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3. SR 02-20-1995 • • ~~.: ; , e~~~ • .i. ~.~' February 13, 1995 The Honorable Hank Duitsman Mayor of Elk River 13065 Orono Parkway P.O. Box 490 Elk River, MN 55330 Dear Mayor Duitsman: EIk River Area Chamber of Commerce ITEM 3. Over the last two years, we have worked with legislators to build support for property tax reform and business property tax relief. Our efforts for reform and relief would advance significantly with endorsements from the city council, county board and school board. Therefore, the Elk River Area Chamber of Commerce asks the Elk River City Council to adopt the attached business property tax resolution without amendment. It is imperative that legislators hear from our city officials that you oppose raising business property taxes and support direct business property tax relief. To that end, we also ask you to join us in communicating your support of this position to our legislators. Thank you for considering our request. Sincerely, Sharon L. Bromen Buy the Book President Dennis Chuba The Chuba Company Vice President Charlie Houle Houle Oil Co. Inc. Past President Richard Duggan Marketech, Inc. Director Linda Frederickson Steve Pattison Marketing Images Mosford Barthel & Co. LLP Director Director Roger Hebeisen Kay Reynolds First National Bank of Elk River Vernon Sales Promotions Director Director Richard Hinkle Century 21 White Dove Director Scott Martin United Power Association Director Myron Rothstein Investment Centers of America Director Marcy VanValkenburg Elk River Travel Director 509 Highway 10 • Elk River, Minnesota 55330-141 S • (612) 441-3110 "Building a Better Community Together" ~~' .. ~'`" :.s EIk River Area Chamber of Commerce BUSINESS PROPERTY TAX RESOLUTION WHEREAS, businesses are the principal source of jobs and economic vitality in the City of Elk River, and WHEREAS, the City of Elk River's businesses must have competitive prices in order to stay in business and continue employing residents of our community, and WHEREAS, business property taxes are a significant cost of doing business, equaling a second fifteen-year mortgage on every Minnesota business, and • WHEREAS, Minnesota business property taxes place local businesses at a competitive disadvantage because their taxes are significantly higher than their competitors in other states, and WHEREAS, communities like the City of Elk River cannot afford to lose jobs because potential new employers choose other, less expensive locations, and WHEREAS, previous efforts by the Legislature to reduce effective tax rates on business property have not been successful, and WHEREAS, relief for business property taxpayers must be achieved without causing .significant tax increases on lower income homeowners and renters and without raising taxes NOW THEREFORE BE IT RESOLVED that the Elk River City Council does hereby call on the 1995 Minnesota state legislature to act to make business property taxes competitive with those in Minnesota's neighboring states. 509 Highway 10 • Elk River, Minnesota 55330-141 S • (612) 441-3110 "Building a Better Community Together" THE CITY OF ELK RIVER NEWSLETTER "THE CURRENT" -DECEMBER 1994 Steering committee looks Storm water property tax fee dropped by Robert Minton, four-fifths are used to subsidize In July, 1994, the Elk River C' Steering Committee Chairman homeowners. Council discussed the possibility of - The biggest share of property taxes, Even more surprising to me, on a per ating a surface water managemen fee we are often told, is paid by business and acre basis, commercially zoned property that wo d be charged against all rop- industry. Individual homes, so the story excesses in Lakeville were almost twice ertyowne inordertohelpfinai storm goes, do not carry their own weight, be- as much as those from industrial zones. water imp ement projects. I was in- cause the cost of services from the city So commercial properties not only subsi- tended that 's fee would included and schools far exceeds the amount they dine homeowner property taxes, butthey with the garb e, electric, afar, and pay in taxes. The balance is made up by also do it very efficiently in terms of land sewer bills that sent ou by the Mu- business. use. nicipal Utilities. r re wing a sig- Well, we wanted some proof of this When the application for Elk Park nificant amount o pub c input from conventional wisdom on the Compre- Center was under consideration by the area citizens and p p owners, the hensive Plan Steering Committee, and planning Commission, several residents City Council has der ed not to imple- city staff member Steve Ach found a expressed the concern that the develop- went this proposed ace water man- study that amply demonstrates the ben- mentwould increasetheirpropertytaxes. agement fee. efits that business pays to homeowners. Quite the opposite appears to be em- In deciding n to c e reside~ats The study also has the advantage of phatically true, and if you are concerned and property o ners a m nthly storm being more or less local, from the city of about property taxes, this information water manage ant fee on air utility Lakeville should not be taken lightly. bills, the co cil looked at ternative The study took the commercial and The implications for updating the financing a roaches. In ord r to meet industrial zones of that city, and some- comprehensive plan are clear. In future the city's ebt requirement r storm how computed the cost of all tax-paid development, there has to be a healthy water ' rovement projects, a City services to those properties. What they balance between the residential, Indus- Counc' decided to conside a city- f undwasthat fully one-third of all taxes trial, and commercial zones. This is im- wide levy for debt and ongo ex- ~ected by the city were in excess of the portent not only for property taxes, but Pe s that are necessary to mane a the t of services. also for jobs in the local area. Moreover, city's storm water runoff. When taxes paid to the school district the industrial and commercial zones have were brought into the equation, the dif- to be preserved well in advance, because ference between taxes paid and taxes oncetheybecomeresidential,itwouldbe used became rather astounding. That is extremely difficult politically to change because businesses as such do not send them. 'll children to schools, but they do pay a lot These are some of the issues we wi of property taxes to school districts. For be considering at future meetings of the both city and school services, businesses Comprehensive Plan Steering Commit- paid about $ve +-irnes more taxes than tee. The meetings are announced in the the cost of the services they used. Star News, and at those meetings, the In other words, when businesses pay future of your community will be consid- property taxes, about one-fifth of those erect. We hope you will join us in our taxes pav for the services they use, and discussions. City of Elk River'..:..: :. ~.` a©ss oro~ ra~>t~y, ~ R"iver. MN sss3a, ~L$ R1VER ~'I'r"Y C©~~1C.. ci~y Asll politer ~epartmeat P]ut$e i~eL P:4. Box 490 t'.O. $ox 724 T~:LEP~iONE NUMBER-S ~~ ~#iAUk n 4t1-371'!{izl iS,bi~arge Ciiy Hall 4f 1-7420 +141-490$(mnr " Bui}dia¢ $ 2onin~ 44I-4900 Street DepartmeaL 4#1-4910 I M~mbers- Counc~ $obn l3ietz, 441-5783(l~ :Ward 1 Police Departaaent 44I-2324 441-?4'20 ezi 480I(vm) li~asbevvatea 1~eatmeat Plant :441-4918 CSecllia Scheel 441.7b78(h) Wasd 2 ' ire ihpartmenf 441-4919 #dl-?420 ext 480'~(vm} Ellt Rivez Utilities 441-2020 Ells Ricer Public L'brary 441-164i ~~, barber 441.8508(h) Ward 8 '441-7420 ext 46Q3~vea) gFFTGE HOURS itt~z Hfllm¢ron '441-T828{b) Ward d City Hall - `.,341.7420 ext 4804(wn1 lia~aay ~ l•tiday s:a-:.~. ~ i:sa F.m ~,- ~,n~b.•~>n~a pOIiLY- :.. tvm)-vclrolNaH imeargas ml9~-~~Am Monday thru b5ridsy 8.•00 a.m. to b:00 p.m 'vosoe man tme~sa~ee aaly) - anypraa 1 2 3 kT+:n'-i:::i-::ivti•.:i ::{:i:::.:ii~n>::.i::;tiii::: q:- 1112 13 14 15 16 17 18 ~> 24 25 26 27 28 29 30 31 Shaded mess represent recyciirg weeks BUSINESS PROPERTY TAX RELIEF FACT SHEET The Problem The statewide average effective tax rate on commercial/industrial (CI) property is approaching 6% of market value. That's the equivalent of a second 15 year mortgage on every Minnesota business. A mortgage that's due whether or not the business makes a profit oreven opens its doors. CI effective tax rates are more than twice the statewide average for all .property, and almost four times higher than homestead taxes. Minnesota CI taxes are among the highest (if not the highest) in the nation. In most states, effective tax rates are less than 3%. Of Minnesota's 87 counties only one, Cass County, at 2.63% is competitive with this standard.. By moving to Wisconsin, a business can .cut its property taxes in half; to Iowa, by 89%; to South Dakots by 85%; and to North Dakota by about 75°~. Businesses are moving. Forward Wisconsin reports attracting Minnesota companies, 2 irr 1991; 13 in 1992; and 14 in 1993. Growth in Watertown, South Dakota has been fueled by Minnesota companies. Minnesota businesses ;pay twice their proportionate share in property taxes. CI property is 16%° of total market value, but it pays almost 36% of the total property tax bill All of our surrounding states except Wisconsin have classified property taxes;. fiowever, none of them do so to .the same degree as Minnesota. ~ CI's effective tax rate continues to increase despite classification rate reductions in each of the last five years. In 1989, the classification rate on business property was 5.25% Legislation reduced it to 4.6% for taxes payable in 1994. These reductions have not been sufficient to offset increases in local government spending and/or reductions in classification rates for other types of property (e.g. residential and farm homesteads). The statewide average effective tax rate has increased. from 4.4% in 1989 to 5.7% in 1993. The Business Solution Reduce effective tax rates on CI property by doing the following: Reducing. the classification rate on business property relative to all other kinds of property. Make it no more than twice the rate on homesteads. Use market value (instead of taxable value) to assess property tax increases. Make 1994 the base year: Any amount over the base would be assessed against market value instead of taxable value. 'By using market value, property owners will be taxed irr proportion to their share of the actuaF tax base. Pay property tax relief directly to taxpayers using the circuit breaker and renters credit. Doing so will target relief at homeowners/renters with the least ability to pay. Target state aid to local governments at services mandated by the state. Structure -aid to encourage efficiency and reflect local need and tax base rather than past spending. practices.