06-03-1991 WS - Laserfiche WebLink

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2 Overview of the 1991 omnibus tax bill The 1991 omnibus tax bill (HF1698)has many more positive features than negative ones for cities. On the up side: * The LGA/HACA cuts were less than one-tenth of the governor's original proposal; * The separation of city property tax relief fund dollars from legislative manipulation has begun with the dedication of two cents of the sales tax,part of which is adopted locally; * The third tier classification rate on homestead property is being reduced over a two-year period without the tax cost shifting to other property; * The 1991 revenue base is restored to its pre-cut level before 1992 cuts - which may be recovered by levy - are calculated; and, * The promise for 1993 levy limit repeal remains intact. On the down side: * Cities and counties will lose an additional$35 million LGA/HACA in the December 1991 payment(approximately 1.6 percent of revenue base, or equivalent to about 80 percent of the July 1991 cuts), and *The overall levy base is frozen at the 1991 pre-cut level and contains no growth factor. For comparative purposes, the total 1991-92 LGA/HACA cuts beyond the$51 million 1992 cut passed in the 1990 tax bill is $70 million. The governor's proposal was $639 million; the Senate bill was $125 million and the House bill, $25 million. L Local Sales Tax Option CITY RESOLUTIONS IN SUPPORT OF COUNTY BOARDS ADOPTING LOCAL SALES TAX OPTION The Association of Metropolitan Municipalities urges member city councils to pass resolutions in support of their county boards to adopt the one-half cent sales tax by the July 1, 1991, deadline. The sales tax automatically will increase to 6.5 percent for the period July 1, 1991-,_through Dec. 31, 1991. If the one-h• •- - • • • •• • i • •••pted, the sales tax within the county reverts to 6 percent- not 4.5 percent - and all aid is lost to the county and cities in that county's borders. Of the 6 percent sales tax, the difference- or 1.5 percent-will go to the Local Government Trust Fund as a windfall for other cities and counties. In a county not adopting the one-half cent option, the lost aid to each unit of government may be replaced by additional property tax levy. If a county board fails to act by July 1, 1991, the governing bodies of cities and towns within the county totalling at least 50 percent of the county population may make the option choice for the county. It is important for cities to act quickly in support of their county boards to help absorb the difficult political decision of increasing the sales tax by one-half cent.