1.1 	A bill for an act
1.2 	relating to taxation; prohibiting increases in
1.3 	property tax rates for taxes payable in 2006 and
1.4 	certain subsequent years; prohibiting increases in
1.5 	local government and state fees; providing
1.6 	reimbursement to local governments for certain
1.7 	property tax and fee increases; appropriating money.
1.8 	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

1.9 	Section 1. CITATION.
 1.10 	This act may be cited as the "Truth and Fairness in
1.11 	Taxation Act" (TAFTA) or the "State/Local Fiscal Relations:
1.12 	Truth in Taxation Act." 

1.13 	Sec. 2. STATEMENT OF PURPOSE.
 1.14 	The legislature finds that the state of Minnesota is
1.15 	continuing to experience a persistent budget deficit and that
1.16 	reductions in state spending have resulted in increased burdens
1.17 	on school districts, counties, cities, and other units of local
1.18 	government.  In order to recognize the implications of
1.19 	addressing the state budget deficit without increasing tax
1.20 	rates, and to maintain stability in state and local fiscal
1.21 	relations, the purpose of this act is to prevent property tax
1.22 	rate increases and to illuminate the impact of reductions in
1.23 	revenue to school districts, counties, cities, and other units
1.24 	of local government.

1.25 	Sec. 3. BENEFIT RATIO FOR RURAL SERVICE DISTRICTS.
 1.26 	Notwithstanding Minnesota Statutes, section 272.67,
2.1 	subdivision 6, the benefit ratio used for apportioning levies to
2.2 	a rural service district for taxes payable in 2006 and any
2.3 	subsequent year prior to the freeze termination year must not be
2.4 	greater than that in effect for taxes payable in 2005.

2.5 	Sec. 4. PROHIBITION AGAINST INCURRING NEW DEBT.
 2.6 		Subdivision 1.Actions prohibited. After May 31, 2005,
2.7 	no municipality as defined in Minnesota Statutes, section
2.8 	475.51, or any special taxing district as defined in Minnesota
2.9 	Statutes, section 275.066, may sell obligations, certificates of
2.10 	indebtedness, or capital notes under Minnesota Statutes, section
2.11 	412.301, chapter 475, or any other law authorizing obligations,
2.12 	certificates of indebtedness, capital notes, or other debt
2.13 	instruments, or enter into installment purchase contracts or
2.14 	lease purchase agreements under Minnesota Statutes, section
2.15 	465.71, or any other law authorizing installment purchase
2.16 	contracts or lease purchase agreements, if issuing those debt
2.17 	instruments or entering into those contracts would require a
2.18 	levy first becoming payable in 2006 or any subsequent year prior
2.19 	to the freeze termination year.
2.20 		Subd. 2.Exceptions. This prohibition does not apply to:
2.21 	(1) refunding bonds sold to refund bonds originally sold
2.22 	before June 1, 2005;
2.23 	(2) obligations for which the amount of the levy first
2.24 	becoming due in 2006 would not exceed the amount by which the
2.25 	municipality's total debt service levy for taxes payable in 2006
2.26 	prior to issuance of those obligations is less than the
2.27 	municipality's total debt service levy for taxes payable in
2.28 	2005; or 
2.29 	(3) obligations with respect to which the municipality
2.30 	makes a finding at the time of the issuance of the obligations
2.31 	that no levy will be required for taxes payable in 2006 or any
2.32 	subsequent year prior to the freeze termination year or to pay
2.33 	the debt service on the obligations because sufficient funds are
2.34 	available from nonproperty tax sources to pay the debt service.
2.35 	As used in clauses (2) and (3), "obligations" includes
2.36 	certificates of indebtedness, capital notes, or other debt
3.1 	instruments or installment purchase contracts or lease purchase
3.2 	agreements.
3.3 		Subd. 3.Date when bonds are deemed sold. For purposes
3.4 	of this section, bonds will be deemed to have been sold before
3.5 	June 1, 2005, if:
3.6 	(1) an agreement has been entered into between the
3.7 	municipality and a purchaser or underwriter for the sale of the
3.8 	bonds by that date;
3.9 	(2) the issuing municipality is a party to a contract or
3.10 	letter of understanding entered into before June 1, 2005, with
3.11 	the federal government or the state government that requires the
3.12 	municipality to pay for a project, and the project will be
3.13 	funded with the proceeds of the bonds; or 
3.14 	(3) the proceeds of the bonds will be used to fund a
3.15 	project or acquisition with respect to which the municipality
3.16 	has entered into a contract with a builder or supplier before
3.17 	June 1, 2005.

3.18 	Sec. 5. LEVY LIMITATION FOR TAXES PAYABLE IN 2006 AND
3.19 	SUBSEQUENT YEARS.
 3.20 		Subdivision 1.Proposed levy. Notwithstanding any other
3.21 	law to the contrary, for purposes of the certification required
3.22 	by Minnesota Statutes, section 275.065, subdivision 1, in 2005
3.23 	and any subsequent year prior to the freeze termination year, no
3.24 	taxing authority shall certify to the county auditor a proposed
3.25 	property tax levy or, in the case of a township, a final
3.26 	property tax levy, greater than the levy certified to the county
3.27 	auditor pursuant to Minnesota Statutes, section 275.07,
3.28 	subdivision 1, in the prior year, except as provided in this
3.29 	section.
3.30 		Subd. 2.Final levy. Notwithstanding any other law to
3.31 	the contrary, for purposes of the certification required by
3.32 	Minnesota Statutes, section 275.07, subdivision 1, in 2005 and
3.33 	any subsequent year prior to the freeze termination year, no
3.34 	taxing authority shall certify to the county auditor a property
3.35 	tax levy greater than the amount certified to the county auditor
3.36 	pursuant to Minnesota Statutes, section 275.07, subdivision 1,
4.1 	in the prior year, except as provided in this section.
4.2 		Subd. 3.Debt service exception. If a levy for taxes
4.3 	payable in 2006 or any subsequent year prior to the freeze
4.4 	termination year, for debt service on obligations, certificates
4.5 	of indebtedness, capital notes, or other debt instruments sold
4.6 	prior to June 1, 2005, or to make payments on installment
4.7 	purchase contracts or lease purchase agreements entered into
4.8 	prior to June 1, 2005, exceeds the levy a taxing authority
4.9 	certified pursuant to Minnesota Statutes, section 275.07,
4.10 	subdivision 1, for taxes payable in 2005 for the same purpose,
4.11 	the excess may be levied notwithstanding the limitations of
4.12 	subdivisions 1 and 2.
4.13 		Subd. 4.Annexation exception. The city tax rate for
4.14 	taxes payable in 2006 or any subsequent year prior to the freeze
4.15 	termination year on any property annexed under Minnesota
4.16 	Statutes, chapter 414, may not be increased over the city or
4.17 	township tax rate in effect on the property for taxes payable in
4.18 	2005, notwithstanding any law, municipal board order, or
4.19 	ordinance to the contrary.  The limit on the annexing city's
4.20 	levy under subdivisions 1 and 2 may be increased in excess of
4.21 	that limit by an amount equal to the net tax capacity of the
4.22 	property annexed times the city or township tax rate in effect
4.23 	on that property for taxes payable in 2005.  The levy limit of
4.24 	the city or township from which the property was annexed shall
4.25 	be reduced by the same amount.
4.26 		Subd. 5.School district statutory operating debt
4.27 	exception. A school district that is in statutory operating
4.28 	debt under Minnesota Statutes, section 123B.81, and has an
4.29 	approved plan under Minnesota Statutes, section 123B.83 that
4.30 	includes an increase to its referendum allowance under Minnesota
4.31 	Statutes, section 126C.17, is exempt from the levy freeze on
4.32 	referenda according to this section.

4.33 	Sec. 6. FREEZE ON LOCAL MATCH REQUIREMENTS.
 4.34 	Notwithstanding any other law to the contrary, the local
4.35 	funding or local match required from any city, town, or county
4.36 	for any state grant or program shall not be increased for
5.1 	calendar year 2006 or any subsequent year prior to the freeze
5.2 	termination year above the dollar amount of the local funding or
5.3 	local match required for the same grant or program in 2005,
5.4 	regardless of the level of state funding provided.  Any local
5.5 	match or local funding requirement that first becomes effective
5.6 	after December 31, 2005, for new or changed state grants or
5.7 	programs shall not be effective until the freeze has been
5.8 	terminated for that taxing jurisdiction under section 16.
5.9 	Nothing in this section shall affect the eligibility of a city,
5.10 	town, or county for the receipt of state grants or program funds
5.11 	in 2006 or any subsequent year prior to the freeze termination
5.12 	year, or reduce the amount of state funding a city, town, or
5.13 	county would otherwise receive in 2006 or any subsequent year
5.14 	prior to the freeze termination year if the local match
5.15 	requirements of the state grant or program were met in 2005.

5.16 	Sec. 7. SUSPENSION OF SALARY AND BUDGET APPEAL
5.17 	AUTHORIZATION.
 5.18 	After March 1, 2005, no county sheriff may exercise the
5.19 	authority granted under Minnesota Statutes, section 387.20,
5.20 	subdivision 7, and no county attorney may exercise the authority
5.21 	granted under Minnesota Statutes, section 388.18, subdivision 6,
5.22 	to the extent that the salary or budget increase sought in the
5.23 	appeal would result in an increase in county expenditures in
5.24 	calendar year 2006 or any subsequent year prior to the freeze
5.25 	termination year.

5.26 	Sec. 8. SUSPENSION OF PUBLICATION AND HEARING
5.27 	REQUIREMENTS.
 5.28 	A local taxing authority is not required to comply with the
5.29 	public advertisement notice of Minnesota Statutes, section
5.30 	275.065, subdivision 5a, or the public hearing requirement of
5.31 	Minnesota Statutes, section 275.065, subdivision 6, with respect
5.32 	to taxes payable in 2006 and any subsequent year prior to the
5.33 	freeze termination year.

5.34 	Sec. 9. FISCAL DISPARITIES FREEZE.
 5.35 	Notwithstanding Minnesota Statutes, section 276A.06,
5.36 	subdivision 2, paragraph (a), or 473F.08, subdivision 2,
6.1 	paragraph (a), the amount to be deducted from a governmental
6.2 	unit's net tax capacity for taxes payable in 2006 and any
6.3 	subsequent year prior to the freeze termination year under that
6.4 	clause must equal the amount deducted for taxes payable in
6.5 	2005.  Notwithstanding Minnesota Statutes, section 276A.06,
6.6 	subdivision 2, paragraph (b), or 473F.08, subdivision 2,
6.7 	paragraph (b), the amount to be added to a governmental unit's
6.8 	net tax capacity for taxes payable in 2006 and any subsequent
6.9 	year prior to the freeze termination year under that clause must
6.10 	equal the same amount added for taxes payable in 2005.
6.11 	Notwithstanding Minnesota Statutes, section 276A.06, subdivision
6.12 	3, or 473F.08, subdivision 3, the areawide portion of the levy
6.13 	for each governmental unit must be determined using the local
6.14 	tax rate for the 2003 levy year.  Notwithstanding Minnesota
6.15 	Statutes, section 276A.06, subdivision 7, or 473F.08,
6.16 	subdivision 6, the portion of commercial-industrial property
6.17 	within a municipality subject to the areawide tax rate shall be
6.18 	computed using the amount determined under Minnesota Statutes,
6.19 	sections 276A.04 and 276A.05, or 473F.06 and 473F.07, for taxes
6.20 	payable in 2005.

6.21 	Sec. 10. TAX RATE FREEZE; REDUCTION OF LEVY.
 6.22 	If in the course of determining local tax rates for taxes
6.23 	payable in 2006 or any subsequent year prior to the freeze
6.24 	termination year after reductions for disparity reduction aid
6.25 	under Minnesota Statutes, section 275.08, subdivisions 1c and
6.26 	1d, the county auditor finds the local tax rate exceeds that in
6.27 	effect for taxes payable in 2005, the county auditor shall
6.28 	reduce the local government's levy so that the local tax rate
6.29 	does not exceed that in effect for taxes payable in 2005,
6.30 	adjusted as provided in section 5.

6.31 	Sec. 11. PENSION LIABILITIES.
 6.32 	Notwithstanding any other law or charter provision to the
6.33 	contrary, no levy for taxes payable in 2006 or any subsequent
6.34 	year prior to the freeze termination year for a local police and
6.35 	fire relief association for the purpose of amortizing an
6.36 	unfunded pension liability may exceed the levy for that purpose
7.1 	for taxes payable in 2005.

7.2 	Sec. 12. DUTIES OF TOWNSHIP BOARD OF SUPERVISORS.
 7.3 	Notwithstanding Minnesota Statutes, section 365.10, in 2005
7.4 	the township board of supervisors shall adjust the levy and in
7.5 	any subsequent year prior to the freeze termination year, the
7.6 	township board of supervisors may adjust the expenditures of a
7.7 	township below the level authorized by the electors to adjust
7.8 	for any reduction in the previously authorized levy of the
7.9 	township pursuant to section 5.

7.10 	Sec. 13. PROHIBITION ON NEW OR INCREASED FEES.
 7.11 	After March 1, 2005, no municipality as defined in
7.12 	Minnesota Statutes, section 475.51, or special taxing district
7.13 	as defined in Minnesota Statutes, section 275.066, and no
7.14 	executive branch state agency may impose a new fee or increase
7.15 	the rate or amount of an existing fee.  As used in this section,
7.16 	a fee is any charge for goods, services, regulations, or
7.17 	licensure, and includes charges for admission to or for use of
7.18 	public facilities.

7.19 	Sec. 14. REIMBURSEMENT FOR LOCAL PROPERTY TAX AND FEE
7.20 	INCREASES; APPROPRIATIONS.
 7.21 		Subdivision 1.Generally. On August 1, 2005, the state
7.22 	must make payments to cities, counties, and school districts to
7.23 	reimburse them for property tax and fee increases attributable
7.24 	to reductions in state aids as provided in this subdivision.
7.25 		Subd. 2.Cities. Each home rule charter and statutory
7.26 	city shall receive a payment equal to 20 percent of the sum of
7.27 	the amounts of aids it received under Minnesota Statutes,
7.28 	section 477A.013, in each of 2004 and 2005 that is less than the
7.29 	amount of aid the city was certified to receive in 2003 before
7.30 	reductions pursuant to laws enacted in 2003, provided that the
7.31 	reimbursement paid under this section may not exceed the sum of
7.32 	the amounts by which the city's levies for taxes payable in each
7.33 	of 2004 and 2005 exceeded its levy for taxes payable in 2003.
7.34 		Subd. 3.Counties. Each county shall receive a payment
7.35 	equal to 20 percent of the sum of the amounts by which the aid
7.36 	it was certified to receive under Minnesota Statutes 2002,
8.1 	sections 273.138; 273.1398, subdivision 2, minus the amount
8.2 	certified under Minnesota Statutes, section 273.1398,
8.3 	subdivision 4a, paragraph (b), for counties in Judicial
8.4 	Districts One, Three, Six, and Ten, and 25 percent of the amount
8.5 	certified under Minnesota Statutes, section 273.1398,
8.6 	subdivision 4a, paragraph (b), for counties located in Judicial
8.7 	Districts Two and Four; 273.166; 477A.0121; and 477A.0122, in
8.8 	2003 before reductions pursuant to laws enacted in 2003, is less
8.9 	than the aids it received in each of 2004 and 2005 under
8.10 	Minnesota Statutes, section 477A.0124, provided that the
8.11 	reimbursement paid under this section may not exceed the sum of
8.12 	the amounts by which the county's levies for taxes payable in
8.13 	each of 2004 and 2005 exceeded its levy for taxes payable in
8.14 	2003.
8.15 		Subd. 4.School districts. Each school district shall
8.16 	receive fee reimbursement revenue for any authorized fees, under
8.17 	Minnesota Statutes, section 123B.36, that were increased during
8.18 	fiscal year 2004 and 2005.  A school district's fee
8.19 	reimbursement revenue is equal to the sum of its authorized fees
8.20 	under Minnesota Statutes, section 123B.36, for each of fiscal
8.21 	years 2004 and 2005, subtracted from its total authorized fees
8.22 	for fiscal year 2003, multiplied by .5.
8.23 		Subd. 5.Appropriations. A sum sufficient to make the
8.24 	payments required in subdivisions 2 and 3 is appropriated from
8.25 	the general fund to the commissioner of revenue, who shall make
8.26 	the payments required under those subdivisions.  A sum
8.27 	sufficient to make the payments required in subdivision 4 is
8.28 	appropriated from the general fund to the commissioner of
8.29 	education, who shall make the payments required under that
8.30 	subdivision.

8.31 	Sec. 15. SAVINGS CLAUSE.
 8.32 	Notwithstanding any provision in this act, nothing in this
8.33 	act constitutes an impairment of any obligations, certificates
8.34 	of indebtedness, capital notes, or other debt instruments,
8.35 	including installment purchase contracts or lease purchase
8.36 	agreements, issued before the date of final enactment of this
9.1 	act, by a municipality as defined in Minnesota Statutes, section
9.2 	469.174, subdivision 6; a school district; or a special taxing
9.3 	district as defined in Minnesota Statutes, section 275.066.

9.4 	Sec. 16. EFFECTIVE DATE; TERMINATION.
 9.5 	(a) This act is effective the day following final enactment
9.6 	and applies to taxes payable in 2006 and subsequent years prior
9.7 	to the termination date provided in paragraph (b), (c), (d), or
9.8 	(e) for the taxing jurisdiction described in each of those
9.9 	paragraphs.
9.10 	(b) For cities, the termination date is the taxes payable
9.11 	year that is the calendar year when local government aids
9.12 	payable to cities under Minnesota Statutes, section 477A.013,
9.13 	are sufficient to fully fund the formula without any reduction
9.14 	due to the limitation in Minnesota Statutes, section 477A.03.
9.15 	(c) For counties, the termination date is the taxes payable
9.16 	year when the total amount to be paid to all counties under
9.17 	Minnesota Statutes, section 477A.0124, exceeds the amount paid
9.18 	to all counties under Minnesota Statutes 2002, sections 273.138;
9.19 	273.1398, subdivision 2, minus the amount certified under
9.20 	Minnesota Statutes, section 273.1398, subdivision 4a, paragraph
9.21 	(b), for counties in Judicial Districts One, Three, Six, and
9.22 	Ten, and by 25 percent of the amount certified under Minnesota
9.23 	Statutes, section 273.1398, subdivision 4a, paragraph (b), for
9.24 	counties located in Judicial Districts Two and Four; 273.166;
9.25 	477A.0121; and 477A.0122, increased by the rate of increase in
9.26 	the annual implicit price deflator for government consumption
9.27 	expenditures from 2003 to the current year.
9.28 	(d) For school districts, the termination date is the taxes
9.29 	payable year that is the year in which the state provides a real
9.30 	state aid inflationary increase to the basic formula allowance
9.31 	under Minnesota Statutes, section 126C.10, subdivision 2, over
9.32 	the amount paid in the prior year.
9.33 	(e) For special taxing districts, the termination date is
9.34 	the 2008 taxes payable year.