8.4. SR 07-31-1995 - Laserfiche WebLink

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L C] • Session, continued from page 1 cuts. In the end, the 1996 HACA distribution will be reduced by $16 million in a one-yeaz cut shared by counties, townships, and special taxing authorities. The 1995 state aid distribu- tion to cities will remain intact despite the Governor's proposal to cut current aid distributions for LGA and HACA by $57 million this fiscal year. For 1996, the LGA inflation growth factor remains intact and will raise the LGA appropriations by approximately $10 million. (The Governor had proposed eliminating that growth factor to divert state resources for other purposes.) Tax increment financing Despite several onerous proposals to further restrict the use of tax increment financing, the final tax bill included a significantly scaled-back set of new restrictions. Some new provisions may actually be preferable than existing state laws-most notably the option for cities to choose matching local contributions for TIF projects, rather than the application of the LGA/ HACA penalty. Proposals to impose restriction on pre-1990 TIF districts were not ultimately adopted. Taxation of municipal bond interest Despite efforts by several key House members to enact a law to tax interest on municipal bonds, cities were successful in defeating the proposal. The initiative was targeted at a lawsuit filed in Ohio-that challenges. the constitutionality of differential taxation of in state and out-of-state bond interest. City officials successfully argued that elimination of the tax exempt status would substantially increase local borrowing costs and ultimately increase local property taxes. On the House floor, taxation of municipal bonds was pulled from the tax bill, while taxation of state bonds was ultimately adopted by the full June 9, 1995 House. In the tax conference commit- tee, the provision to tax state bonds was ultimately removed because it made no sense to tax only state governmental bonds. Property tax freeze Eazly in the session, Senate leadership proposed a freeze on all local property taxes for one yeaz in order to constrain property tax in- creases and to force discussions for local government finance reforms. The actual property tax freeze bill was not offered until late March. This bill included a "hard" freeze on property taxes, including a freeze on levies for growth based on new construction within a community. Provisions also reimposed levy limits for pay 1997 taxes to prevent any second-year increase in property taxes. To ensure that levies were totally frozen, the bill also restricted levies for newly issued debt. The mere thought caused havoc for city officials who had plans to issue new debt in 1996. Strong responses of opposition from city officials across the state played an essential role in killing the proposal. (~ 4M Fund update An investment alternative sponsored by the League of Minnesota Cities What is the 4M Fund? The 4M Fund is a short-term money market fund specifically designed to address the cash - management needs of Minnesota cities and their instrumentalities.The Fund is comprised. of the highest quality, short-term investments allowable under Minnesota Statute 475.66 and the Fund's objectives are safety, liquidity and a competitive yield. The short term nature - of the Fund helps to insulate it trom the effect of changes in interest rates. The Fund is ~ managed by Insight Investment Management and Dain Bosworth and served by MBIA - Municipal Investors Service Corporation. A fixed rate investment program for Fund participants, offering such alternatives as certificates of deposit and U.S. Treasury and Agency securities, is also available. Market update-Week of May 29-June 2, 1995 The bond market responded strongly to last Friday's unemployment report. The news of much lower than expected non-farm figures was a signal to market participants that the economy has slowed, and that the Federal Reserve Board will lower the Fed Funds rate sometime soon. Current yields reflect an ease in the Fed funds rate of 50 basis points to 5.50 percent. This action could happen as soon as August. The Treasury Bill yield curve has remained flat at between 5.65 and 5.75 percent. Daily Rates-Week of May 29-June 2, 1995 Interest Average Maturity Date Rate' of Portfolio 5/29 5.56% 22 days 5/30 5.55% 22 days 5/31 5.57% 18 days 611 5.58% 18 days 6/2 5.56% 18 days 'Interest rates are net of all applicable fees. Daily interest compounding, free checking, andAutomated Clearing House (ACH) payment systems are among the conveniences offered by the Fund. For more information, please call Kathy Kardell of Insight Investment Management at (800) 333-0813 or Shirley Hogan at Dain Bosworth at (800) 388-7125. Page 3