5.10. SR 05-08-1995~ ~
~Ik Ri
Item 5.10
MEMORANDUM
~~~ TO: Mayor & City Council
FROM: Pat Klaers, City Ad i trator
DATE: May 8, 1995 /
SUBJECT: Legislative Updates
Articles on activities at the State Legislature appear almost daily in the
newspapers. Attached for your review is some information on the status of
the Wetlands bill and some information on the status of the House Tax bill.
The city is especially concerned about the proposed House TIF restrictions,
HACA and LGA changes, and the tax exempt status of municipal bonds. It is
anticipated that I will have some additional information to hand out to the
council on May 8 as the city will be receiving another League of Minnesota
Cities-Cities Bulletin on that date. I also hope to provide some information on
the status of our special legislation for Sherburne County and the City of Elk
River regarding ditches.
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13065 Orono Parkway • P.O. Box 490 • Elk River, MN 55330 • (612) 441-7420 • Fax: (612) 441-7425
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Wetlands bill advances-
Joel Jamnik
The House approved its version of
amendments to the Wetland Conserva-
tion Act (WCA} 127-4 on Wednesday,
April 19. Floor action on the Senate's
proposal is expected on Thursday,
April 27, but could be delayed. The
League supports both bills, H.F.. 787
(Munger, DFL-Duluth) and S.F. 483
(Stumpf, DFL-Thief River Falls). The
environmental lobby and state agen-
cies find H.F. 787 acceptable but S.F.
483 too broad while the property
owners, developers, and some local
governments strongly favor the Senate
version over the more restrictive
House version.
Given these differences, S.F. 483
appears to be is a more favorable bill
from the operational perspective of
city government.. However, from the
perspective of protecting wetland
resources from public and private
draining and filling activities, H.F. 787
is preferable.
A compromise is attainable. The
League will continue to support
passage of amendments to the WCA
Issue House
Local planning plans as Significant agency Little oversight, allows
alternatives to WCA oversight and approval, total exemption by wetland
allows function and value type.
exemptions
Shoreland area wetlands Special rules to protect Special rules would apply
wetlands within 300 feet of only within the building
river or stream and 1,000 setback area (often as little
feet of lakes as 75 feet from lakes)
Road construction and Reduces 2:1 mitigation No mitigation required for
maintenance exemptions ratio to 1: l any road project. which is
exempted from federal.
wetlands rules
Defense :and State may assume State assumes.
indemnification for local responsibility after responsibility
governments which are appropriations process is
sued for "takings" because followed
of state WCA
and will focus our efforts on the
defense and indemnification provi-
sions to ensure that they adequately
protect city governments from liability
arising from a state law. ~
Senate
Changes proposed in SAW and EIS rules
Joel Jamnik
City officials have until May 10
to review and comment on proposed
amendments to state rules governing
the Environmental Review Program.
The program is the system of environ-
mental assessment worksheets
(EAW's) and environmental impact
statements (EIS) that must be applied
to various land use or public project
proposals.
The amendments address:
• Revision of the criteria for
assigning petitions for EAW's to units
of government;
• Revisions to the contents and.
preparation procedures for EAW's;
• Clarification of the criteria by
which it is determined that an EIS is
needed;
• Clarification of which impacts
and alternatives must be addressed in
an EIS and in what level of detail,
including treatment of unavailable
information;
• Modification of the procedures
for terminating an EIS process;
• Modification of the way of
applying EAW and EIS mandatory
category thresholds to existing stages
of certain projects;
• Modification of the mandatory
EAW and EIS and Exemption catego-
ries for certain types of projects
including industrial, commercial, and
institutional facilities, air pollutant
sources, solid waste facilities, waste-
water systems, residential projects,
recreational projects, airport projects,
water appropriations and impound-
ments, marinas, stream diversions,
projects impacting wetlands, agrieul-
tore, and forestry; projects destroying
historic .places, and communications
towers;
• Establishment of a mandatory
EIS category for certain PCB incinera-
tion activities;
• Revision of the time period for
filing legal appeals of decisions that
EAW's and EIS's are or are not
needed; and
• Revision of the procedures for
assessing EIS casts to the project
proposer.
These rules will have a significant
impact on developing cities and cities
which undertake large projects. We
encourage city planning officials to
review the. proposah To obtain the:
proposal or additional information,
contact Gregg Dawning at the Envi-
ronmental Quality Board at (612) 296-
2603, FAX (612) 296-3698. ~
April 28, 1995 L-,rh C C.+~~ e5 ~K lrol~~l~ Page 5
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Localgovernmentscou1d
Y w vel t merit under bill
llo de op
By.Dane Smith
~"~A,~ Staff Writer
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•, _' '_'.:`'; Local governments would be given broad authority to
n ~ ~ allow drainage or other development of privately owned
1 ~ ~'~ wetlands now protected by state law, under a bill ap-
I , ~ ~J ,~.. proved Friday by the Minnesota Senate.
~ " ~ ~ ~;
~ 1 ~ i ; ! The action drew praise from the advocates: for recently
'organized landowners' groups in agricultural and rural
` ' LEGISLATURE Minnesota, who claim the that the 1991 law is too
restrictive and costly. But it prompted protests from
'1995 legislators who argued for retaining strong state environ- ''
~ ' 'mental protections of sensitive wetlands.
House Minority "It means we no longer have a statewide .wetlands plan,"
ader Steve said Sen. Steven Morse, DFL-Dakota.. He said Minneso-'
• ~viggum called tans should have learned from the 1993 floods that the
fir bipartisan co- state's vast agricultural acreage needs to have more
o~eration Friday, water-retaining wetlands.
aday after angry ~ ,,
Independent-Re-. Landowners claim. a significant `victory, said Dan Lar- ''
publicans defeat-. son, a lobbyist," representing northern county govern-
e~! a $2.5 billion merits, some of which refuse to adopt wetlands protec- '
' t nsportation lions that the 1991 Wetlands Conservation Act requires.
•+ b~ll. Capitol brief- `'
ir~g, Page 2B. Wetlands continued on page 2B
W~~'~~~5 Continued from page 1B
Farmers 'and other landowners have places covered by standing water.
complained bitterly about the current
law, arguing that it prevents them Wetlands protection is a key "goal of
from"altering or draining even tiny environmental groups, ..which argue
parcels .classified as wetlands, some that it provides flood control and a
of which are dry most of the year. natural habitat for wildlife. But all
-_ : • parties agree that some fine-tuning of
The "House has already passed a bill the law es in order.
f that` ~is~ much more acceptable to ~ '
i environmentalists, because it simply The bill passed on a 46-20 vote, with
increases the maximum amount that most `no' votes coming from Twin
can le~drained or developed. Cities DFLers. IR and outstate legis-
• lators from both parties combined to
~ Sen.:LeRoy Stumpf, DFL-Thief Riv- produce a solid majority. "
er Fails, the author of the Senate bill,
', said'"lots of protections" will remain Gov. Arne Carlson, a moderate Inde-
in the law under his proposal. While pendent-Republican who has held up
i it gives local control to the status of the 1991 wetlands act as one of his
• .mostly dry and marginal wetlands, proudest achievements, has suggest-
' Stumpf clams that it ~s actually more ed that he will veto revisions that go
~~ protective than other proposals of too far.
obvious marshes and wetlands,
I; ~.
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House completes work on omnibus tax bill
Lithe if anything for cities
Gary Carlson
The House completed work on the
Omnibus Tax bill on Tuesday April 2S.
During a four hour floor debate,
members of both parties mounted
several attempts to modify the bill.
However,. in the end, little in the bill
changed from its original draft.
Although the League and other city
groups were successful in moderating
several of the most onerous provisions,
the bill still contain few, if any
favorable provisions for cities.
The most notable change involved
the status of municipal bonds for
income tax purposes. Under the bill
originally adopted by the House Tax
committee, only general obligation
bonds issued by municipalities
maintain their tax exempt status. The
bill was amended by Representative
Ann Rest (DFL-New Hope) so that all
municipal bonds will maintain their
tax exempt status. This amendment
was a major victory in our efforts to
preserve the tax exempt status of
municipal bonds.
In an effort to close the door this
session on the tax exempt bond
controversy, Representative Gene
Hugoson (1R-Granada) offered an
amendment to repeal all of the bond
interest provisions in the bill. The
Hugoson amendment was defeated on
a 65 to 68 vote.
City officials should still be
concerned by the remaining provisions
that would make state bonds taxable.
The Ohio lawsuit that has been cited
as the rationa}e for the bond interest
provision could still ultimately lead to
major changes in the Minnesota law.
If this continues to be viewed as a
potential state liability, we can expect
future legislation to remove the
exemption for all bonds.
The League is looking for
potential Congressional remedies for
the issues raised by the Ohio lawsuit.
We will. keep you informed on any
development in that arena.
The tax increment financing
provisions included in the original ,~~"`~~
House tax bill were essentially L~ ,
Uh changed during the House floor
debate. Representative Jim Girard
(IR-L nd) offe ed dm
City officials influence bond
interest provisions
Gary Carlson
The changes offered to the
bond interest provisions on the
House floor by Representative Ann
Rest were apparently heavily
influenced by the calls and letters
from city officials throughout the
State.
According to sources, the DFL
caucus meeting shortly before the
tax bill floor debate included a
lengthy discussion of the provisions
that would affect the tax. status of
state and municipal bond interest
income. Apparently many DFL
legislators were skittish about
removing the income tax exemp-
tion, because it would not only
raise income taxes but would
increase governmental borrowing
costs.
The efforts of city officials that
wrote or called their legislators
ultimately paid substantial divi-
dends. We were able to clarify with
legislators the impact of the
proposal and ultimately change of
the position of the House.
Unfortunately, the battle over
chose provisions may not be over.
.Although it may be less likely that
tax status of municipal bonds would
be reinstated in conference commit-
tee, stranger things have happened.
We may colt upon you again to
communicate with not only the
House members but the Senate
members as well. (~
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Page 6
y r an amen ent to
remove the pre-.1990 pooling restric-
tions from the bill. After a brief
debate, his amendment . • s defeate
on a S4 to 7$ vote. For a more
complete review of the TIF provisions,
see the. bill summary on page 7.
The bill still contains a provision
to make $20 million of permanent cuts
in HACA to cities, counties, special
districts, and townships for the 1996
aid distribution year. These cuts are
"permanent" because the base amount
of HACA for each community would
be permanently reduced into the future.
by the amount of the 1996 cut.
Consistent with earlier version of the
bill, the final version of the House bill
does not contain the governor's
proposed $S7 million of 1995 aid
reductions.
The House tax bill will now be
sent to the Senate where they will
likely refuse to concur and force a
conference committee be appointed.
We expect this could happen as early
as Thursday and the conference
committee could convene late this
week early or next week. Q~
LMC Cities Bulletin
Summary of omnibus House tax bill
Article 1 (Income and Franchise
Tax) includes interest earnings on state
bonds issued before July 1, 1995 as
taxable income. Interest earnings on
municipal bonds state bonds issued
before July 1, 1995 and bonds of
Minnesota Indian tribes are not
included in taxable income.
Article 2 (Sales and Excise Tax)
includes a provision that expands the
permissible uses for the lodging tax
within the city of Winona and allows
the city of Hutchinson to impose a
local general sales tax of one. half of
one percent if approved by the voters
in a referendum.
Article 3 (Property Tax) clarifies
the tax treatment of park trailers so
that those trailers not moved onto a
highway during the year are treated as
personal property for tax purposes
rather than subject to the motor
vehicle registration tax. The article
includes a provision that would apply
a four percent class rate to commercial
and industrial property structures built
after January 2, 1996 that are located
within one-quarter mile of a bus route
within the metropolitan urban service
area. Certain wind energy properties
would be taxed as personal property.
In cities under 5,000 population the
property class rate for apartments with
four or more units would be reduced
from 3.4 percent to 2.3 percent for
taxes payable in 1°996 and thereafter.
This reduction would. not be accompa-
nied by additional HACA to offset the
property tax shifts. The trut
taxation notice would be changed by
specifym hg eat portportion of school
district property tax that is determined
by the state and removing the esti-
mated percentage increase in Minne-
sota personal income. A rental tax
equity pilot project would be estab-
lished in Brooklyn Park for payable
1996 only. The pilot project would
provide a property tax credit. for
properties that meet certain eligibility
requirements. The Commissioner of
Revenue would conduct a study
Apri128, 1995
looking at the property tax implica-
tions of reducing apartment class rates.
Article 4 (Senior Citizen Prop-
erty Tax Deferral) includes a property
tax deferral for senior citizens with
total household incomes of less than
$30,000. Seniors would have to apply
to the Commissioner of Revenue for
the deferral. Qualifying applicants
would only be allowed to defer the
property tax on their homestead that
exceeds five percent of their household
income. Interest would be charged on
the deferred taxes and the state would
reimburse local governments for the
deferred amount of the property tax.
Article 5 (Property Tax Refund
as a Deduction on the Property Tax
Statement) provides that the regular
circuit breaker and special property tax
refunds for homeowners will be shown
as deductions on the individual's
property tax statement.
Article 6 (Credit for Seasonal
Recreational Property) would extend
the circuit breaker property tax credit
program to owners of commercial
seasonal recreational property (cabin)
property. This refund would be in
addition to the regular property tax
refund allowed to individuals as
homeowners or renters.
Article 7 (Tax Increment
Fin~ncin) would restrict the use of
sot s districts to contamination and
pollution clean up only, would expand
the '`but for" test to require a cost
benefit analysis before the approval of
the district, would limit pooling of TIF
revenues to i0 percent of the incre-
ments,. would require expanded
financial reporting disclosure, and
would require developers to repay all
or part of the TIF assistance if they sell
the property or fail to carry out the
identified development activities.
Special laws that authorize the
extension. of the duration of a district
would require the state aid offset to
apply to the district. Economic
development district findings would
require that the TIF be used to discour-
age the relocation of a business to
another state and the TIF would
increase the employment or tax base of
the state. Pre-1990 districts would be
restricted by allowing increment
revenue to be used only for the
retirement of bonds sold before July 1, _,~
1995, to pay for pen mg_ rp oiects or /
which resolutions have been assed by
July 1, 1 , or or-costs identified by
a plan adopted a municipali_ ty before
December 31, 1995. Special laws that.
exten t e uration limit of a T'IF
district would have to be approved by
the city, school district, and county.
The Metropolitan Council would study
the uses of TIF and its impact on land
use patterns in the Twin Cities metro-
politan area.
Article 8 (Budget Reserve)
would reduce the state's budget
reserve from $360 million to $350
million and would place an overall
state debt service limitation equal to
three percent of the total nondedicated
general fund revenues for tine Bien-
nium. The amount of general obliga-
lion debt plus any revenue bond debt
for the Cambridge bank case would be
limited to 2.5 percent of total personal
income in the state.
Article 9 (Miscellaneous) would
create a local government efficiency
and effectiveness review panel. The
panel would be comprised of five
members of the Senate and five
members of the House. The panel
would review applications from cities
over 5,000 population in the metro
area for five percent of their local
government aid distribution. The
LGA distribution for the city of
Pillager would be increased by
$40,000 for 1995 and later years. The
insurance premium tax rate would be
increased on automobile insurance and.
fire, lightning, sprinkler and extended
coverage. The increased proceeds of
the tax would be used to support fire
and police pensions. ~1
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