1.1 	A bill for an act
1.2 	relating to property tax aids; changing the city local
1.3 	government aid formula; amending Minnesota Statutes
1.4 	2004, sections 477A.011, subdivisions 34, as amended,
1.5 	35; 477A.013, subdivisions 8, 9; 477A.03, subdivision
1.6 	2a, by adding a subdivision.
1.7 	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

1.8 	Section 1. Minnesota Statutes 2004, section 477A.011,
1.9 	subdivision 34, as amended by Laws 2005, chapter 151, article 4,
1.10 	section 7, is amended to read:
1.11 		Subd. 34.City revenue need. (a) For a city with a
1.12 	population equal to or greater than 2,500, "city revenue need"
1.13 	is the sum of (1) 5.0734098 times the pre-1940 housing
1.14 	percentage; plus (2) 19.141678 times the population decline
1.15 	percentage; plus (3) 2504.06334 times the road accidents factor;
1.16 	plus (4) 355.0547; minus (5) the metropolitan area factor; minus
1.17 	(6) 49.10638 times the household size.
1.18 	(b) For a city with a population less than 2,500, "city
1.19 	revenue need" is the greater of (1) $400 or (2) the sum of (1)
1.20 	2.387 times the pre-1940 housing percentage; plus (2) 2.67591
1.21 	times the commercial industrial percentage; plus (3) 3.16042
1.22 	times the population decline percentage; plus (4) 1.206 times
1.23 	the transformed population; minus (5) 62.772.
1.24 	(c) For a city with a population of 2,500 or more and a
1.25 	population in one of the most recently available five years that
1.26 	was less than 2,500, "city revenue need" is the sum of (1) its
2.1 	city revenue need calculated under paragraph (a) multiplied by
2.2 	its transition factor; plus (2) its city revenue need calculated
2.3 	under the formula in paragraph (b) multiplied by the difference
2.4 	between one and its transition factor.  For purposes of this
2.5 	paragraph, a city's "transition factor" is equal to 0.2
2.6 	multiplied by the number of years that the city's population
2.7 	estimate has been 2,500 or more.  This provision only applies
2.8 	for aids payable in calendar years 2006 to 2008 to cities with a
2.9 	2002 population of less than 2,500.  It applies to any city for
2.10 	aids payable in 2009 and thereafter.
2.11 	(d) The city revenue need cannot be less than zero.
2.12 	(e) For calendar year 2005 and subsequent years, the city
2.13 	revenue need for a city, as determined in paragraphs (a) to (d),
2.14 	is multiplied by the ratio of the annual implicit price deflator
2.15 	for government consumption expenditures and gross investment for
2.16 	state and local governments as prepared by the United States
2.17 	Department of Commerce, for the most recently available year to
2.18 	the 2003 implicit price deflator for state and local government
2.19 	purchases.
2.20 	
EFFECTIVE DATE. This section is effective for aids
2.21 	payable in 2006 and thereafter.

2.22 	Sec. 2. Minnesota Statutes 2004, section 477A.011,
2.23 	subdivision 35, is amended to read:
2.24 		Subd. 35.Tax effort rate.  "Tax effort rate" means the
2.25 	net levy for all cities divided by the sum of the city net tax
2.26 	capacity for all cities, unless the need increase percentage
2.27 	determined under section 477A.013, subdivision 8, is 100
2.28 	percent, in which case the tax effort rate is the rate needed so
2.29 	that the total aid under section 477A.013, subdivision 9, equals
2.30 	the total amount available for aid under section 477A.03, after
2.31 	the subtractions in section 477A.014.  For purposes of this
2.32 	section, "net levy" means the city levy, after all adjustments,
2.33 	used for calculating the local tax rate under section 275.08 for
2.34 	taxes payable in the year prior to the aid distribution.  The
2.35 	fiscal disparity distribution levy under chapter 276A or 473F is
2.36 	included in net levy.
3.1 	
EFFECTIVE DATE. This section is effective beginning with
3.2 	aids payable in 2006.

3.3 	Sec. 3. Minnesota Statutes 2004, section 477A.013,
3.4 	subdivision 8, is amended to read:
3.5 		Subd. 8.City formula aid.  In calendar year 2004 and
3.6 	subsequent years, the formula aid for a city is equal to the
3.7 	need increase percentage multiplied by the difference between
3.8 	(1) the city's revenue need multiplied by its population, and
3.9 	(2) the sum of the city's net tax capacity multiplied by the tax
3.10 	effort rate, and the taconite aids under sections 298.28 and
3.11 	298.282, multiplied by the following percentages:
3.12 	(i) zero percent for aids payable in 2004;
3.13 	(ii) 25 percent for aids payable in 2005;
3.14 	(iii) 50 percent for aids payable in 2006;
3.15 	(iv) 75 percent for aids payable in 2007; and 
3.16 	(v) 100 percent for aids payable in 2008 and thereafter.
3.17 	No city may have a formula aid amount less than zero.  The need
3.18 	increase percentage must be the same for all cities.
3.19 	Notwithstanding any law to the contrary, local sales tax
3.20 	revenues or an amount that could be raised from a local sales
3.21 	tax base shall not be included in calculating the aid under this
3.22 	subdivision.
3.23 	The applicable need increase percentage must be calculated
3.24 	by the Department of Revenue so that the total of the aid under
3.25 	subdivision 9 equals the total amount available for aid under
3.26 	section 477A.03 after the subtraction under section 477A.014,
3.27 	subdivisions 4 and 5. The need increase percentage may not be
3.28 	more than 100 percent.
3.29 	
EFFECTIVE DATE. This section is effective for aids
3.30 	payable in 2006 and thereafter.

3.31 	Sec. 4. Minnesota Statutes 2004, section 477A.013,
3.32 	subdivision 9, is amended to read:
3.33 		Subd. 9.City aid distribution.  (a) In calendar year
3.34 	2002 and thereafter, each city shall receive an aid distribution
3.35 	equal to the sum of (1) the city formula aid under subdivision
3.36 	8, and (2) its city aid base.
4.1 	(b) The aid for a city in calendar year 2004 shall not
4.2 	exceed the amount of its aid in calendar year 2003 after the
4.3 	reductions under Laws 2003, First Special Session chapter 21,
4.4 	article 5.
4.5 	(c) For aids in 2006 only, the total aid for any city shall
4.6 	not exceed the sum of (1) 20 percent of the city's net levy for
4.7 	the year prior to the aid distribution plus (2) its total aid in
4.8 	the previous year.For aids payable in 2005 2007 and
4.9 	thereafter, the total aid for any city shall not exceed the sum
4.10 	of (1) ten percent of the city's net levy for the year prior to
4.11 	the aid distribution plus (2) its total aid in the previous
4.12 	year.  For aids payable in 2005 and thereafter, the total aid
4.13 	for any city with a population of 2,500 or more may not decrease
4.14 	from its total aid under this section in the previous year by an
4.15 	amount greater than ten percent of its net levy in the year
4.16 	prior to the aid distribution.
4.17 	(d) For aids payable in 2004 only, the total aid for a city
4.18 	with a population less than 2,500 may not be less than the
4.19 	amount it was certified to receive in 2003 minus the greater of
4.20 	(1) the reduction to this aid payment in 2003 under Laws 2003,
4.21 	First Special Session chapter 21, article 5, or (2) five percent
4.22 	of its 2003 aid amount.For aids payable in 2005 2006 and
4.23 	thereafter, the total aid for a city with a population less than
4.24 	2,500 must not be less than the amount it was certified to
4.25 	receive in the previous year minus five percent of its 2003
4.26 	certified aid amount.
4.27 	
EFFECTIVE DATE. This section is effective for aids
4.28 	payable in 2006 and thereafter.

4.29 	Sec. 5. Minnesota Statutes 2004, section 477A.03,
4.30 	subdivision 2a, is amended to read:
4.31 		Subd. 2a.Cities.  For aids payable in 2004, the total
4.32 	aids paid under section 477A.013, subdivision 9, are limited to
4.33 	$429,000,000.  For aids payable in 2005 and thereafter, the
4.34 	total aids paid under section 477A.013, subdivision 9, are
4.35 	increased to $437,052,000. For aids payable in 2006, the total
4.36 	aids paid under section 477A.013, subdivision 9, are limited to
5.1 	$485,552,000.  For aids payable in 2007 and thereafter, the
5.2 	total aids payable under section 477A.013, subdivision 9, are
5.3 	limited to an amount equal to the total amounts certified to be
5.4 	paid in the previous year, increased for inflation as provided
5.5 	under subdivision 5.
5.6 	
EFFECTIVE DATE. This section is effective for aids
5.7 	payable in 2006 and thereafter.

5.8 	Sec. 6. Minnesota Statutes 2004, section 477A.03, is
5.9 	amended by adding a subdivision to read:
5.10 		Subd. 5.Inflation adjustment. In 2007 and thereafter,
5.11 	the amount paid under each section to be adjusted for inflation
5.12 	shall be increased by an amount equal to:
5.13 	(1) the amount certified to be paid under that section in
5.14 	the previous year multiplied by 
5.15 	(2) one plus the percentage increase in the implicit price
5.16 	deflator for government consumption expenditures and gross
5.17 	investment for state and local governments prepared by the
5.18 	Bureau of Economic Analysis of the United States Department of
5.19 	Commerce for the 12-month period ending March 31 of the previous
5.20 	year.  The percentage increase used in this subdivision shall be
5.21 	no less than 2.5 percent and no greater than 5.0 percent.
5.22 	
EFFECTIVE DATE. This section is effective for taxes
5.23 	payable in 2007 and thereafter.