Management Report and Recommendations 12/31/1998

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Honorable Mayor and Members of the City Council City of Link Lakes Page 25 Recent Legislation Related to City Finance HACA, LGA, and Local Performance Aid The Legislature made the following changes to state aid programs affecting cities: • Provided additional state Homestead and Agricultural Credit Aid (HACA) to compensate local governments for the class rate reductions to agricultural homestead property and noncommercial seasonal recreational property. • Increased the local government aid of three specific cities in 2000 and subsequent years. These increases will be paid out of scheduled LGA appropriation increases. • Repealed local performance aid in 2000 and ads an amount equal to each city's 1999 LPA payment to the local government aid paid in 2000. The LPA is permanently added to the LGA base. In addition, the inflation adjustment in current law will provide an estimated 2.5 percent increase in aids paid in 2000. Property Tax Provisions A number of changes to property tax classifications for taxes payable in 2000 were once again adopted as part of the continuing property tax reform efforts. Some of the provisions impacting cities include the following: • Eliminates the provision limiting the reduced first-tier class rate to one property per owner per county in the case of public utility property. This provision was provided to commercial and industrial property in the 1997 omnibus tax bill. • Includes all public utility personal property in the definition of class 3a property. No class rate changes result from moving the property from class 5 to class 3a. All personal property remains classified at the class rate for the higher tier. • Provides that non-commercial seasonal recreational property (cabins) are subject to the same class rates as class 4b single-unit residential non-homestead property. • Eliminates the special class rate that applies to certain warehouse property converted to apartments, due to the fact that the regular apartment rate is now almost identical to the special rate. • Provides that manufactured home park land is subject to the same class rates as class 4b residential non-homestead property which is the classification for duplexes, triplexes, and undeveloped land zoned residential. • Increases the education homestead credit from 66.2 percent in payable 1999 to 83 percent for payable 2000 and increases the maximum credit from $320 in payable 1999 to $390 for payable 2000. • Creates a new education agricultural credit equal to 54 percent of the general education tax, in the case of agricultural homestead property, or 50 percent of the general education tax, in the case of agricultural non-homestead property. The credit does not apply to the house, garage, and one acre of agricultural homestead property that is covered by education homestead credit. Limited Market Value The Legislature made some modest changes to the limited market value statutes. Under the new law, valuations for agricultural homestead and non-homestead property, residential homestead and non- homestead property, and seasonal recreational residential property (cabins) generally cannot increase by more than 8.5 percent of the preceding year's assessment. The law includes a catch-up provision to prevent the limited value from falling too far behind the assessor's estimate. If the assessor's valuation exceeds the previous value by more than approximately 57 percent, the value increase is limited to 15 percent of the difference between the current year assessment and the new assessment.