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North Metro Mayors Association INFORMATION Basic Tax Reform Principles ON LY 1111111 NMMA Board of Directors Adopted on April 16, 1997 The 1997 Legislature is in the process of considering various tax reform proposals. The North Metro Mayors Association recalls historical tax reform efforts and hopes to avoid some of the negative impacts experienced by local government: • The pre-1967 environment found local units of government sharing in the State's cigarette and liquor tax. • In 1967 this tax was modified to include a share of the sales tax. • In 1971 local governmental aids, fiscal disparities and levy limits became law. • In 1991 the Trust Fund was established and lasted just a couple of years. • Currently cities are receiving approximately 20 percent of all property taxes collected. Member cities are concerned that they will be used as the vehicle to raise the necessary funds to accomplish tax reform across the state. The North Metro Mayors Association sets forth herein several basic principles that it believes are essential in order to achieve a well balanced tax reform package this year: 1. State-wide education costs need to be taken off of the property tax payer. Accountability, however, needs to be designed and incorporated into any reform package. 2. The revenue streams of fiscal disparities and local government aids need to be maintained. This is particularly true for community like Robbinsdale, Crystal and Columbia Heights that depend on these sources of revenue for more than fifty percent of their respective general fund expenditures. These revenue streams should not be allowed to be diminished inadvertently as the result of property tax classification changes. 3. Tax Increment Financing as a redevelopment tool should be preserved. 4. Levy limitations have not worked in the past and should not be imposed now. 5. Even with tax reform, cities will still be faced with the most regressive and most unreliable source of funding (i.e., the property tax). This will be especially true for older cities with low, flat or slow grow tax base. 6. Cities should not be required to have referendums for raising revenue to meet general fund operating requirements. 7. Cities should not be mandated unless there are state funds made specifically available to implement such mandate(s). North Metro Mayors Association recognizes that education costs should be removed from the property tax and paid for out of general funds. The method used to achieve this objective should however, be structured in a way that allows local units of government to continue to deliver services that citizens want and desire in an accountable manner. The facts are clear, many cities throughout the state are property tax base poor. But for the fact of fiscal disparities (metro area) and local governmental aids (state wide), these cities would not be able to deliver services or stimulate economic development without dramatically increasing property taxes. The North Metro Mayors Association is unified in its support on these basic tax reform principles, and calls on its elected delegation to support this position. U:\NMMA\LEG-GENL\TAXREFRM\TAXPOLIC.DOC 4/18/97