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The Fiscal Disparities Program: Commercial- Industrial Tax Base Sharing - House Research Page 1 of 2 <br />Minnesota House of Representatives Legislature Home 1 Links to the World 1 Help 1 Search <br />HOUR ReSearCh <br />House 1 Senate 1 Joint Departments and Commissions 1 Bill Search and Status 1 Statutes, Laws, and Rules <br />The Fiscal Disparities Program: Commercial - Industrial Tax Base Sharing <br />• What is the fiscal disparities program? <br />• Why share commercial /industrial tax base? <br />• How does the fiscal disparities program work? <br />• How has the metropolitan area program grown? <br />• How much do fiscal disparities affect tax burdens? <br />• How did the 2001 property tax reform affect fiscal disparities? <br />• What about the Iron Range Program? <br />What is the fiscal <br />disparities program? <br />Why share <br />commercial/ <br />industrial tax base? <br />The fiscal disparities program is a system for the partial sharing of commercial - industrial <br />(C /I) property tax base among all jurisdictions within a geographic area. In Minnesota, <br />two programs are used: the primary one was created in 1971 and operates in the seven <br />counties of the Twin Cities metropolitan area; a smaller scaled version was created in <br />1995 for the Iron Range in northern Minnesota. <br />The main purposes and goals of the program are to: <br />• Support a regional approach to development. Tax -base sharing spreads the <br />fiscal benefit of business development spawned by regional facilities, such as <br />shopping centers, airports, freeway interchanges, and sports stadiums. It also <br />may make communities more willing to accept low- tax -yield regional facilities, <br />such as parks. <br />• Equalize the distribution of fiscal resources. Communities with low tax bases <br />must impose higher tax rates to deliver the same services as communities with <br />higher tax bases. These high tax rates make poor communities less attractive <br />places for businesses to locate or expand in, exacerbating the problem. Sharing <br />C/I tax base can reduce this effect. <br />• Reduce competition for commercial - industrial development. Communities <br />generally believe that some kinds of C/I properties pay more in taxes than it costs <br />to provide services to them. This encourages communities to compete for these <br />properties by providing tax concessions or extra services, which can weaken their <br />fiscal condition. Tax -base sharing reduces the incentive for this competition, <br />thereby discouraging urban sprawl and reducing the cost of providing regional <br />services such as sewage and transportation. <br />How does the fiscal Contributions to the areawide tax base. Each taxing jurisdiction annually contributes <br />disparities program 40 percent of the growth in its 0/1 tax base since the year of enactment to an abstract <br />work? entity called the "areawide tax base." This contribution value is not available for taxation <br />by the jurisdictions where the property is located. <br />Distributions from the areawide tax base. Each municipality receives a share of the <br />areawide tax base through a formula based on its share of the area's population and its <br />relative property tax wealth (tax base per capita). The municipality is allowed to tax this <br />distribution value at the same rate as the tax rate paid by its residents. All taxing <br />jurisdictions whose boundaries encompass the municipality are also allowed to tax the <br />municipality's distribution value (i.e., counties, school districts, and special taxing <br />districts). <br />http://wvvw.house.leg.state.mn.us/hrd/pubs/ss/ssfisdis.htm 12/13/2011 <br />