voto, Tautges, Redpath & Co., Ltd. July 15, 1991 APPENDIX A Page 4 of 12 CITY OF OAK PARK HEIGHTS. MINNESOTA YEAR & INITIAL YEAR STATUTE ESTIMATED REFERENCE STATE LEGISLATIVE ACTION IMPACT 1991 BF 1698 #24 Created the local government trust fund to be used The creation of the Art. 2 Section 2 exclusively to pay local governments for inter - governmental local government aid and to repay advances made by the State's general fund trust fund will impact as may have been required to make all required payments as the City of Oak Park provided by law. If revenues of the trust fund are Heights only if the insufficient to pay commitments, all commitments to local estimated revenues of governments will be proportionately reduced unless other the fund fluctuate provisions have been made. If the estimated receipts of the significantly from trust fund exceed estimated payments by $1 million or more estimates. Revenue the appropriation from the trust fund to each inter- shortfalls should be governmental aid program would be increased budgeted to anticipate proportionately unless there are specific provisions which cuts late in the prohibit such increase. operating year. Budget practices should therefore be amended to consider a factor for possible reductions based on suppressed economic conditions in any given year. 1991 HF 1698 #23 Establish the advisory commission on inter - The commission is in Art. 2 Section 1 governmental relations with an initial membership of twenty a "advisory" position through July 1, 1992. After July 1, 1992 the commission is to the legislature. As reduced to fourteen members. The commissioners are to be such the commission representative of the various geographic and governmental has little or no power jurisdictions of the State. and therefore cannot directly impact the State or the City of Oak Park Heights. Prepared by Voto, Tautges, Redpath & Co., Ltd. July 15, 1991 APPENDIX A Page 5 of 12 -CITY OF OAK P ARK HEIGH MINNESOTA YEAR & INITIAL YEAR STATUTE ESTIMATED REFERENCE STATE LEGISLATIVE ACTION IMPACT 1991 MS 273.13 #22 Approve further adjustments to the commercial Tax burden shifts Subd. 32 industrial tax rate for valuations in excess of $100,000. from commercial Adjusted rates effective through 1994 as follows: industrial property. Tax increment districts may reflect 1990 1991 1992 1993 1994 1995 lower than Rate Rate Rate Rate Rate Rate anticipated revenue First $100,000 of flows. market value 3.30% 3.20% 3.10% 3.00% 3.00% 3.00% Market value over Targeted tu $100,000 5.06% 4.95% 4.75% 4.70% 4.60% eventually be 4% 1991 MS #21 Prohibits municipalities from conscientiously excluding For those Section 473F.02 most commercial - industrial development within their communities deemed Subd. 8 community for reasons other than preserving agricultural use to violate this statute, through restrictive comprehensive zoning and planning they may be excluded policies. from the fiscal disparities pool within the seven county metropolitan area. The impact for such excluded communities would likely be a significant increase in their local tax rates. 1991 #20 For aid payable in 1992, HACA will increase for State aid increase in MS 273.13 certain cities as a result of the adjusted property class rates funding to cities not Subd. 22 (see #19 and #22) and the net tax capacity adjustment (see yet available. 1992 #12). The net tax capacity adjustment is calculated as HACA increase to follows: City of Oak Park Heights of $3,349. (previous year total net tax capacity - current year total net tax capacity) x current local tax rate. Prepared by Voto, Tautges, Redpath & Co., Ltd. July 15, 1991 APPENDIX A Page 6 of 12 CITY OF OAK PARK HEIGHTS. MINNESOTA YEAR & INITIAL YEAR STATUTE ESTIMATED REFERENCE STATE LEGISLATIVE ACTION IMPACT 1991 MS 273.13 #19 Approved adjustments to residential homestead The change in class Subd. 22 property (class la). Adjusted rates are as follows: rates applied to residential property will not impact the Payable Payable Payable total revenue raised 1991 1992 1993 by the City or shift Rate Rate Rate the tax burden between property First Tier of Market Value classes but rather will Up to $68,000 1.00% increase the amount Up to $72,000 1.00% 1.00% of HACA received by the City. (see Second Tier of Market Value #20) Note: The $68,001 to $110,000 2.00% increased HACA $72,001 to $115,000 2.00% payments are subject over $72,000 200% to adequate revenue available in the local Third Tier of Market Value government trust over $110,000 3.00% fund. (see #25) over $115,000 2.50% Prepared by Voto, Tautges, Redpath & Co., Ltd. July 15, 1991 APPENDIX A Page 7 of 12 CITY OF OAK PARK HEIGHTS MINNESOTA YEAR & INITIAL YEAR STATUTE ESTIMATED REFERENCE STATE LEGISLATIVE ACTION IMPACT 1991 #18 Establish methodology used in preparing assessments The assessment/sales MS 270.12 /sales ratio studies requiring them to be consistent with the ratio factor of the Subd. 2 most recent Standard on Assessment /Sales Ratio Studies local government aid published by the Assessment Standards Committee of the formula affected a International Association of Assessment Officers. variety of Cities in 1990. This current change in methodology should be reviewed and challenged by Cities if they believe the methodology results in a higher adjustment to market values within the City which directly impacts tax capacity. Recent state legislative actions have targeted aid reductions to Cities with high tax capacity. 1991 #17 1991 LGA initially frozen at 1990 levels, then in Statewide reduction MS 477A.0132 subsequent actions, aid was cut. The 1991 reduction equals in funding to cities Subd. 1 & 2 2.052% of the City's Revenue Base. This aid cut will first $20.5 million. City reduce LGA. If the City's LGA is insufficient, then the cut of Oak Park Heights will affect Equalization Aid, HACA and Disparity Reduction reduction $24,700. Aid, in that order. Aid cut not replaced by levy authority. 1991 BF 47 #16 State Aid road allotments were reduced to Cities. Statewide reduction $3.8 million. City of Oak Park Heights no impact. Prepared by Voto, Tautges, Redpath & Co., Ltd. July 15, 1991 APPENDIX A Page 8 of 12 CITY OF OAK PARK HEIGHTS. MINNESOTA YEAR & INITIAL YEAR STATUTE ESTIMATED REFERENCE STATE LEGISLATIVE ACTION IMPACT 1990 Ch. 604 #15 Levy limits for Cities repealed starting with Anticipated extension Art. 3 Section 47 collectible 1993 levy. and delay of start likely to result in no impact. 1990 #14 Approved potential LGA and HACA cuts related to Estimated reduction MS 273.1399 tax increment districts formed after April 30, 1990. in aids not calculated. Subd. 5 Legislation designed to discourage new tax increment districts. 1990 #13 Further reductions in LGA to cities. The Legislature Statewide decrease MS 477A.013 reduced LGA by 1.53% of the revenue base. This in 1990 LGA Subd. 7 permanent cut occurred after City budgets were adopted and $14.4 million, City the operating year was one third elapsed. The Legislation of Oak Park Heights did not provide a replacement revenue source. no impact. 1990 #12 The prior year (1990) HACA cut related to LGA is Reduction equal or MS 273.1398 extended to also reduce 1991 HACA. Established a greater than 1990 Subd. 2 "Homestead and Agricultural Credit Base ". HACA base is HACA cut. For aid defined as the previous year's certified HACA aid. For aid payable in 1992, payable in 1991, HACA is determined as shown in #7. For HACA will increase aid payable in 1992, HACA is determined as follows: for certain cities based on the tax rate change "buy down ". (HACA base x growth adjustment factor) + net tax capacity (see #20) adjustment + fiscal disparity adjustment. Prepared by Voto, Tautges, Redpath & Co., Ltd. July 15, 1991 APPENDIX A Page 9 of 12 CJTY OF OAK PARK HEIGHTS MINNESOTA YEAR & INITIAL YEAR STATUTE ESTIMATED REFERENCE STATE LEGISLATIVE ACTION IMPACT 1990 #11 Commercial property tax rates lowered. (See #21). Tax burden shifted to MS 273.13 residential and other Subd. 24 & 32 property classes. 1990 1991 1992 1993 Existing commercial based tax increment Rate Rate Rate Rate districts to produce First $100,000 of lower revenue maticetvalue 3.30% 3.20% 3.10% 3.00% stream to cities. Market value over Targeted to City of Oak Park $100,000 5.06% 4.95% eventually be 4% Heights - 5.7% reduction in 1991 TIF revenue - $3,200. 1990 #10 Equalization Aid limited to 12% increase over 1990 Maximum MS 477A.013 Equalization Aid. Also Equalization Aid subject to reduction equalization aid Subd. 5,6,7 if LGA is not sufficient to absorb cuts based on revenue established to limit base. Equalization Aid capped Statewide at $19,485,684. future increases. No impact on Oak Park Heights. 1989 #9 Tax Base Equalization Aid, is a program that Statewide initial year MS 477A.013 targets aid to low tax base cities starting in 1990. Tax Base increase in aid Subd. 5 Equalization Aid to be administered similar to HACA $19.5 million. No whereby the county auditor to deduct the aid from the impact on Oak Park amount of taxes certified by the city. Payments of Tax Base Heights. Equalization Aid to be made on July 20 and December 15, 1990 from the Department of Revenue. 1989 SP1 Ch 1, #8 1989 levy limits for Cities repealed starting with Anticipated extension Art. 5 Section 51 collectible 1992 levy. In 1990 the effective date was and delay of start extended to collectible 1993 levies. (See #15). likely to result in no impact. Prepared by Voto, Tautges, Redpath & Co., Ltd. July 15, 1991 APPENDIX A Page 10 of 12 -CITY OF OA&PARK HEI MINNE YEAR & INITIAL YEAR STATUTE ESTIMATED REFERENCE STATE LEGISLATIVE ACTION IMPACT 1989 #7 Transition Aid re- termed to Homestead and Statewide HACA MS 273.1398 Agricultural Credit Aid (HACA). The formula for reductions totalled Subd. 2 distribution was modified from the 1988 Transition Aid $1.9 million. City of formula for Unique Taxing Jurisdictions (UTJ) as follows: Oak Park Heights - no HACA cut because LGA was Payable 1989 gross taxes of UTJ less [Payable 1989 local sufficient to absorb tax rate X payable 1990 net tax capacity X .9767) entire cut. As with the original Transition Aid the above HACA to be distributed to local governments based on the percent of local government levy to total UTJ levies. HACA was subject to additional reductions if the level of local government aid was insufficient to absorb the education aid shift and other cuts. The education shift and the subsequent cuts were first taken from LGA, then from Equalization Aid, then from HACA and finally from Disparity Reduction Aid. 1989 #6 LGA initiall increased for 1990 by approximately $30 Statewide 1990 MS 273.1398 million from the 1989 level. Funding transfer to school decrease in LGA Subd. 2 districts subsequently approved. The aid transfer to school $44.6 million. City districts is a method of increasing the State financial support of Oak Park Heights for education while decreasing financial support for cities. decrease related to The aid transfer for a city is an amount equal to 3.4% of its the transfer to adjusted net tax capacity. Cities received increased property schools of $242,034 tax levy authority to replace the aid transfer. See #13 for additional LGA reduction. Prepared by Voto, Tautges, Redpath & Co., Ltd. July 15, 1991 APPENDIX A Page 11 of 12 CITY OF OAK PARK HEIGHTS. MINNESOTA YEAR & INITIAL YEAR STATUTE ESTIMATED REFERENCE STATE LEGISLATIVE ACTION IMPACT 1989 #5 LGA formula revised to reduce household guarantee Aid increases were MS 477A.013 factor from 1.08 in 1989 to 1.04 in 1990 to reduce the subsequently entirely Subd. 3 expenditure /unlimited ratio factor by 50 %. A 15% ceiling wiped out by shift increase over prior year LGA factor was also added. to school districts. Initial aid increase for 1990 was $30 million Statewide. City of Oak Park Heights increase of $2,033. 1988 #4 Taxes spread to property owners based on tax Re- measurement of MS 273.13 capacity valuations. Taxes levied divided by tax capacity valuations were valuations equal tax capacity rates. This is a change from the designed to have no prior system in which taxes were spread to property owners impact on aids or based on assessed valuations. Taxes levied divided by relative valuations. assessed valuations equalled mill rates. 1988 #3 Cities to receive Transition Aid in lieu of homestead The freeze nature of MS 273.1398 credits. Transaction aid to be calculated on each unique the legislation will Subd. 2 taxing jurisdiction (UTJ) and then allocated to the local units result in gradual of government within the UTJ based on the proportion of decrease of HACA local governments gross tax levy to total taxes within the in 1991 and future UTJ as follows for 1990: years. Actual comparisons not available because Gross taxes of UTJ less [46% X 2.17% X 1989 tax capacity Homestead Credit no rate X 1988 aggregate assessment sales ratio] X UTJ net tax longer calculated on capacity X 103 the prior method. The above UTJ amount to be allocated to local governments based on percent of local governments levy to total UTJ levies. Transition Aid to be frozen at 1990 levels. Considering growth and inflation, this freeze is a reduction of State funding. Transition Aid was the replacement of the Homestead Credit Program. This Transition Aid was subsequently re- termed as Homestead Credit and Agricultural Aid (HACA) - see #7. Prepared by Voto, Tautges, Redpath & Co., Ltd. July 15, 1991 APPENDIX A Page 12 of 12 QTY OF OAK P ARK HEIGHTS MINNESOTA YEAR & INITIAL YEAR STATUTE ESTIMATED REFERENCE STATE LEGISLATIVE ACTION IMPACT 1988 #2 Targeted Cities (primarily non -metro cities) to receive 1989 increase in MS 273.1398 disparity reduction aid. The 1989 disparity reduction Aids to Cities State - Subd. 3 aid to be based on 1988 gross taxes and gross tax capacity wide $54.3 million, rates. Disparity reduction aid will be frozen at 1989 levels. City of Oak Park Metropolitan suburban cities to receive one -half of one Heights no increase percent of this aid ($300,000 of $54.3 million). in aids. 1988 #1 Local government aid (LGA) formula modified to Statewide 1989 aid MS 477A.013 reflect a per household aid factor compared to prior year tax increased $79.3 Subd. 3 capacity and tax base increase. Expenditure /unlimited ratio million, Oak Park factor established as component of LGA formula. Lower of Heights increase of three -part formula to calculate initial LGA increase. $1,993. Prepared by Voto, Tautges, Redpath & Co., Ltd. July 15, 1991