2. Authorizing Excess Levy Distribution to ISD 112.MEMORANDUM
CHANHASSEN
CITY OF c)-
690 COULTER DRIVE • P.O. BOX 147 • CHANHASSEN, MINNESOTA 55317
(612) 937 -1900 • FAX (612) 937 -5739
TO: Mayor and City Council
FROM: Don Ashworth, City Manager
DATE: October 24, 1996
SUBJ: Resolution Authorizing Excess Levy Distribution to ISD 112
The attached Exhibit A provides the background, rationale, and actual method of calculating the
excess levy distribution from the City/HRA to School District 112. The exhibit also commits the
city to make future excess levy distributions for both the previous referendum as well as any
future referendum to the extent that the school district actually does generate those dollars.
Should the city council act to approve Exhibit A as representing the rational and method by
which payments would be made, I will request that the actual form of that approval be a cover
contract which will solely state that Exhibit A governs transfers and that the contract is voided if
changes in state law affect our ability to receive /distribute those dollars and in no case shall the
amount being distributed be higher than what the city actually receives in any one year.
g: \mgr \isd 1 12excesslevy.e
Exhibit A
24- Oct -96
EXCESS LEVY DISTRIBUTION
16:30
TAX INCREMENT REVENUES
FROM: CITY OF CHANHASSEN
TO: ISD 112
TIF
ISD
DIFF
ADUT
ANTIC.
ACT.
BASE
TAX
112 TAX
CURB YR-
TAXES
PYMT
PYMT TO
YEAR
CAP (1)
RATE (2)
BASE YR
GEN.
ISD 112 (3)
ISD 112 (4)
1992 1992
3,695,795
62.658
1993
3,488,337
57.172
-5.486
($191,370)
1994
3,556,465
62.883
0.225
$8,002
1995
3,736,225
71.220
8.562
$319,896
$350,000
$350,000
1996
3,764,225
71.201
8.543
$321,578
$600,000
$600,000
1997
3,764,225
70.000
7.342
$276,369
$276,369
$276,369
1998
3,764,225
70.000
7.342
$276,369
$276,369
$276,369
1999
3,764,225
70.000
7.342
$276,369
$276,369
$276,369
2000
3,764,225
70.000
7.342
$276,369
$276,369
$276,369
NOTES:
1) Although the city and School District 112 agreed to share excess tax increment generated
as a result of the school's referendum of 1992/93, significant disagreement occurred in
1993 -1995 as to how the "excess" would be calculated. During this time frame, the HRA
entered into various "incentive agreements" essentially agreeing to return three years of
"full increment" created by the prospective firms (1995- 2000). All of this occurred during
a time frame of substantial deterioration of the existing base valuations of commercial/
industrial properties. (Fallout of the S & L failures of the late 1980's.) Accordingly, the
total tax capacity, as presented in this agreement, is the base tax capacity of $3,736.225.
The City of Chanhassen will consider increasing this base value to a value between
$3,736,225 and any current value if the total debt obligations incurred prior to July 1, 1996
and administrative costs (defined by state statute) and reimbursement agreements (prior to
July 1, 1996) is less than the tax increment which was actually received by the HRA.
[Note: The calculation in any year that this phenomenon occurs shall be to adjust the "TIF
TAX CAP" column to the current value, but the result of that calculation shall not exceed
the amount of debt, as defined above, incurred prior to July 1, 1996, including
administrative costs and reimbursement agreements.]
2 & 3 The base tax rate prior to the referendum was 62.658. As the school district levies 1
years in advance of receiving property tax receipts, an overpayment was agreed to by the
city, even though the city did not receive the monies in 1995 and 1996 as anticipated in
1992/93. The city, by this agreement, agrees that future capital, operational, or other
increases to the school district's total tax levy shall be governed by this agreement through
L �I��o UPDATE
RECEIVED
JUL 10 RECD UPDATE 1996 -7
CITY OF CHANHASSEN MONDAY, JULY 8
REPRESENTATIVE ANN REST
PRESENTS HER PROPERTY TAX REFORM PROPOSAL TO
THE MLC OPERATING COMMITTEE
Representative Ann Rest (DFL -New Hope), Chair of the House Tax Committee,
presented her ideas for property tax and school funding reform to the MLC
Operating Committee on May 28. She spoke with the committee for more than
one hour, highlighting the major components of her plan. The primary provisions
of Representative Rest's proposal include the following:
Simplify local property tax class rates. The ratio of the
class rate for lower tier homes to commercial properties
would be reduced from 4.6:1 to 2:1. The total number of
class rates would be as follows:
- 0.5% for agricultural property
- 1% for homes and 1 to 3 unit rental properties
- 1.5% for apartment buildings with 4 or more units
- 2% for commercial- industrial properties
The state would levy an education property tax, at a rate
of 2.2 %, on commercial industrial properties over
$60,000; rental housing; residential homes valued at
more than $115,000; and seasonal recreational
properties.
The 6.5% sales tax would be expanded to include
clothing.
The expanded sales tax and state imposed education
property tax would enable the state to fully fund general
education expenses. In lieu of referendum levies that
increase property taxes, school districts could raise
additional operating revenues to be used for
discretionary programs by imposing local income
taxes - if approved by voters.
The MLC Update is prepared by Robert G. Renner, Jr. and Jennifer J. Peterson
Messerli & Kramer P.A., 145 University Avenue West, Suite 450, St. Paul, MN 55103
Telephone (612) 228.9757 Fax (612) 228 -9787
the year 2000 so as to ensure that excess tax increment (current and future) is returned to
the school district. [Note: a) The amounts overpaid by the city to ISD 112 will be repaid
to the city from future excess levy calculations as a result of a future referendum; and
b) The resolution adopting this worksheet as to the city's ability to make payments to ISD
112 shall override calculations presented here as it would relate to changes in state law
regarding calculation of taxes, tax increment received by the city/HRA, calculation of tax
capacity rates or tax capacity, etc.]
4) The "Act Pymt to ISD 112" shall be adjusted each year to represent the "TIF TAX CAP"
(as referred to above) times the difference between the current total tax rate and the base
year tax rate. Stipulations described in 1 -3 above, shall apply.
g: \mgr \isd 1121evy.
State aid formulas for cities and counties would be re-
worked based on need. LGA "grandfathers" would be
phased out, and HACA would be eliminated.
A state fund would be created for the purpose of
ensuring that cities could meet their outstanding TIF
obligations.
The property tax refund program (circuit breaker) would
receive additional funding, and the limited market value
law would be extended.
If you would like more detailed information on this proposal, please contact
Jennifer Peterson at 228 -9757 and materials will be mailed to you.
MINNESOTA TAXPAYERS ASSOCIATION
RELEASES PROPERTY TAX STUDY
A study released on June 25 by the Minnesota Taxpayers Association (MTA)
ranked Minnesota as the state with the highest property taxes in the nation for
higher - valued commercial property, and second - highest for large apartment
buildings. The study also showed that higher - valued cabins rank number one in a
comparison of rural areas in the fifty states.
Property taxes paid by Minnesota homeowners for the first $70,000 of value are
12% below the U.S. average, while a home valued at $150,000 is taxed at a rate
that is 24% above the national average. Residential property taxes for these
values are ranked 27th and 14th respectively. Homes between $350,000 and $1
million are ranked 9th in the nation.
By comparing property taxes to personal income, the MTA study also showed that
Minnesota's overall property taxes collected per $1,000 of personal income rank
16th in the nation.
The MTA stated that the results of this study illustrate an extreme disparity in
property taxes paid by the many different property classifications. The study also
showed that, as a percentage of its market value, a high- valued business in
Minnesota pays 366% more than a lower - valued home. The MTA contends that
this disparity is ultimately paid for in the form of higher consumer prices, lower
worker wages, and lower investment returns.
Prior to release of the study, the MTA released a property tax reform proposal
that was aimed at "reducing the rate of growth in local spending and property
taxes by unmasking the true cost of local government." The MTA hopes that the
legislature will utilize the MTA study and property tax reform proposal as tools
when revamping the property tax system.
Many observers believe that the 1997 Legislature may seriously consider property
tax reform measures, although many legislators have publicly stated that the
governor will need to assume a leadership role in this proposition. The MLC will
be actively involved in the legislative process to reform property taxes.
If you would like a copy of the complete MTA property tax study, please call
Jennifer Peterson at 228 -9757.
METROPOLITAN COUNCIL PRESENTS
GROWTH OPTIONS REPORT TO
THE MLC OPERATING COMMITTEE
John Carey delivered a presentation on the Metropolitan Council's study of
Growth Options MLC Operating Committee on June 18. The Metropolitan
Council has been meeting with various community leaders this summer in order to
set a plan for future metropolitan growth. The growth options report released
earlier this year was summarized in the February 5 MLC Update.
Carey's discussion was an overview of the challenges a rapidly expanding
metropolitan area can present for community leaders and planners. He explained
in detail the demands placed upon the transportation system by urban sprawl
outside the metropolitan area boundaries. Carey explained to the Operating
Committee that the Metropolitan Council will be holding several outreach
meetings during June. The Council plans to recommend a growth options plan
later this summer, and present this recommendation to the 1997 Legislature.
1996 LOCAL AND LEGISLATIVE ELECTIONS UPDATE
At the end of the legislative session, we reported to you all 201 legislators are up
for re- election in 1996, but that many had announced they were leaving office.
Since the April MLC Update the number of retiring legislators has grown from 16
to 23. The legislators listed below have announced they will not be seeking re-
election for their current seats. Of the 23, only Steve Kelley (DFL- Hopkins) is
retiring from the House to run for an open Senate seat in this fall's election.
SENATORS:
Kevin Chandler (DFL -White Bear Lake) Gene Merriam (DFL -Coon Rapids)
Harold "Skip" Finn (DFL -Cass Lake) Ted Mondale (DFL -St. Louis Park)
Terry Johnston (R -Prior Lake) Phil Riveness (DFL - Bloomington)
Carl Kroening (DFL - Minneapolis)
REPRESENTATIVES:
Jeff Bertram (DFL - Paynesville)
Chuck Brown (DFL- Appleton)
Roger Cooper (DFL -Bird Island)
Marvin Dauner (DFL- Hawley)
Jim Girard (R -Lynd)
Bob Johnson (DFL - Bemidji)
Steve Kelley (DFL - Hopkins)
Virgil Johnson (R- Caledonia)
Teresa Lynch (R- Andover)
Tony Onnen (R- Cokato)
Howard Orenstein (DFL -St. Paul)
Don Ostrom (DFL -St. Peter)
Walter Perlt (DFL - Woodbury)
Jim Rice (DFL - Minneapolis)
John Sarna (DFL - Minneapolis)
Gary Worke (R- Waseca)
There will also be a number of local elections taking place this year within our
MLC communities. Bloomington, Lakeville, Maplewood, Minnetonka and
Roseville have no council or mayoral races in 1996. In the remaining 7 MLC
communities, the seats held by the following councilmembers and mayors are on
the ballot this fall:
Apple Valley
Eagan
Eden Prairie
Gary Humphrey
Tom Goodwin
Edina
Mayor Fred Richards
Peggy Kelly
Jane Paulus
Woodbury
Nancy Remakel
Lee Slagter
Shawn Hunter
Sandy Masin
Plymouth
Mayor Joy Tierney
David Anderson
Nicholas Granath
Chuck Lymangood
Ross Thorfinnson
Patricia Pidcock
Shoreview
Mayor James Chalmers
Jim Olson
Ben Withhart
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