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$For more information contact Kaye RakowNAIOP MinnesotaDirector of Public Policy4248 Park Glen RoadMinneapolis, Minnesota 55416Phone: (952) 928-7461 | Fax: (952) 929-1318www.naiopmn.orgNAIOP Minnesota thanks the Citizens League for assistance in the research and writing of this publication.?WHAT IS Fisc a l DisparitiesFisc a l Disp a ritie shas been a part of the Twin Cities regional economy for more than 30 years. This“uniquely Minnesota” property tax-base sharing program, operating largely out of sight of the taxpayingpublic, grew out of the recommendations of a 1969 report by the Citizens League,“Breaking the Tyrannyof the Local Property Tax.”The report concluded that the existing property tax system was causing “fiscalfragmentation,” with residents in metro area communities with differing tax base wealth paying differinglevels of property taxes for roughly equal levels of service. In fact, some communities with low fiscalcapacity were struggling to afford basic services.To address the problem, The Charles R. Weaver Metropolitan Revenue Distribution Act, now commonlyreferred to as “Fiscal Disparities,”established a seven-county program for sharing area-wide C-I tax base.Each metro community or local taxing unit–cities,counties and school districts–agreed to contribute up to40 percent of the growth in its local commercial-industrial tax base each year, measured from the base yearof 1971 when the law was enacted. This aggregated tax base “pool of value” would then be redistributedbased on whether each community or taxing unit’s fiscal capacity per capita was higher or lower than themetro area average.An ingenious fiscal invention, with noble goals.Widely recognized by tax authorities worldwide as a novel and creative fiscal tool, Fiscal Disparities iscredited with improving equity and closing the gap between the lowest and highest communities in termsof tax-base wealth. From the beginning, it has also been focused on achieving other goals, includingbuilding a more cohesive region, promoting more orderly regional growth, and reducing competitionbetween communities for investment and development.As an equalizer, it has helped underpin the tax bases of those metro area communities who do not have asignificant commercial-industrial tax base, or have limited prospects for future growth. The disparitybetween taxes paid on commercial-industrial property in high tax communities vs. low tax communitieshas been reduced, and taxes on all property types have been lowered in those areas with limitedcommercial-industrial growth.From a purely revenue point of view, Fiscal Disparities has been an outstanding success. Continuing metroarea economic expansion,particularly the development of more new commercial and industrial propertiesas well as inflationary increases in the market values of pre-existing C-I properties,will likely result in evenlarger distributions in the future.For more information contact Bob DeBoerDirector of Policy Development555 North Wabasha Street, Suite 240Saint Paul, Minnesota 55102Phone: 651-293-0575 | Fax: 651-293-0576bdeboer@citizensleague.orgwww.citizensleague.orgAbout the National Associationof Industrial and Office PropertiesThe Minnesota Chapter of NAIOP is one of 53 chaptersnationwide making up the National Association ofIndustrialand Office Properties, a 12,000 member professionalorganization representing developers, owners and managersof business properties throughout North America.The Minnesota Chapter,one of the largest and most active inthe nation, has been a leader in increasing the vitality andefficiency of Minnesota businesses for more than 20 years.Together, NAIOP members and their firms invest in, buildand manage modern facilities to house our state’s mostvaluable economic resource–thousands of companies, largeand small, employing hundreds of thousands of workers incommunities across the state.In the public policy arena, NAIOP members have devotedpersonal time,energy and resources in successfully fightingfor comprehensive property tax reform and business-friendly legislation, for the benefit of all Minnesotabusinesses and their employees.About the Citizens League Founded in 1952, the independent, non-partisan CitizensLeague is one of the nation’s premier citizen-based "goodgovernment" organizations. The organization isdistinguished by its pioneering process that involves citizensin studying public issues and developing policy solutions.Based in Saint Paul, the Citizens League focuses on publicpolicy issues at the local,metropolitan and state levels.Overthe years, the Citizens League has been one of the mosteffective agents of change in Minnesota public policy. TheCitizens League’s impact can be seen in areas such as publicfinance, regional government, education, transportationand health care.The 1,800 members of the Citizens League contribute theirtime and money, not as agents of special interest groups orsingle-issue devotees, but as citizens who are concernedabout the quality of life in Minnesota and the Twin Cities.Fiscal Disparities’ sharing of C-I tax capacity through its system of local contributions and distributions is determined by acomplex formula and an even more complicated calculation process. This piece has been designed to educate the reader in ageneral way about how the Fiscal Disparities law works, and how it impacts commercial-industrial properties in the metro area.Due to the many variables involved, the actual impact of the Fiscal Disparities law and the tax bill that results may varysubstantially from what is presented here when it is applied to an individual commercial-industrial property in a specificgeographic location or local taxing jurisdiction.Housing Minnesota’s Businesses
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