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Local projects would get a boost from property tax division report

If you seek an example of a bipartisan bill, look no further than the proposed House Property Tax Division report. Its provisions arose from bills with 35 different sponsors, 21 of them DFLers, 14 Republicans.

Why such a wealth of sponsors? Well, as longtime U.S. Speaker of the House Tip O’Neill often said, “All politics is local.” And, since the Legislature must approve local governments’ plans for local option sales taxes and tax increment financing districts, that means that each city, suburb or town’s representative must go before the House Property Tax Division to ask permission.

The proposals that were approved are part of the division report, a delete-all amendment to HF1735. Sponsored by the division chair, Rep. Cheryl Youakim (DFL-Hopkins), it received a walkthrough in a Monday meeting of the division, which then heard public testimony. On Wednesday, the division plans to review amendments and take action on the bill. From there, it is expected to be forwarded to the House Taxes Committee for possible inclusion in an omnibus tax bill.

The Senate Subcommittee on Property Taxes has not yet compiled a similar bill.

According to the nonpartisan House Fiscal Analysis Department, $2.07 billion in aids, credits and refunds would be returned to Minnesota taxpayers in fiscal year 2022 when taking the bill’s potential changes into account, $2.12 billion in fiscal year 2023.

Here are some examples of how state tax policy would change under the bill:

Property taxes

Among other things, the bill would:

  • increase the maximum refund for the homestead credit by $250 and reduce the copay for the renter’s credit by between 5% and 15%;
  • move to Dec. 31 the deadlines for homestead occupancy and application and the disabled veteran’s homestead market value exclusion;
  • set a class rate for low-income rental housing, manufactured home park property and manufactured homes of 0.75% and a first-tier limit of $174,000;
  • allow local jurisdictions to create special taxing districts for fire protection and emergency medical services and impose special assessments for energy improvement projects; and
  • establish an annual meeting for the public to provide input on proposed property tax levies for counties, cities and school districts.

Aids and credits

These amounts of Local Government Aid payments would be issued annually for five years:

  • $320,000 – Staples;
  • $320,000 – Warren; and
  • $250,000 – Floodwood.

To cover the aid adjustment, the total of Local Government Aid appropriations for Minnesota cities would increase by $890,000 for each of the next five years.

Local taxes

The bill would extend the expiration date for the local lodging tax in Plymouth and remove the expiration date of the food and beverage tax in Sartell.

It would also allow new local sales taxes in Carlton County, Cloquet, Edina, Fergus Falls, Grand Rapids, Hermantown, Itasca County, Litchfield, Little Falls, Maple Grove, Mille Lacs County, Moorhead, Oakdale, St. Cloud, St. Peter, Wadena and Waite Park.

Tax increment financing

The bill would change state TIF policy by:

  • extending the five-year rule to 10 years for redevelopment districts certified after Dec. 31, 2017;
  • providing a corresponding extension of the six-year rule;
  • allowing TIF authorities to transfer unobligated increment to the municipality’s general fund or directly to a business that was impacted by COVID-19; and
  • allowing increment generated by a housing district to be transferred to an affordable housing trust fund.

Special tax increment financing authority would be provided to Bloomington, Burnsville, Fridley, Minnetonka, Mountain Lake, Richfield, St. Louis Park, Wayzata and Windom.

Public finance

The bill would make a number of changes in laws relating to municipal financing. Among them are allowing counties to use funds from county transportation sales taxes to pay for the construction of facilities for maintaining transportation or transit projects, and allowing municipalities to use street reconstruction bond proceeds to construct bike lanes, sidewalks and paths that are incidental to street reconstruction.

Cities, counties and towns would be permitted to establish tourism improvement districts. The bill would also change the depreciation calculation for wind and solar energy conversion systems.

Public testimony revealed the most controversial measures in the bill to be those related to “Minnesota Property Taxpayers Day,” which would require all local taxing districts to hold their public hearings on the same day and present any changes to the property tax levy.

“It’s a laudable intent to have more citizen participation,” said Gary Carlson, intergovernmental relations director for the League of Minnesota Cities. “But Minnesota does an exceptional job of informing citizens about local property tax decisions already. Few states have as comprehensive a system as Truth in Taxation.”

After quoting city officials around the state who spoke of technology challenges and scheduling conflicts for multiple taxing districts, Carlson said, “We have concerns that a one-size-fits-all mandate will not always produce the best participation results.”

It was a sentiment echoed by testifiers representing Metro Cities and the Minnesota School Boards Association.

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The following are selected bills that have been incorporated in part or in whole into the Property Tax Division report:

 


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