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<br />A.( ~( <br />( II <br />rill River <br /> <br />ITEM 8. <br /> <br /> <br />TO: <br /> <br />FROM: <br /> <br />MAYOR & CITY COUNCIL ( <br />LORI JOHNSON, FINANCE DIRECTOR ~~ <br /> <br />DATE: JULY 22, 1993 <br /> <br />SUBJECT: URBAN/RURAL TAX RATIO ORDINANCE <br />AMENDMENT <br /> <br />A public hearing has been called for 7:00 on Monday to discuss <br />a proposed ordinance amendment which would change the benefit <br />ratio of the urban and rural taxing districts. The current <br />ratio is .6 and the published ordinance amendment stated the <br />ratio at .9. The published ordinance can be changed to any <br />ratio the Council feels appropriate. <br /> <br />e <br /> <br />As background information, this issue came up last fall during <br />payable 1993 tax calculations due to the wrong classification <br />of commercial/industrial properties by the County. There were <br />numerous commercial/industrial parcels which should have been <br />included in the urban district, but were improperly included in <br />the rural district. When the County corrected the error, the <br />taxpayers in the rural taxing district experienced a relatively <br />large decrease in the tax rate for taxes payable for 1993. <br />Previous to that time, the difference between the urban and <br />rural tax rate had been minimal, between 2.4 to 3.2 points. In <br />1993, the difference was 7.438 points. <br /> <br />YEAR URBAN RURAL DIFFERENCE <br />------ -------- -------- ---------- <br />1993 20.560% 13.122% 7.438 <br />1992 19.742 17.102 2.640 <br />1991 20.690 18.276 2.414 <br />1990 22.620 19.389 3.231 <br /> <br />Note: Taxes decreased from 1990 to 1992; the 1993 rates <br />would have also shown a decrease from 1992 had we had time <br />to correct the situation caused by the classification <br />error. <br /> <br />e <br /> <br />In an effort to maintain continuity between the difference in <br />the urban and rural taxing districts, the ratio needs to be <br />changed from .6 to approximately .85. In addition to adjusting <br />the ratio for 1994 taxes, the ordinance can be worded to <br />include benefit ratio changes for future tax years. The <br />benefit ratio change could be phased in whereby it changes to <br />.85 in 1993, .90 in 1995, .95 in 1997, and 1 in 1999, for <br />example. This would eliminate the need to go through this <br />process for future changes. <br /> <br />I have calculated the urban and rural tax rates based on a <br />ratio of .80, .85, .90, .95, and 1. Each of these calculations <br /> <br />P.O. Box 490 · 13065 Orono Parkway · Elk River, MN 55330 · (612) 441-7420 · Fax: (612) 441-7425 <br />