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MAR 20 19B 05:44PM LEAGIE OF MN CITIES P. 1 1CQ;W RIDAY Ax --- Vol. 3, No. 11 pwnwb-o°°°°� A weekly legislative update from the League of Minnesota Cities March 20, 1998 Tax Bill : Governor Chimes In Late this afternoon,the governor sent Levy Limits provision--some even equating it to the a letter to the Tax Committee chairs in- The governor also demands the exten- California proposition 13 provision that dicating his demands for the final sion of levy limits. According to his has devastated that state. Senator 1998 tax bill. Included in his demands letter,"Levy limits are necessary as Doug Johnson has emerged as the are an immediate phase-in of reduced we continue major structural changes strongest supporter of the House lim- class rates for many properties,and to our state's property tax system. ited market value provision. extension of levy limits through taxes The Senate's position of repealing The House limited market value is payable in 2000,a 1999 property tax levy limits is not acceptable." The significantly more expansive than the rebate of$750 million and the creation governor's position will certainly make current law provision:All property of an income tax reduction account. the removal of levy limits more diffi- would be covered by valuation limits The governor's letter indicated cult. for a period of three years. For as- that he is disappointed in the property Nothing in the governor's letter sessment year 1998,the increase in ,.r tax class rate compression included in addresses the impacts of class rate property market values would be lim- both the House and Senate bills. He compression on tax increment finano- ited to the rate of growth in the con- states, "Neither bill as passed con- ing districts. This will likely be a last sumer price index,which is currently tains the compression necessary for minute conference committee deci- less than 3 percent. For the following real reform,and this must be ad- sion. two years,property market value in- dressed." He suggests that the con- The letter to the tax chairs was not creases would be limited to the lesser ference committee adopt the Senate received until afterthe committee re- of the consumer price index or 5 per- class rates,but phased-in the com- cessed for the weekend and there- cent. pression immediately for taxes pay- fore,the committee did not have time In a memo to the conferees,a able in 1999. The only exceptions de- to react to the governor's demands. Senate staff member highlighted the manded by the governor are that Obviously,the demand for a rebate problems that could occur under lim- home value greater than$75.000 not will not be greeted warmly by the Sen- ited market value and the difficulty of be reduced below 1.7 percent,that the ate members who have no rebate in removing the provision in three years. first$75,000 of cabin value not ex- their tax bill. The reaction of the The limit would shift taxes from high eeed 1.3 percent and that the balance House members is more difficult to growth property to properties with low of cabin property not exceed 2.3 per- gauge. market value growth. The limit would cent. be difficult to remove because the Under the Senate bill,home value Other Conference Committee taxes on those properties that benefit in excess of$75,000 would be Bassi- Developments from the Omit could potentially in- fied at 1.6 percent,and cabins would crease dramatically. The governor did Limited market value is also evolving be classified at 1.25 for the value un- into an important issue among confer- not express any particular position on der$75,000 and 2.2 percent for the ees. Although the House bill included the limited market value provision. value over$75,000. However,the However,the Department of Revenue an aggressive limited market value Senate would riot have implemented has expressed concerns about moving these lass rates until provision,none of the House confer- these 2000. ees voted for the amendment Many away from a true market value basis -'� Relative to the Senate class rates,the for the property tax. of the conferees have expressed sig- effect of the governors demands will nificant concerns about the precedent be to provide less relief to high value established by the limited market value homes,but to guarantee relief for cabin owners. For more information on city legislative issues,contact any member of the League of Minnesota Cities Intagovernmental Relation team.