Management Report and Recommendations 12/31/1998

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Honorable Mayor and Members of the City Council City of Link Lakes Page 26 Local Govemment Fees During the course of the session, several bills were introduced that challenged the fees set by local units of govemment for activities ranging from amusement machine licensing to land use and building fees. These bills would have generally required local units of govemment to justify fees though a detailed cost analysis estimating the annual expense in providing the service, including detailed estimates of the number of employee hours necessary to perform the service. Although the bill that would have required justification of land use and building fees was tabled in the Senate Local Government Committee, this growing attention to the reasonableness of fees charged by local units will likely continue into the future. Social / Recreational Purposes Prohibited - Spending tax increments to construct or renovate facilities used for social, recreational, or conference facilities, or a public park used as a commons area, is prohibited. This prohibition will apply to facilities typically financed with TIF in the past, such as ice rinks and community centers. Additionally, the use of tax increments outside of a TIF district for improvements, equipment, or other uses is prohibited if the primary purpose is decorative or aesthetic, or if the materials or design cost double that which is more commonly used. Rehabilitation of historic structures or structures within a historic district listed on the national register is still permitted. Effective for expenditures made or binding contracts entered into after January 1, 2000. TIF Pooling Authority Municipalities with TIF district deficits caused by the 1997 and 1998 reductions in property tax class rates are authorized to transfer available increments from other districts in order to address the deficits. In order to utilize this authority, the district's request for certification must have been made prior to the first set of class rate reductions, which occurred with the enactment of the 1997 tax bill. A qualifying deficit equals the lesser of (1) the increments from the district plus any available increments from other districts permitted by existing pooling, minus the district's obligations to pay pre-June 2, 1997, bonds (or bonds issued to refund contracts entered into prior to that date); or (2) the reduction in the district's increments resulting from the 1997 through 1999 class rate changes. Transfers of increment are authorized among districts created by different types of development authorities (for example, an economic development authority and a port authority) as long as the development authorities are under the control of the municipality. Transferred increments will be deducted before the percentage pooling limits for post-1990 districts are calculated, which means that increments available for spending inside and outside the district will be reduced proportionately. Abatement Authority Abatements are authorized to be used to defer payment of property taxes, without interest or penalties, and requires establishing a repayment schedule and levying the deferred taxes as with a regular abatement. Political subdivisions may now also abate fiscal disparities tax in an amount equal to the local tax rate multiplied by the tax capacity of the parcel, which essentially includes the tax equal to the fiscal disparity tax on a commercial or industrial parcel. The approving local unit of govemment would fully fund the abatement so that there is no impact on the fiscal disparities pool. Finally, abatement of interest and penalties on property taxes is authorized. Language was added to the existing law to clarify that abatements may be used to pay for public infrastructure (improvements are not required to be located on the parcel whose taxes are abated), abatements may be retained to reimburse political subdivisions for infrastructure costs for which bonds are not issued, and property owners need not consent to an abatement.