Property tax bill ready for full taxes committee debate

More than 15 hours of discussion, dominated by the DFL minority, and several amendments were not enough to change Republican members’ minds concerning the proposal to cut local government aid to Minneapolis, St. Paul and Duluth.

The proposed aid cap to three of the four first-class cities is contained in HF984, the division report for the House Property Tax and Local Government Finance Division. After a 9-6 roll-call vote (one DFLer voted in the affirmative) Friday, the report moves to the House Taxes Committee for possible incorporation into that committee’s omnibus bill.

“We’ve had some very intensive and certainly thoughtful and thorough discussions. It’s not something everyone can support, but everyone had an opportunity to put some input into it,” said Rep. Steve Drazkowski (R-Mazeppa), chair of the division. He said the $450 million in changes to the state general levy would benefit all businesses- including the state’s smallest.

MORE: Read an April 16 Session Daily story and listen to audio from the meeting

Democrats criticized the bill for the amount of property tax relief for businesses with little directed toward homeowners and renters. However, the proposed cap on Local Government Aid to three of the four cities of the first class raised the minority’s ire.

HF2034, sponsored by Rep. Duane Quam (R-Byron), and included in the report, would create a maximum aid limit for the three cities. While Rochester is considered a first-class city, it currently receives less per capita aid than the average non-first class city.

The loss of LGA to the three cities would have devastating effects on services and create the need for substantial increases in property taxes, testifiers said.

“In reality, I don’t think any city council in any of the three cities could either absorb this size of a cut by cutting services or on the flip side a raise in property taxes. It will have to be a combination … We’d see massive service cuts and massive property tax increases,” said Rep. Erik Simonson (DFL-Duluth). He called the cut politically targeted and noted there is no policy argument to support it.

In an earlier committee hearing, Quam noted that the LGA formula needs “some dramatic fixing because many cities that have great tax bases are receiving fairly large per capita contributions. ... Each of our first class cities have robust tax bases and should be able to provide services to their citizens.”

LGA was created in 1972 as a means to even out disparities in the state — to assure residents of a certain standard of services. The formula was revised beginning in calendar year 2014 to bring funding stability to a program that had experienced volatility due to recent state fiscal shortfalls.