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8.1. SR 05-12-2003Item ~ 8.1. MEMORANDUM TO: FROM: DATE: Mayor and City Council Pat Klaers, Ci~d~ninistrator May 12, 2003 SUBJECT: Updates on State Legislative Session, City Budget, and Public Safety/City Hall Project Most of the update on the State Legislature, city budget, and the Public Safety/City Hall project will be given verbally at the May 12, 2003, Council meeting. State Legislature Attached for your information is some recent material from the League of Minnesota Cities regarding activities at the State Legislature. To a certain degree in the last few weeks, the state budget has taken a back seat to other issues such as the conceal and carry law, the right-to-know law, healthcare, and bonding for roads. The pace at the Legislature is getting "fast and furious" and there are many long nights ahead as the session is scheduled to adjourn on Monday, May 19, 2003. There are still lots of indications that a special session will be needed to resolve the budget shortfall. I have recently talked with Senator Wergin regarding proposed legislation and our city budget issues. City Budget The number of adjustments in the adopted 2003 budget that have been suggested by department heads have been remarkable. Use of reserves will still be necessary but the £mal amount will not be determined until some time toward the end of the year when we know more about the amount of growth related revenues that are received. Almost half (about 45%) of the projected 2003 cuts in state aid will be addressed with adjustments in personal services. We are currently working on the guidelines for a voluntary leave program. Recommended budget amendments will be presented to the City Council after the Legislature has determined the amount of cuts in state aids. Some amendments will be "easy" for the City Council to approve; however, there will be some budget proposals that will generate Council discussion on priorities for desired services and programs. This will be especially true when we consider the 2004 budget. My main budget concerns remain the size of the cuts in state aids for 2004 and what type of levy limits will be in place for 2004. Public Safety/City Hall Project The monthly K-taus Anderson/Tushie Montgomery meeting ~vith city staff was held on May 6, 2003. An update on current issues discussed at this meeting will be presented to the City Council on May 12, 2003. A number of weeks ago the city requested information on the cost to complete the upstairs of the Public Safety Facility so that it could be usable for city or community activities/functions. The minimum improvements, including a functional bathroom, is approximately $93,000. To make the upstairs usable without a bathroom is about $49,000. The quotes for the upstairs work are good for 30 days. The cost to do the work at a later date should not be significantly more. Police Department representatives will be at this City Council meeting to discuss and review options. There are some security issues with opening up this facility to the public. At this time, the building contingency balance for the Public Safety project stands at about $150,000 and we do not expect this number to go down too much lower. Accordingly, some funds will be available for some additional work if desired by the city. The other big expenditure that remains on the horizon is the gun range. The bids received last summer are no longer valid for this work. The bid for the gun range last summer was $220,000. The City Hall "purge" days on April 24 and 25 went very well. A significant amount of paper was recycled and, in general, "old stuff was thrown away". City office staff continues to work on the moving of files from the upstairs at City Hall to the basement at the Utilities building. This will be the permanent storage location for the city archives. Storage shelving has been ordered; the shelving is scheduled to be installed the week of May 12; and the moving of fries is scheduled for May 20 (with help from the STS program). One of the main outside activities being worked on is the parking lot. The exact schedule is not known at this time but it looks like it will take 2-3 weeks for the parking lot to be completed. The existing City Hall parking lot is scheduled to be raised up a few feet and fill material will begin showing up shortly for this part of the project. (The lighting should follow the bituminous work.) Also, work is currently taking place on the curbing of the parking lot for the Public Safety Facility. There will be a significant amount of activities going on in the next few weeks in preparation for the June 26 (approximately) move of the Police Department to the new facility. S:\COUNCIL~Pat\Updates\leg-cityhall-psupdates.doc 85 Z003 14:19:5G Via Fax -> 7634417425 O~mi~istrator 881 0£ 804 - Frid ay Fax- A weekly legislative update from the League of Minnesota Cities We apologize--events at the Capitol went late into the evening on Friday. Therefore, we are sending a Monday edition of the Friday Fax. Legislative activity cranks-up Legislators ~ve just over two weeks in the regular legislative session to finalize the House and Senate tax proposals, close a $1 billion gap between House and Senate budget-balancing proposals, iron-out differences in several omnibus spending bills and debate hundreds of other issues. The focus this week will be action on the omnibus tax bills and the likely appointment of conference committee members. After a marathon Thursday floor session that adjourned early Friday morning, the House passed the last of eight omnibus spending bills. The Senate finished up their floor session work for the week wrapping up the transportation and health/human services bills late Friday night. The highlights in each spending area are provided below. Criminal Justice Finance The House spends over $1.4 billion on public safety, judiciary, and corrections programs; about $51 million more than Gov. Pawlenty recommended. The bill cuts the State Fire Marshal's budget by $1.5 million, but allows the division to recover these cuts in fee increases for hotel, resort, and school inspections. It also reduces state funding for CriMNet by $3.5 million. However, state officials plan to use additional federal funds to continue implementation of this statewide criminal justice information system. The proposal raises about $60 million in fees--mostly coming from court fee increases, public defense co- pays, and a $5 surcharge on criminal and traffic offenses. The Senate passed a $650 million criminal justice package (total does not include corrections spending) as part of the state government budget May 5, 2003 Page 1 bill. The Senate bill restores funding for anti- terrorism equipment and training grants to local units of government. It reinstates $4 million for CriMNet projects and protects funding for law enforcement grants. The Senate proposal spends almost $16 million more on 911 programs and dedicates at least 20 cents a month ofgll fees for distribution to public safety answering points. The bill also authorizes additional revenue bonds to fund the build-out of the public safety radio communications system (800 MHz). Omnibus Transportation Finance Earlier this week, the full House passed a $1.2 billion transportation funding bill. The bill closely resembles the governor's recommendation to pay for road projects by borrowing money and leveraging federal funds, not by raising the gas tax. The bill provides no new money for local roads. The Senate transportation package provides $2.1 billion. It increases the gasoline tax from 20 cents to 25 cents per gallon in order to "pay as you go" in funding new projects. In addition, a license tab fee schedule change will generate about $90 million in the first year and $105 million in the second year of the biennium. The Senate bill provides $1.3 billion for trunk highways, $395 million for local and county highways, and $445 million for transit. The measure also allows the commissioner to spend up to $250 million on trunk highway improvements approved by the federal government and designated as advance construction funds. A League-sponsored provision that would allow cities to impose transportation utility fees to pay for street reconstruction and maintenance was removed in the Senate Tax Committee. Omnibus Jobs & Economic Development Finance The House proposal spends $389 million ($334 million general fund) on jobs and economic development programs. The bill takes many of the governor's recommended cuts and includes the governor's recommendation to provide $2 million For more information on ¢ily legi$lalive issues, conlacl any member of Ihe League of Minne$ola Cilie$ Inlere:overnmenlal Relalion$ learn. 651.281.1200 or 800.925.1122 Xay 05 Z083 14:20:48 ~ia Fax -> 7634417425 Administrator Page 082 0£ 804 for a University of Minnesota/Mayo Clinic partnership grant. It also pumps additional resources into Roseau for flood recovery and extends the Petrofund program through 2007. FridayF - aX- A weekly legislative update from the League of Minnesota Cities May 5, 2003 Page 2 to the Office of the State Auditor (OSA), and a proposal transferring best practice reviews from the legislative auditor to the state auditor. The Senate appropriates over $426 million for economic development purposes, $356 million from the general fund. The Senate bill cuts more from contaminated site clean-up grants and the Minnesota Investment fund, and converts the investment fund to a revolving loan program. However, the bill includes additional funds for grants to various workforce development organizations and creates a new job training grant program. The Senate proposal does not merge the departments of Trade & Economic Development (DTED) and Economic Security. The House and Senate both provide more funding for housing programs than the governor recommended. Both proposals also increase the amount that can be spent from the petroleum tank release fund to administer the contamination clean-up program; change the operation of the rural challenge grant program; and add job enhancement as a goal for various DTED programs. The House bill also includes a couple of miscellaneous provisions that would cap fees cities could impose on vendors selling consumer fireworks, and pre-empt cities' ability to set fines and penalties for businesses that sell tobacco to minors. Omnlbas State Government Finance The House passed a $474 million omnibus state government finance bill after over ten hours of debate on Thursday, while the Senate spends $557 million on these programs. The House bill contains many policy provisions, including language transferring compensation limit waiver requests and local government pay equity compliance from the Dept. of Employee Relations The proposal would allow the state auditor to charge fees to cover the costs associated with evaluating compensation limit waiver requests from local units of government and administering pay equity compliance. It includes a hiatus from pay equity reporting requirements in 2003 and 2004, and changes the length of the pay equity reporting cycle from every three years to every five years beginning in 2005. Under the House bill, responsibility for conducting best practices reviews is transferred to the OSA beginning in 2004. The bill requires the state auditor to consult with various organizations representing local governments, but it does not appear to continue the Best Practices Advisory Council. These provisions are also traveling in a separate bill--HF 1082 (Samuelson)/SF 919 (Robling)--proposed by the OSA. The Senate did not transfer responsibility for pay equity compliance and compensation limit waivers in its version of the omnibus state government budget bill. However, the Senate State Government Budget Division did pass SF 919 (Robling, R- Jordan), which includes the provisions transferring the best practice review program to the state auditor. Environment, Natural Resources and Agriculture The House bill provides $411 million for natural resources and agriculture programs, while the Senate version appropriates $451 million for these purposes. The House plan increases state park fees and cuts a third of the funding for state ethanol subsidies, paying producers 13 cents a gallon until 2008 when the payments would increase back to the 20-cent level. The Senate proposal raises additional revenue by increasing some recreation fees and cuts mote informalion on oily legislalive issues, conlacl any membel of Ihe League of Minnesola Cilies Inlergovernmenlal Relalions learn. 651.281.1200 or 800.925.1122 Mas 05 2803 14:21:22 Yin Fax -> 7634417425 Administrator Pa§e 003 0£ 804 -FridayFax- ethanol producers to a lesser degree than the House and the Governor, paying producers 16 cents a gallon. Both bills increase water appropriation fees to fund DNR Waters division programs. The bills also contain several policy provisions, including a provision directing the Pollution Control Agency (PCA) to modify its water quality assessment rules. This language is the result of negotiations between the League of Minnesota Cities, the Coalition of Greater Minnesota Cities, the Farm Bureau, and the PCA. Conceal and carry law to take effect May 28 A weekly legislative update from the League of Minnesota Cities May 5, 2003 Page 3 decide for themselves whether they need to carry a concealed weapon. Three groups supported the legislation - the National Rifle Association, Concealed Carry Reform Now and the Republican Party of Minnesota. Governor Pawlenty this week signed into law a bill that reduces local authority over issuance of concealed handgun permits and is expected to significantly increase the number of permit-holders. The law gives private entities the right to prohibit guns on private property, but preserves the longstanding law that prohibits local units of government from restricting permit holders from bringing concealed weapons to local public places. Guns are allowed in city halls, recreation centers, state and county fairgrounds, convention centers and public sports arenas. The Minnesota Personal Protection Act, passed in the Senate on a 37-30 vote and signed into law by Gov. Tim Pawlenty on April 28, removes all authority from police chiefs to issue conceal and carry permits and mandates that sheriffs issue permits to all applicants except those convicted of serious crimes. More than 300 organizations including city councils, statewide police associations, churches and health and education groups opposed the legislation, arguing that the new law would put an estimated 90,000 additional concealed weapons onto the streets. Currently, fewer thanl2,000 individuals have permits to carry concealed weapons. Proponents of the bill argued sheriffs had too much discretionary authority and that applicants should An amendment offered in the House on behalf of the League of Minnesota Cities would have allowed public facilities such as city halls, parks, and recreation centers to prohibit concealed weapons on the premises. The amendment failed on a vote of 48 to 84. League staff is in the process of drafting information about what the new law will mean for cities. The document will be available next week and will contain information relating to legal implications and human resource issues as well as details about what rights property-owners--such as cities, schools and private businesses-have to prohibit guns on property. Watch the League's web site and the Cities Bulletin for updates on the availability of the information. House Tax Committee completes tax bill Late Friday, the House Tax Committee completed work on its version of the omnibus tax bill. The bill contains numerous provisions that will impact city budgets in 2003 and beyond. The Senate will likely compile their version of an omnibus tax bill sometime this week, setting up a conference committee with less than two weeks remaining in the regular legislative session. The House bill contains deep cuts in LGA and market value homestead credit for 2003 and 2004-- although the cuts are nearly $75 million lower than the cuts contained in the governor's original budget proposal. The House tax bill has nearly $100 million in additional revenue when compared to the governor's plan due to new revenues generated by a casino operated at the Canterbury Downs racetrack. With this higher tax committee revenue target, the House has reduced the cuts to city LGA and market For more informalion on oily legiqalive issues, conlacl any member of the League 0f Minne$ola Cilie$ Inlergovemn'~nlal Relations learn. 651.281.1200 or 800.925.1122 Xay 05 Z083 14:2Z:BG g~a F~x -> 7G34417425 A&m~n~strator P~ge 884 0£ 084 -FridayFax- A weekly legislative update from the League of Minnesota Cities value homestead credit. Estimates of the cuts will be posted later today on the LMC web site (www,h'nnc.or~). Perhaps one of the least understood components of the House tax bill is the revised levy limits for cities and counties. The bill includes severe levy limits that will be in place for the next two year and these limits will impact ALL cities. The new levy limits are severe for two reasons-- they will not allow cities to increase their property tax for current state aid cuts and the computation would no longer include an inflation adjustment. In previous years, each city's levy limit has been directly tied to LGA. If the city's LGA increased, the city's levy limit would be decreased by the same amount. Similarly, reductions in LGA would result in a dollar-for-dollar increase in a city's levy authority. Under the House plan, each city's levy limit for taxes payable in 2004 would not increase by the amount of the 2003 reduction in LGA. However, any increased cut in state aids in 2004 beyond the cut in 2003 would result in increased levy authority. May 5, 2003 Page 4 developed so that levy limits would not create an incentive for cities to automatically levy to their maximum. Under the House bill, these same cities would lose all but 30 percent of their unused levy limit. In contrast to the Governor's levy limit proposal, the House plan would use the current law definition of "special levies" which are outside of levy limits--including levies for debt service. The governor's proposal would not have classified all debt levies as "special levies" which would have potentially restricted the ability of a city to increase property taxes to cover debt service for some new debt issues. The House Tax Committee's bill will be introduced today as HF 1597. The bill will be sent to the Ways & Means Committee later today and will likely be on the House floor for final consideration early this week. There is still time to contact your representative to express your concerns about the aid cuts and levy limits contained in the House Tax bill. The levy limit calculation also eliminates the inflationary adjustment based on the implicit price deflator--which is now estimated to be slightly more than 3 percent. The only growth in the levy limit would be based on household growth and one- half of the growth in commercial-industrial market value. These two adjustments would only provide very modest levy increases in rapidly growing cities while fully developed cities would receive little, if any increased levy authority. The calculation of levy limits under the House bill also eliminates most of any unused levy authority for cities that did not levy to their limit for 2003. Under current law, cities that are covered by levy limits but who chose to levy at a level less than the limit would preserve any unused levy authority for future years. This feature of levy limits was For mote information on oily legislalive issues, conlac! any member of Ihe League of Minnesola Cities Inlergovetnmenlal Relalions learn. 651.281.1200 or 800.925.1122