8.0. SR 07-26-1993
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rill River
ITEM 8.
TO:
FROM:
MAYOR & CITY COUNCIL (
LORI JOHNSON, FINANCE DIRECTOR ~~
DATE: JULY 22, 1993
SUBJECT: URBAN/RURAL TAX RATIO ORDINANCE
AMENDMENT
A public hearing has been called for 7:00 on Monday to discuss
a proposed ordinance amendment which would change the benefit
ratio of the urban and rural taxing districts. The current
ratio is .6 and the published ordinance amendment stated the
ratio at .9. The published ordinance can be changed to any
ratio the Council feels appropriate.
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As background information, this issue came up last fall during
payable 1993 tax calculations due to the wrong classification
of commercial/industrial properties by the County. There were
numerous commercial/industrial parcels which should have been
included in the urban district, but were improperly included in
the rural district. When the County corrected the error, the
taxpayers in the rural taxing district experienced a relatively
large decrease in the tax rate for taxes payable for 1993.
Previous to that time, the difference between the urban and
rural tax rate had been minimal, between 2.4 to 3.2 points. In
1993, the difference was 7.438 points.
YEAR URBAN RURAL DIFFERENCE
------ -------- -------- ----------
1993 20.560% 13.122% 7.438
1992 19.742 17.102 2.640
1991 20.690 18.276 2.414
1990 22.620 19.389 3.231
Note: Taxes decreased from 1990 to 1992; the 1993 rates
would have also shown a decrease from 1992 had we had time
to correct the situation caused by the classification
error.
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In an effort to maintain continuity between the difference in
the urban and rural taxing districts, the ratio needs to be
changed from .6 to approximately .85. In addition to adjusting
the ratio for 1994 taxes, the ordinance can be worded to
include benefit ratio changes for future tax years. The
benefit ratio change could be phased in whereby it changes to
.85 in 1993, .90 in 1995, .95 in 1997, and 1 in 1999, for
example. This would eliminate the need to go through this
process for future changes.
I have calculated the urban and rural tax rates based on a
ratio of .80, .85, .90, .95, and 1. Each of these calculations
P.O. Box 490 · 13065 Orono Parkway · Elk River, MN 55330 · (612) 441-7420 · Fax: (612) 441-7425
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was made using 1993 property tax and levy numbers. However,
when comparisons are made to past years, they should be made to
1992 tax rates instead of 1993 tax rates. As I stated earlier,
the 1993 rates are not consistent with the past due to a
classification error which was corrected in 1993. The
following table indicates what the 1993 tax rates would have
been based on the various benefit ratios.
BENEFIT RATIO URBAN RURAL DIFFERENCE
------------- ----- ------ ----------
.80 20.165 16.432 3.733
.85 20.070 17.237 2.833
.90 19.975 18.034 1. 941
.95 19.882 18.822 1. 060
1. 19.790 19.603 .187
Note: Because the 1977 G.O. Refunding Levy is split 58%
to the urban district and 42% to both the urban and rural
districts, an equal benefit ratio does not equate to an
equal tax rate. The final levy for the 1977 refunding
issue is for taxes payable in 1996 after which a ratio of
1 would provide for equal tax rates for the rural and
urban districts.
A benefit ratio of .85 would bring the urban and rural taxing
rates within 2.833 points which is slightly larger than the
difference in the 1992 rates. A ratio of .90 would bring the
difference to 1.941 points which is slightly less than the 1992
difference.
A copy of the proposed amendment is attached for your review.
Again, this amendment includes a ratio of .90; however, the
Council may change that number to any number it feels
appropriate. In addition, it is suggested that future changes
be incorporated into this ordinance amendment. In order for
the benefit ratio change to be effective for taxes payable in
1994, the ordinance amendment needs to be certified to the
County Auditor by August 1. Please keep in mind that changing
the benefit ratio does not affect the amount of tax revenue the
City receives, instead it redistributes the way it is
collected.
Because you are familiar with the logic behind the urban and
rural taxing districts, I have not distributed a great deal of
background information. However, if you feel you want
additional information regarding the consolidation and the
reasons for the separate taxing districts, please let me know
and I will provide that information. Also, I did not provide
the detailed calculations for each of the proposed benefit
ratios. That information is also available for your review. I
will be available at Monday's meeting to address any additional
questions you may have.
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At Monday's meeting, Council is asked to approve an ordinance
amendment to Section 1406 of the Elk River Code of Ordinances
to restate the benefit ratio for the rural/urban service
districts.
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ORDINANCE 93 -
AN
ORDINANCE AMENDING THE CODE OF ORDINANCES
FOR THE CITY OF ELK RIVER
SECTION 1406
TO RESTATE THE BENEFIT RATIO
The City Council of the City of Elk River does ordain as
follows:
Section 1. The Code of Ordinances for the City of Elk River
is amended to restate Section 1406.00 to read as follows:
Section 1406 - Rural/Urban Service Districts
1406.00 - Amendment of Benefit Ratio. The benefit ratio as
defined in Minnesota Statutes, Section 272.67, and originally
established by the State of Minnesota Municipal Board Order
regarding the consolidation of the Town of Elk River and the
City of Elk River, dated October 31, 1977, is hereby amended to
a ratio of .90.
Section 2. This ordinance shall become effective upon filing
a certified copy of the ordinance with the County Auditor.
Passed and adopted by the City Council of the City of Elk
River, this 26th day of July, 1993.
Henry A. Duitsman, Mayor
ATTEST:
Sandra A. Thackeray, City Clerk