04-14-2011 Charter Packet - Laserfiche WebLink

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HOUSE RESEARCH Short Subjects Pat Dalton General levy limits are imposed for taxes payable in 2009-2011 Levy limits are intended to ensure that state aid reduces property taxes and limits the growth rate of property taxes Levy limits have expired several times and been reenacted State aids are used to calculate limits Updated: August 2008 Levy Limits The general levy limits under Minnesota Statutes, sections 275.70 to 275.74, restrict the amount of property taxes cities with a population of 2,500 or more and all counties may impose for general fund expenditures. Levy limits were reenacted during the 2008 legislative session and are in effect for taxes payable in 2009 through 2011. Levy limits are adopted to keep the growth in property taxes low and to help ensure that cities and counties use increased state aid payments to reduce property taxes and not for higher local spending. Because of this, general purpose state aids are included in calculating the limit. When a local government's state aid increases, its maximum allowed levy decreases. Conversely, if a local government's aid decreases, its allowed levy increases. If a local government receives no state aid, the limit applies only to its property tax levy. Although the purpose of levy limits is to limit growth in property taxes, some opponents argue that they may actually increase taxes by encouraging cities and counties to levy up to the maximum allowed. In recent years, the legislature has generally imposed levy limits as part of property tax reforms, or when state aid reductions may have led to higher property taxes. They were re- imposed for Pay 2009- 2011 to limit rising property taxes and ensure that aid increases are passed on as property tax reductions. The table shows the years in which levy limits were Chronolo y of Levy Limits Taxes payable years Limits Apply? Instigating Event 1972-1992 Yes Enactment of 1971 property tax reform 1993-1997 No Enactment of Truth -in -Taxation notices as a replacement 1998-2000 Yes "Compression" of class rates 2001 No Allowed to expire 2002-2003 Yes 2001 property tax reform 2004 Yes 2003 and 2004 aid reductions 2005-2008 No Allowed to expire 2009-2011 Yes Previous county and city levy increases imposed. As noted above, state general-purpose aids are used to calculate levy limits. The aids included in the levy limit base are (1) taconite aid; (2) county program aid, for counties only; and (3) local government aid (LGA), for cities only. The combination of levy plus aid is known as the levy limit base.