HF 785

Conference Committee Report - 84th Legislature (2005 - 2006) Posted on 12/15/2009 12:00am

A bill for an act
relating to taxation; prohibiting increases in
property tax rates for taxes payable in 2006 and
certain subsequent years; prohibiting increases in
local government and state fees; providing
reimbursement to local governments for certain
property tax and fee increases; appropriating money.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1. new text begin CITATION.
new text end

new text begin This act may be cited as the "Truth and Fairness in
Taxation Act" (TAFTA) or the "State/Local Fiscal Relations:
Truth in Taxation Act."
new text end

Sec. 2. new text begin STATEMENT OF PURPOSE.
new text end

new text begin The legislature finds that the state of Minnesota is
continuing to experience a persistent budget deficit and that
reductions in state spending have resulted in increased burdens
on school districts, counties, cities, and other units of local
government. In order to recognize the implications of
addressing the state budget deficit without increasing tax
rates, and to maintain stability in state and local fiscal
relations, the purpose of this act is to prevent property tax
rate increases and to illuminate the impact of reductions in
revenue to school districts, counties, cities, and other units
of local government.
new text end

Sec. 3. new text begin BENEFIT RATIO FOR RURAL SERVICE DISTRICTS.
new text end

new text begin Notwithstanding Minnesota Statutes, section 272.67,
subdivision 6, the benefit ratio used for apportioning levies to
a rural service district for taxes payable in 2006 and any
subsequent year prior to the freeze termination year must not be
greater than that in effect for taxes payable in 2005.
new text end

Sec. 4. new text begin PROHIBITION AGAINST INCURRING NEW DEBT.
new text end

new text begin Subdivision 1. new text end

new text begin Actions prohibited. new text end

new text begin After May 31, 2005,
no municipality as defined in Minnesota Statutes, section
475.51, or any special taxing district as defined in Minnesota
Statutes, section 275.066, may sell obligations, certificates of
indebtedness, or capital notes under Minnesota Statutes, section
412.301, chapter 475, or any other law authorizing obligations,
certificates of indebtedness, capital notes, or other debt
instruments, or enter into installment purchase contracts or
lease purchase agreements under Minnesota Statutes, section
465.71, or any other law authorizing installment purchase
contracts or lease purchase agreements, if issuing those debt
instruments or entering into those contracts would require a
levy first becoming payable in 2006 or any subsequent year prior
to the freeze termination year.
new text end

new text begin Subd. 2. new text end

new text begin Exceptions. new text end

new text begin This prohibition does not apply to:
new text end

new text begin (1) refunding bonds sold to refund bonds originally sold
before June 1, 2005;
new text end

new text begin (2) obligations for which the amount of the levy first
becoming due in 2006 would not exceed the amount by which the
municipality's total debt service levy for taxes payable in 2006
prior to issuance of those obligations is less than the
municipality's total debt service levy for taxes payable in
2005; or
new text end

new text begin (3) obligations with respect to which the municipality
makes a finding at the time of the issuance of the obligations
that no levy will be required for taxes payable in 2006 or any
subsequent year prior to the freeze termination year or to pay
the debt service on the obligations because sufficient funds are
available from nonproperty tax sources to pay the debt service.
new text end

new text begin As used in clauses (2) and (3), "obligations" includes
certificates of indebtedness, capital notes, or other debt
instruments or installment purchase contracts or lease purchase
agreements.
new text end

new text begin Subd. 3. new text end

new text begin Date when bonds are deemed sold. new text end

new text begin For purposes
of this section, bonds will be deemed to have been sold before
June 1, 2005, if:
new text end

new text begin (1) an agreement has been entered into between the
municipality and a purchaser or underwriter for the sale of the
bonds by that date;
new text end

new text begin (2) the issuing municipality is a party to a contract or
letter of understanding entered into before June 1, 2005, with
the federal government or the state government that requires the
municipality to pay for a project, and the project will be
funded with the proceeds of the bonds; or
new text end

new text begin (3) the proceeds of the bonds will be used to fund a
project or acquisition with respect to which the municipality
has entered into a contract with a builder or supplier before
June 1, 2005.
new text end

Sec. 5. new text begin LEVY LIMITATION FOR TAXES PAYABLE IN 2006 AND
SUBSEQUENT YEARS.
new text end

new text begin Subdivision 1. new text end

new text begin Proposed levy. new text end

new text begin Notwithstanding any other
law to the contrary, for purposes of the certification required
by Minnesota Statutes, section 275.065, subdivision 1, in 2005
and any subsequent year prior to the freeze termination year, no
taxing authority shall certify to the county auditor a proposed
property tax levy or, in the case of a township, a final
property tax levy, greater than the levy certified to the county
auditor pursuant to Minnesota Statutes, section 275.07,
subdivision 1, in the prior year, except as provided in this
section.
new text end

new text begin Subd. 2. new text end

new text begin Final levy. new text end

new text begin Notwithstanding any other law to
the contrary, for purposes of the certification required by
Minnesota Statutes, section 275.07, subdivision 1, in 2005 and
any subsequent year prior to the freeze termination year, no
taxing authority shall certify to the county auditor a property
tax levy greater than the amount certified to the county auditor
pursuant to Minnesota Statutes, section 275.07, subdivision 1,
in the prior year, except as provided in this section.
new text end

new text begin Subd. 3. new text end

new text begin Debt service exception. new text end

new text begin If a levy for taxes
payable in 2006 or any subsequent year prior to the freeze
termination year, for debt service on obligations, certificates
of indebtedness, capital notes, or other debt instruments sold
prior to June 1, 2005, or to make payments on installment
purchase contracts or lease purchase agreements entered into
prior to June 1, 2005, exceeds the levy a taxing authority
certified pursuant to Minnesota Statutes, section 275.07,
subdivision 1, for taxes payable in 2005 for the same purpose,
the excess may be levied notwithstanding the limitations of
subdivisions 1 and 2.
new text end

new text begin Subd. 4. new text end

new text begin Annexation exception. new text end

new text begin The city tax rate for
taxes payable in 2006 or any subsequent year prior to the freeze
termination year on any property annexed under Minnesota
Statutes, chapter 414, may not be increased over the city or
township tax rate in effect on the property for taxes payable in
2005, notwithstanding any law, municipal board order, or
ordinance to the contrary. The limit on the annexing city's
levy under subdivisions 1 and 2 may be increased in excess of
that limit by an amount equal to the net tax capacity of the
property annexed times the city or township tax rate in effect
on that property for taxes payable in 2005. The levy limit of
the city or township from which the property was annexed shall
be reduced by the same amount.
new text end

new text begin Subd. 5. new text end

new text begin School district statutory operating debt
exception. new text end

new text begin A school district that is in statutory operating
debt under Minnesota Statutes, section 123B.81, and has an
approved plan under Minnesota Statutes, section 123B.83 that
includes an increase to its referendum allowance under Minnesota
Statutes, section 126C.17, is exempt from the levy freeze on
referenda according to this section.
new text end

Sec. 6. new text begin FREEZE ON LOCAL MATCH REQUIREMENTS.
new text end

new text begin Notwithstanding any other law to the contrary, the local
funding or local match required from any city, town, or county
for any state grant or program shall not be increased for
calendar year 2006 or any subsequent year prior to the freeze
termination year above the dollar amount of the local funding or
local match required for the same grant or program in 2005,
regardless of the level of state funding provided. Any local
match or local funding requirement that first becomes effective
after December 31, 2005, for new or changed state grants or
programs shall not be effective until the freeze has been
terminated for that taxing jurisdiction under section 16.
Nothing in this section shall affect the eligibility of a city,
town, or county for the receipt of state grants or program funds
in 2006 or any subsequent year prior to the freeze termination
year, or reduce the amount of state funding a city, town, or
county would otherwise receive in 2006 or any subsequent year
prior to the freeze termination year if the local match
requirements of the state grant or program were met in 2005.
new text end

Sec. 7. new text begin SUSPENSION OF SALARY AND BUDGET APPEAL
AUTHORIZATION.
new text end

new text begin After March 1, 2005, no county sheriff may exercise the
authority granted under Minnesota Statutes, section 387.20,
subdivision 7, and no county attorney may exercise the authority
granted under Minnesota Statutes, section 388.18, subdivision 6,
to the extent that the salary or budget increase sought in the
appeal would result in an increase in county expenditures in
calendar year 2006 or any subsequent year prior to the freeze
termination year.
new text end

Sec. 8. new text begin SUSPENSION OF PUBLICATION AND HEARING
REQUIREMENTS.
new text end

new text begin A local taxing authority is not required to comply with the
public advertisement notice of Minnesota Statutes, section
275.065, subdivision 5a, or the public hearing requirement of
Minnesota Statutes, section 275.065, subdivision 6, with respect
to taxes payable in 2006 and any subsequent year prior to the
freeze termination year.
new text end

Sec. 9. new text begin FISCAL DISPARITIES FREEZE.
new text end

new text begin Notwithstanding Minnesota Statutes, section 276A.06,
subdivision 2, paragraph (a), or 473F.08, subdivision 2,
paragraph (a), the amount to be deducted from a governmental
unit's net tax capacity for taxes payable in 2006 and any
subsequent year prior to the freeze termination year under that
clause must equal the amount deducted for taxes payable in
2005. Notwithstanding Minnesota Statutes, section 276A.06,
subdivision 2, paragraph (b), or 473F.08, subdivision 2,
paragraph (b), the amount to be added to a governmental unit's
net tax capacity for taxes payable in 2006 and any subsequent
year prior to the freeze termination year under that clause must
equal the same amount added for taxes payable in 2005.
Notwithstanding Minnesota Statutes, section 276A.06, subdivision
3, or 473F.08, subdivision 3, the areawide portion of the levy
for each governmental unit must be determined using the local
tax rate for the 2003 levy year. Notwithstanding Minnesota
Statutes, section 276A.06, subdivision 7, or 473F.08,
subdivision 6, the portion of commercial-industrial property
within a municipality subject to the areawide tax rate shall be
computed using the amount determined under Minnesota Statutes,
sections 276A.04 and 276A.05, or 473F.06 and 473F.07, for taxes
payable in 2005.
new text end

Sec. 10. new text begin TAX RATE FREEZE; REDUCTION OF LEVY.
new text end

new text begin If in the course of determining local tax rates for taxes
payable in 2006 or any subsequent year prior to the freeze
termination year after reductions for disparity reduction aid
under Minnesota Statutes, section 275.08, subdivisions 1c and
1d, the county auditor finds the local tax rate exceeds that in
effect for taxes payable in 2005, the county auditor shall
reduce the local government's levy so that the local tax rate
does not exceed that in effect for taxes payable in 2005,
adjusted as provided in section 5.
new text end

Sec. 11. new text begin PENSION LIABILITIES.
new text end

new text begin Notwithstanding any other law or charter provision to the
contrary, no levy for taxes payable in 2006 or any subsequent
year prior to the freeze termination year for a local police and
fire relief association for the purpose of amortizing an
unfunded pension liability may exceed the levy for that purpose
for taxes payable in 2005.
new text end

Sec. 12. new text begin DUTIES OF TOWNSHIP BOARD OF SUPERVISORS.
new text end

new text begin Notwithstanding Minnesota Statutes, section 365.10, in 2005
the township board of supervisors shall adjust the levy and in
any subsequent year prior to the freeze termination year, the
township board of supervisors may adjust the expenditures of a
township below the level authorized by the electors to adjust
for any reduction in the previously authorized levy of the
township pursuant to section 5.
new text end

Sec. 13. new text begin PROHIBITION ON NEW OR INCREASED FEES.
new text end

new text begin After March 1, 2005, no municipality as defined in
Minnesota Statutes, section 475.51, or special taxing district
as defined in Minnesota Statutes, section 275.066, and no
executive branch state agency may impose a new fee or increase
the rate or amount of an existing fee. As used in this section,
a fee is any charge for goods, services, regulations, or
licensure, and includes charges for admission to or for use of
public facilities.
new text end

Sec. 14. new text begin REIMBURSEMENT FOR LOCAL PROPERTY TAX AND FEE
INCREASES; APPROPRIATIONS.
new text end

new text begin Subdivision 1. new text end

new text begin Generally. new text end

new text begin On August 1, 2005, the state
must make payments to cities, counties, and school districts to
reimburse them for property tax and fee increases attributable
to reductions in state aids as provided in this subdivision.
new text end

new text begin Subd. 2. new text end

new text begin Cities. new text end

new text begin Each home rule charter and statutory
city shall receive a payment equal to 20 percent of the sum of
the amounts of aids it received under Minnesota Statutes,
section 477A.013, in each of 2004 and 2005 that is less than the
amount of aid the city was certified to receive in 2003 before
reductions pursuant to laws enacted in 2003, provided that the
reimbursement paid under this section may not exceed the sum of
the amounts by which the city's levies for taxes payable in each
of 2004 and 2005 exceeded its levy for taxes payable in 2003.
new text end

new text begin Subd. 3. new text end

new text begin Counties. new text end

new text begin Each county shall receive a payment
equal to 20 percent of the sum of the amounts by which the aid
it was certified to receive under Minnesota Statutes 2002,
sections 273.138; 273.1398, subdivision 2, minus the amount
certified under Minnesota Statutes, section 273.1398,
subdivision 4a, paragraph (b), for counties in Judicial
Districts One, Three, Six, and Ten, and 25 percent of the amount
certified under Minnesota Statutes, section 273.1398,
subdivision 4a, paragraph (b), for counties located in Judicial
Districts Two and Four; 273.166; 477A.0121; and 477A.0122, in
2003 before reductions pursuant to laws enacted in 2003, is less
than the aids it received in each of 2004 and 2005 under
Minnesota Statutes, section 477A.0124, provided that the
reimbursement paid under this section may not exceed the sum of
the amounts by which the county's levies for taxes payable in
each of 2004 and 2005 exceeded its levy for taxes payable in
2003.
new text end

new text begin Subd. 4. new text end

new text begin School districts. new text end

new text begin Each school district shall
receive fee reimbursement revenue for any authorized fees, under
Minnesota Statutes, section 123B.36, that were increased during
fiscal year 2004 and 2005. A school district's fee
reimbursement revenue is equal to the sum of its authorized fees
under Minnesota Statutes, section 123B.36, for each of fiscal
years 2004 and 2005, subtracted from its total authorized fees
for fiscal year 2003, multiplied by .5.
new text end

new text begin Subd. 5. new text end

new text begin Appropriations. new text end

new text begin A sum sufficient to make the
payments required in subdivisions 2 and 3 is appropriated from
the general fund to the commissioner of revenue, who shall make
the payments required under those subdivisions. A sum
sufficient to make the payments required in subdivision 4 is
appropriated from the general fund to the commissioner of
education, who shall make the payments required under that
subdivision.
new text end

Sec. 15. new text begin SAVINGS CLAUSE.
new text end

new text begin Notwithstanding any provision in this act, nothing in this
act constitutes an impairment of any obligations, certificates
of indebtedness, capital notes, or other debt instruments,
including installment purchase contracts or lease purchase
agreements, issued before the date of final enactment of this
act, by a municipality as defined in Minnesota Statutes, section
469.174, subdivision 6; a school district; or a special taxing
district as defined in Minnesota Statutes, section 275.066.
new text end

Sec. 16. new text begin EFFECTIVE DATE; TERMINATION.
new text end

new text begin (a) This act is effective the day following final enactment
and applies to taxes payable in 2006 and subsequent years prior
to the termination date provided in paragraph (b), (c), (d), or
(e) for the taxing jurisdiction described in each of those
paragraphs.
new text end

new text begin (b) For cities, the termination date is the taxes payable
year that is the calendar year when local government aids
payable to cities under Minnesota Statutes, section 477A.013,
are sufficient to fully fund the formula without any reduction
due to the limitation in Minnesota Statutes, section 477A.03.
new text end

new text begin (c) For counties, the termination date is the taxes payable
year when the total amount to be paid to all counties under
Minnesota Statutes, section 477A.0124, exceeds the amount paid
to all counties under Minnesota Statutes 2002, sections 273.138;
273.1398, subdivision 2, minus the amount certified under
Minnesota Statutes, section 273.1398, subdivision 4a, paragraph
(b), for counties in Judicial Districts One, Three, Six, and
Ten, and by 25 percent of the amount certified under Minnesota
Statutes, section 273.1398, subdivision 4a, paragraph (b), for
counties located in Judicial Districts Two and Four; 273.166;
477A.0121; and 477A.0122, increased by the rate of increase in
the annual implicit price deflator for government consumption
expenditures from 2003 to the current year.
new text end

new text begin (d) For school districts, the termination date is the taxes
payable year that is the year in which the state provides a real
state aid inflationary increase to the basic formula allowance
under Minnesota Statutes, section 126C.10, subdivision 2, over
the amount paid in the prior year.
new text end

new text begin (e) For special taxing districts, the termination date is
the 2008 taxes payable year.
new text end