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HomeMy WebLinkAbout8.a. Half Cent Sales Tax RevocationCITY OF ROSEMOUNT EXECUTIVE SUMMARY FOR ACTION CITY COUNCIL MEETING DATE: MARCH 2, 1992 There is a movement amongst counties to reconsider the half sales tax which went into effect recently. The purpose of the tax was to supplement the pool of funds available for aids to cities, counties and school districts. Because of certain vetoes by Governor Carlson, counties may not receive any funds from that half cent taxa So, counties are considering revoking it. As the attached memo suggests, if our County revokes it, we will not receive any State Aids. This must be left in place. I recommend that you consider adopting a motion to ask the County to not revoke the tax and send a message on to the legislature asking them to insure that legislation is put in place to insure that counties receive a portion of that half cent tax. RECOMMENDED ACTION: Motion to ask Dakota County not to revoke the half cent salestaxin Dakota County and that letter be sent to the Dakota Legislature and Governor Carlson to insure that legislation is adopted to insure Counties receive a proportional share of the tax. COUNCIL ACTION: AGENDA SECTION: ADMINISTRATORS REPORT AGENDA ITEM: HALF CENT SALES TAX REVOCATION PREPARED BY: STEPHAN JILK, CITY ADMINISTRATOR AGENDA NQ— IRM # 8 A ATTACHMENTS: LEAGUE OF MINNESOTA CITIES MEMO AP VE BY• There is a movement amongst counties to reconsider the half sales tax which went into effect recently. The purpose of the tax was to supplement the pool of funds available for aids to cities, counties and school districts. Because of certain vetoes by Governor Carlson, counties may not receive any funds from that half cent taxa So, counties are considering revoking it. As the attached memo suggests, if our County revokes it, we will not receive any State Aids. This must be left in place. I recommend that you consider adopting a motion to ask the County to not revoke the tax and send a message on to the legislature asking them to insure that legislation is put in place to insure that counties receive a portion of that half cent tax. RECOMMENDED ACTION: Motion to ask Dakota County not to revoke the half cent salestaxin Dakota County and that letter be sent to the Dakota Legislature and Governor Carlson to insure that legislation is adopted to insure Counties receive a proportional share of the tax. COUNCIL ACTION: R[qj I League of Minnesota Cities February 25, 1992 183 University Ave. East St. Paul, MN 55101.2526 (612) 227.5600 (FAX: 221-0986) TO: Mayors, Managers, and Clerks FROM. Donald A. Slater, Executive Director SUBJECT: 1/2 Cent Sales Tax The purpose of this memorandum is to alert cities to a proposal which could seriously affect municipal revenue in the future. The Association of Minnesota Counties (AMC) has circulated a memorandum to Minnesota county commissioners proposing that counties consider revoking the 1/2 cent optional sales tax. The memorandum reasons that counties will receive no money from the Local Government Trust Fund for calendar year 1993 and thereafter because the legislature failed to override the Governor's line item veto of the 1991 tax act. The memorandum also states the promises of enacting legislatioin restoring the distribution is not a given and the Governor and the legislature may raid the trust fund to balance the state's budget. AMC advises counties to remind their legislators and the governor that the counties voted the 1/2 cent sales tax. If the counties don't receive a portion of the funds from the trust fund, there is no reason for the counties to support the tax. Finally, the AMC provides a sample resolution for counties to pass expressing the above sentiments to the Governor and the legislature. It is obvious this move is intended to exert pressure on the legislature and the Governor to produce a replacement mechanism for the vetoed portion of the tax act. AMC also seeks to protect the integrity of the Local Government Trust Fund. LMC and 'AMC share these objectives. However, the threat to revoke support for the trust fund is an extremely serious matter for cities, especially. Without the trust fund, cities, in any county revoking the 1/2 cent sales tax, would Have no Iocal government aid, no housin anda ri.culture credit assistance, no ispari y a no anything. The programs w is existed e ore a creation of the rust fund really aren't there anymore and would not be reconstituted if a county opted out of the trust fund. Mayors, Managers, Clerks Page 2 February 25, 1992 It is, of course, rather unlikely the legislature won't enact legislation correcting the problem resulting from the Governor's line item veto. But it could happen. Or, more likely, the programs included in the trust fund could be shifted around so less of the trust fund money would fund county programs. What would the counties do then? Opt out, or continue their support of optional sales tax so that city property taX*,. elief programs continue? Should the Legislatut�r fai'L .to adopt,_ a new., trust fund distribution formula this year, we would expect many counties to rescind the local option tax and the whole trust fund concept to,collapse.,� However there is a danger that some counties could act to rescind the tax, even if the legislature passes a new distribution formula which is satisfactory., but- not_, ideal. from the county, standpoint.. In view- of this '` nazard; h encour ge io . YAicials to take.;these.actzons, 1. Urge yours leq. i slator to � supWrt-, a new, `trust- ;fungi distribution of..the trust'fund�a Y.. . 2. Urge _ g your county. of to continue to support the trust fund a the 1/2w +cent lc ,al,.optiopl :tax,, provided: the ,l,eg3slsture Paa ,< � . .. _ _ , ,fundi d,�stributi�on formula -,11 Ask them to be ca7r� o ary rer.Qluton . regard ini� reset ndinq : the ; . - la;rib - $ •: Ppta� on ; tax be, app c. Tont y in> :the event: th-at� no new r . �d utiot}; forinu,a h1992, -sesss4_ 3 Point`''out `to your county offisiais their action to„rescind ;the local option tax could be negated by adoption of resolutions by the, -c ty... o no ,and tboards having a', majority of_ the coun'�s p_opi i pow issue has such a� __. otentiall ` ' P y powerful impact on city finance that being forewarned is being forearmed. I encourage city officials most strongl x;.to. _deve-lop...&, contingency.. plan- meeting such ;an event:..,. I. suggerj._,. Abu ccnteniplate: what actions You might your city would take and whether Y g Join* with city council`s representing a majority -of the county's popIlatior�., to: reverse,, any,, county_ government decision to revolve-' _su�PPorE, o the 1/2s Gent ,1Qca1,_ optional sales tax. January 29, TO: 0 FROM: a, RE: R 1992 ASSOCIATION 1 i � 1 COMMISSIONERS MULDER, EXECUTIVE DIRECTOR OLUTION TO RESCIND LOCAL "OPTIONAL" SALES TAX Recent disturbing events that occurred at the State Capitol have prompted me to encourage AMC's member counties to consider revoking the 1/2 cen "optional" sales tax. As you are probably aware, the legislature failed in its attempt to override the Governor's line item veto or Januaaiy 14. sy not accomplishing an override, current law is stilin effect, which means that counties will receive no money from he Local Government Trust Fund for calendar year 1993 and thereat er. we have bee told that the legislature and Governor will enact legislation to adopt,new aid formulas, but it is not as given. It also is not clear as to what the distribution formula will include and if the legislature and Governor will use the Local Government Trust Fund lo balance the State's budget (a projected 340 million short fall), AMC believei that it is advisable to remind your legislators and the Governoi that counties voted for the 112 cent State sales tax increase to help Create the Local Government Truxt Fund. If counties are no longer going to be a recipient of a portion of the proceeds othe fund, there is no reason for ceuntiess to participate in it. Therefore, it is recommended that -c:ountiess consider pa sage of the accompanying resolution to "accent your concerns. I is very important that all commissioners Continue to contact the, legislators and the Governor to express concern about our lost aid and the effect the loss of this aid will have on local property tales. 125 CHARLES AVENUE ST. PAUL MINNESOTA 55103.2100 n12-224-4344 FAX 812-224-8540 COUNTY RESOLUTION TO REPEAL 1/2 PERCENT "OPTIONAL" SALES TAX WHEREAS, the 1992 tax bill as passed by the state legislature contained a provision for the establishment of a Local Government Trust Fund, and WHEREAS, it was the understanding of county governments at the time of passage, that the additional one-half percent was added to the State's sales tax to establish such a trust fund, and WHEREAS, it was further understood that approximately two cents of the sales tax and one-half cents collected would be dedicated to this Local Government Trust Fund, and WHEREAS, the establishment of such a trust fund would help to keep property taxes low by providing a guaranteed flow of sale tax income to county and township governments, and WHEREAS, the Governor has eliminated county and township Homestead and Agricultural Credit Aid from the distribution of Trust Fund revenues through the use of his line item veto authority, and WHEREAS, The legislature failed on its first attempt to override the Governor's veto, so THEREFORE, BE IT RESOLVED, that the ---------- County Board Of Commissioners does hereby give notice that it is the intent of the County Board of Commissioners to rescind the "optionalm 1/2 percent sales tax thatwasjust passed by this same board in 1991, if the Governor and Legislature fail to restore the lost Homestead and Agricultural Credit and Disparity Reduction Aid that resulted from the Governor's veto.