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City Council - 12/15/1998 - Workshop APPROVED MINUTES EDEN PRAIRIE CITY COUNCIL/STAFF WORKSHOP LEGISLATIVE ORGANIZATIONAL REVIEW TUESDAY,DECEMBER 15, 1998 5:00-6:30 P.M., CITY CENTER Heritage Room H 8080 Mitchell Road CITY COUNCIL: Mayor Jean Harris, Sherry Butcher- Younghans,Ronald Case,Ross Thorfinnson,Jr., and Nancy Tyra- Lukens CITY STAFF: City Manager Chris Enger,Public Safety Services Director Jim Clark,Parks & Recreation Services Director Bob Lambert,Public Works Services Director Eugene Dietz, Community Development and Financial Services Director Don Uram,Management Services Director Natalie Swaggert, City Attorney Roger Pauly, City Assessor Steve Sinell, and Recorder Dave Hix I. CALL MEETING TO ORDER Mayor Harris called the meeting to order at 5:14 p.m. II. INTRODUCTION- CHRIS ENGER Enger introduced Bob Renner,representative of the Municipal Legislative Commission (MLC). MLC, organized in December of 1983, is comprised of a number of cities who came out on the loosing end of state aid when the Local Government Aid Formula was revised. Communities like Bloomington, Eden Prairie, and Edina lost substantial amounts of state funding because the legislature redid the formula and instituted a formula that was based on"tax capacity." Communities that had"tax capacity," i.e. property wealth, ended up getting fewer and fewer dollars from the state. The MLC, made up of 13 communities,banded together to make sure that these "tax capacity" cities would have a voice in state government. In order to be a member of the MLC a candidate must abide by three of four criteria. The four criteria are: 1. Faster growing populations than the average in the region 2. Greater than average per capita market value(tax capacity) 3. Little or no local government aid CITY COUNCIL/STAFF WORKSHOP December 15, 1998 Page 2 4. Above average population sizes (20-25,000 and up),third tier suburbs (Eden Prairie,Edina,Minnetonka,Plymouth,Bloomington, Woodbury, Lakeville,Apple Valley, Egan,Burnsville, Shoreview,Roseville and Maplewood) Renner noted, of the$373 million in state transfer payments made to Minnesota cities, MLC cities received only$2 million, even though they comprise at least one-eighth of the state's population. MLC cities are also members of the AMM,with the exception of Shoreview. The AMM gets involved in metropolitan governance, tracking of Metropolitan Council activities, take issue with as to whether or not the Metropolitan Council should be elected or appointed, and how the Council should be made up. They represent city groups (city interests) at the Met Council when the Met Council is taking about MUSA lines, comprehensive plans, affordable housing, and regional issues. MLC has consolidated its focus into tax and transfer payment issues. The League of Cities,numbering 816,provides city insurance through the League Trust. The League of Cities also has a legal research arm,they have a significant publication effort(bulletins,magazines, legislative alerts,broadcast facts, etc.), and they are part of the National League of Cities. This coming legislative session the League of Cities,AMM, and the MLC will all share the common goal of trying to get a repeal of the sales tax on local purchases. The sales tax was established in 1991 to help solve a stated budget problem. The tax raises approximately$90 million a year,which is returned to the cities via the transfer payment, of which MLC cities receive very little. It appears that the new Republican majority in the House is going to be willing to put the tax repeal request in its budget. Another goal of the League of Cities,AMM, and MLC will be to make sure that the levy limit that was authorized two years ago, and is supposed to sunset after pay 1999 property taxes, actually is repealed. Enger asked if levy limits were working in the way that had been intended by the state. Renner said they only work if there are a lot of complaints about property taxes. Currently, the property tax issue isn't the hot button that it once was, so levy limits probably will be lifted. Harris said it seemed to her that levy limits were set as a political decision. Renner said the state provided property tax relief by implementing the Homestead Education Credit. The argument was if property taxes dropped the cities would go running in and make up the reduction through an increase in tax levy. In turn,the legislators wouldn't get any credit for the property tax reform. There is a great distrust between the legislature and the cities,Renner noted. Sinell asked if there was enough of a State budget surplus to fund a flat-rate tax, similar to the education homestead credit. Renner said he has not heard that because the CITY COUNCIL/STAFF WORKSHOP December 15, 1998 Page 3 emphasis is being shifted away from property tax. Income and sales tax are the new legislative initiatives,he said. Renner said there had been a very dramatic "power shift" in the House. Currently there are 28 Chair positions. Of those positions,20 members represent suburban communities, and 13 of those positions are representatives of MLC cities. The MLC will argue this year that the Local Government Aid(LGA) formula should have a minimum per capita guarantee because all cities contribute significant sums of money in income and sales tax. There should be some kind of a minimum guarantee for every community that could be based on a percent of basic services,Renner said. The MLC's position is that$25 per capita,minimum, should come back to a community in LGA. Renner said another strongly held MLC belief is that no community should pay more than 15 percent of its tax capacity. If a city is paying more than 15 percent,the contribution would be frozen until the tax capacity catches up and then contributions would begin again. Under this scenario fiscal disparities would not be cut, its's just that the"pool" wouldn't grow as fast. Most of the MLC communities are in the 18-21 percent range. The MLC would also like to see the legislature pass a law that would allow a city to capture growth in fiscal disparities,based on inflation and not new construction, and keep that growth. Enger noted it would be indexed; inflation would be taken out of the formula. Renner said the city would be able to keep the money and spend it on projects that the community wanted to spend it on,with the exception of general government. The funds would not be shared,he said. Renner noted Representative Orfield is also in favor of expanding fiscal disparities to residences. This proposal goes directly to the MLC communities. Representative Orfield wants to capture 40 percent of the market value over$150,000,put the funds in a pool and redistribute the funds the way funds are redistributed for commercial and industrial property. Case asked how redistricting would effect the potential to keep the political change pattern going. Renner said it all depends on Ventura's recruiting efforts and whether or not he helps third party candidates in the year 2000. Lambert said he hadn't talked to a lot of people who were in favor of getting a tax break back. The consensus is the money is gone. If the state has the money to do infrastructure projects why don't they do it. "Is it just because Jesse has said, 'I'm going to give this money back?"' Renner agreed and said now would be the time to put a gas tax on because in real dollars, according to the newspapers, gas is cheaper than at any time since the 1920s. Enger asked if the use of TIF could be directed toward regional goods. Renner said it has been tough over the past two years dealing with TIF issues because of the makeup of the legislature. There is an anti-TIF sentiment in the House and efforts have been made to make sure that TIF programs do not get expanded. MLC efforts in regard to TIF has been CITY COUNCIL/STAFF WORKSHOP December 15, 1998 Page 4 to limit the number of restrictions that the legislature puts on them. Renner told the Council and staff that last year the legislature had authorized 13 cities to levy local sales taxes. They are authorized for infrastructure and capital projects. The levies are limited to .005 cent and do carry sunset dates as part of the authorization. The levy also had to be authorized by a referendum of the people. The MLC is on record this year as trying to get this tax authorization expanded so that any community can levy a sales tax. This would be a state-wide bill giving all communities,by resolution of the city council and referendum of the people,the ability to have a sales tax,not to be used for general government operations. Tyra-Lukens asked Renner to comment on possible transportation issues involving the MLC. Renner said that taxes, education, and crime used to be the main issues on people's minds. Now transportation has become a major concern with the state's politicians. Over the next 20 years the metropolitan area will need$15 billion to build and maintain the area's roads. This would require a 67 cent gas tax, "and therein lies the rub," Renner said. He said the legislature is reluctant to raise the gas tax. IV. GENERAL DISCUSSION ON POSSIBLE LEGISLATION AFFECTING OR TO BE PROPOSED BY EDEN PRAIRIE V. OTHER BUSINESS VI. ADJOURNMENT Mayor Harris adjourned the meeting at 6:35 p.m.