8.5. SR 04-17-1995 - Laserfiche WebLink

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~:.,,' ' r ~ s. ~Act><on Alert p~ (~ iS 1 r' 7w.rP cX ~r~ I i :H.~, mcma 1 ~j Tax-exempt status of bonds threatened Gary Carlson and Andrea Atherton On Mazch 15 Representative Ann Rest (DFL-New Hope) introduced H.F. 1380, a bill that would eliminate the state income tax exclusion for interest on bonds issued by the state and local governments in Minnesota. If enacted this bill would significantly increase local government borrowing costs because investors would no longer be able to exclude the interest income from their state taxable income. On behalf of cities across Minnesota, contact your representa- tive, senator, and the bill's authors income exclusion. According to public finance experts, the bill could increase bond interest rates by a quarter percent to three-quarters of a percent (25 to 75 basis points). Second, the bill would increase state income tax collections. According to the state's tax expenditure budget, state income tax collections could increase by approximately $50 million per year if all state and local bonds were affected. However, the income tax impact would be much less in the first yeaz df implementation because existing bands would only be impacted if they aze resold after July 1, 1995. Tax increment hearings continue C Gary Carlson Tuesday, March 21 was a busy day for those interested in tax increment financing. The Property Tax Division of the House Tax Committee completed testimony on H.F. 147, Representative Dennis Ozment's (IR-Rosemount) TIF reform bill. In addition, the committee considered H.F. 824, Representative Ann Rest's (DFL-New Hope) bill that would require school approval for new or modified tax increment districts. The committee also discussed Repre- sentative Ron Abrams's (IR- Minnetonka) bill requiring state auditor approval for tax increment districts. Many city officials have testified in opposition to provisions contained in H.F. 147. Although the testimony has been persuasive, the committee will likely include some, if nowt aii of the H.F. I47 provisions in the final House omnibus tax bill. Senate Developments On Tuesday afternoon, the Property Tax subcommittee of the Senate Tax Committee considered S.F. ~re~~°~s ly ~ I t~'~-. 1~ e, and voice your opposition to H,F. 1380. The bill was co-authored by Thomas Bakk (DFL-Cook), Edgar Olson (DFL-Fosston), Don Ostrom (DFL-St. Peter), and Jean Wagenius (DFL-Minneapolis). The bill would affect obligations issued or sold after July I,1995, or obligations acquired by a Minnesota taxpayer after July 1, 1995. The bill would have two major impacts. First, it would result in significantly higher borrowing costs for the state and local governments because investors would not realize the 1282, a bill authored by Senator John Hottinger (DFL-Mankato). The Hottinger bill would create a tax increment grant program and eliminate the LGA/HACA penalty for all tax increment districts. The Hottinger bill is a distinct departure from the legislation that has been working its way through the House. Instead of criticizing local officialsand their decisions, Senator Hottinger is deferring to theirjudge- ments. Senator Hottinger has been a constant suppotter of city issues throughout his tenure in the Minnesota Senate. In his testimony in support of his bill, Senator Hottinger outlined what he perceives to be problems wi[h tax increment financing. Under the current system of penalties, he has seen a continuous and growing stream of legislative exemptions from the LGA/ HACA penalty. This stream of legislation, he concludes, can only indicate that the system must be fixed. The tax increment grant program would allow the Department of Trade and Economic Development to make March 24, 1995 L the Cfi}ies $wL~et?r grants to TIF projects that might not be undertaken because of financial considerations. The grants would be available to cities that meet certain eligibility guidelines such as low family income, below average taxable tax capacity, high unemployment, and a demonstrated shortage of low to moderate income housing. Offering testimony and support were Bill Bassett from Mankato, Blaine Hill from Breckenridge, Rob Wolfington from Rushford, Steve Mielke from Hopkins, Matt Fulton. from New Brighton, and Mayor Kelly Ferber from Fergus Falls. Immediately after the discussions of the Hottinger bill, the committee began discussion of the Senate com- panion to the Representative Ozment bill. That bill was authored by Senator Gen Olson (IR-Minnetrista). The committee did not have time to fully consider the bill. While neither bill received a final vote, both will be laid over for further consideration by either the subcommit- tee or the full tax committee. ~ Page 3