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Home My WebLink About8B Tax Levy Transit AGENDA #: PREP ARED BY: SUBJECT: DATE: INTRODUCTION: DISCUSSION: STAFF AGENDA REPORT 8D 1\ \ FRANK BOYLES, CITY MANAGER >\. CONSIDER APPROVAL OF OLUTION 96-66 AUTHORIZING A TRANSIT TAX LEVY PURSUANT TO MINNESOTA STATUTES 473.388. JUNE 17, 1996 As the Council is aware, the Minnesota Valley Transit Authority successfully proposed legislation this year which would authorize each opt-out community to receive the transit tax levy directly rather than through negotiation with the Metropolitan Council. Since Prior Lake is an opt-out community and a member of the Minnesota Valley Transit Authority, it may take advantage of this statutory change. This agenda item outlines the steps which the City must take in order to effectuate this new statute. Since the initiation of the "opt-out statutes" some years ago, opt-out communities received their financial assistance from the Regional Transit Board. More recently, the Metropolitan Council has become responsible for this function. Each opt- out community was authorized to receive up to 90% of the maximum allowable transit levy, with the remaining 10 percent retained by the R TB or Metropolitan Council to support the regional system. This last legislative session the Minnesota Valley Transit Authority successfully proposed legislation, codified at Minnesota Statutes 473.388 which, under Subdivision 7 provides that, "In lieu of receiving financial assistance from the Metropolitan Council to operate transit, the City has the option commencing in 1996 for taxes payable in 1997 and each year thereafter to levy a transit tax". The law states further that, "In any year that the city exercises the option to levy the transit tax, it must levy an amount sufficient to maintain a level of transit service provided in the city in the previous year to a maximum of 88 percent of the transit tax 16200 Eagle Creek Ave. S.E., Prior Lake, Minnesota 55372-1714 / Ph. (612) 447-4230 / Fax (612) 447-4245 AN EQUAL OPPORTUNITY EMPLOYER ISSUES: ALTERNATIVES: AG606I 7B.DOC revenues for the transit levy year". (See attached memo from Best and Flanagan.) If an opt-out city chooses to levy the tax, it must levy an amount sufficient to provide the same level of service as the existing service. The transit tax levy is determined by the legislature. If an opt-out city does not levy the amount required by the statute, the Metropolitan Council will levy the difference. The opt-out community must adopt a resolution and provide a copy to the State Department of Revenue and Metropolitan Council before July 1 of each year in order to elect to levy the tax. This levy will be part of our Truth In Taxation hearing. As Council is aware, Prior Lake is one of six cities who are members of MVT A which operates under a Joint Powers Agreement. The attached memorandum from Counsel to the MVT A recommends an amendment to the Joint Powers Agreement to provide that the member cities pass the required resolution to levy the tax each year. The issues associated with this action are: 1. What is the benefit to Prior Lake? - The primary benefit is to the MVT A. If each individual city adopts a resolution, the MVT A revenue stream will become more predictable and received on schedule. In the past MVT A has had to negotiate with the Metropolitan Council for these revenues resulting in both reduced and delayed funding. 2. Will the property tax increase? - No. This is a levy shift. The Metropolitan Council levy is reduced by the same amount the city's levy is increased. 3. Will the Council be blamed for increasin~ property tax? - No. The legislation requires an explanation in the Truth In Taxation notices explaining the revenue shift and the fact that there is no net tax increase by virtue of the City levying the tax directly. 4. Will this action improve accountability? Yes, the city will be better able to monitor MVT A use of these tax revenues. The alternatives are: RESOLUTION 96-66 RESOLUTION APPROVING THE LEVY OF A TRANSIT TAX IN PRIOR LAKE MOTION BY: SECOND BY: _____ WHEREAS, the City of Prior Lake is a city that is eligible for assistance under Minnesota Statutes ~473.388; and WHEREAS, pursuant to Minnesota Statutes ~473.388, Subd. 7, in lieu of receiving financial assistance from the Metropolitan Council to operate transit, the City has the option, commencing in 1996 for taxes payable in 1997 and each year thereafter, to levy a transit tax; and WHEREAS, in any year that the City exercises the option to levy the transit tax, it must levy an amount sufficient to maintain the level of transit service provided in the City in the previous year to a maximum of 88% of the transit tax revenues for the transit levy year; and WHEREAS, the Commissioner of Revenue shall certify to the City by June 1 of each year the maximum levy limitation under ~473.388, Subd. 7; and WHEREAS, the City must notify the Commissioner of Revenue and the Metropolitan Council before July 1 of each year of its intent to levy the transit tax, which notification must include the amount of the City's proposed transit tax. NOW THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF PRIOR LAKE, that the City of Prior Lake hereby elects to levy the transit tax for the tax year payable 1997 in the amount of $301,171, the maximum levy limitation certified by the Commissioner of Revenue. Passed and adopted this 17th day of June, 1996. YES NO Andren Greenfield Kedrowski Mader Schenck Andren Greenfield Kedrowski Mader Schenck { Seal} City Manager City of Prior Lake RES9666.DOC 16200 Eagle Creek Ave. S.E., Prior Lake, Minnesota 55372-1714 / Ph. (612) 447-4230 / Fax (612) 447-4245 AN EQUAL OPPORTUNITY EMPLOYER ",>",__,,'",",,'__~'_~~""""_~~>~';"___''''-'_._'''__-'''--O^..,.~..~__;.._w__...",_.,,,,,__.._,_,.._~.......-.._"__......,~'"" -->-~,"--~~-",----~~~..,-~..",.........._.....-------""_..._,,,,, -' 05/10/96 FRI 16: 17 _FAX ~~2.8827600 __ _____MN VALLEY TRANSIT ~~~ Prior Lake I4J 002 MAY. -1 O! 96 (PR I) 15: 42 BEST & FLANAGAN TEL:612 339 589i P. 003 BEST . FLANAGAN' Praf...ion.l L~~ted Li&b111~y Partnership Attorneys at Law 4000 First Bank Place 601 Second Avenue South Minneapolis, Minnesota 5S40~-4331 (612) 339-7121 Fax: 339-5897 JIJDIOJlUDUX DATE: Beverley Killer Barhara Ross ~ May 7, 1996 TO: FROM: RE: New Leqislation on Transit Tax Levy The purpose o~ this memo is to outline for the Board Members of MVTA and Council Members of the Kember cities the effects of the bill that was passed by tha 1eqislatuxa with respect to the Transit Tax Levy. I will also outline the process for Member Cities to levy the transit ~ax. By way of background, ~ransit service in the seven county metro area is operated with funds from a transit tax levied by the Metropolitan Council. Each year the Metropolitan council certifies to county auditors the amount of the transit tax to be . levied to funa operatinq costs and for debt service ~or capi~al costs such as equipment and facilities. When the opt-cuts were estab1ished. the law provided that opt-out communities could request rinancial assistance fram the RTB. now the Met counci1, in an amount up to 90t of the transit tax levied in the opt-out communities. This 90% is re~erred to as '-available local transit funds." The opt-cuts presented a budqet and manaqement plan for approval by the RTB, subsequently the Het Council, requesting- the amount of available local transit funds needed to operate the service. Any of the available local transit funds not approved - for use by the opt:.-ou'ts vas retained by the Hat Council and used for regional transit service. With respec~ to funding of capita1 projects, the opt-outs have funded such projects by applying to the region for an a11ocation ot bond dollars to pay for capital items such as bus she1tars. land, buildings, and equipment. The amount of bond do11ars availabla to the Metropolitan Council Transit Operations (MeTO) and for other transit facilities is set ~y the leqisla1:ure. _~/10/96 FRI 16:18 FAX 6128827600 MN VALLEY TRANSIT Prior Lake 141 003 MAY. -10' 96(FRI) 15:42 BEST & FLANAGAN TEL:612 339 589i P. 004 The new provision to ~e opt-out statute passed by the 1996 leqislatura provides ~-out cities with the option ot 1evying ) their shara of the transit tax directly rather than app1ying to the Met Council for transit funds. The amount o~ the reqional transit 'tax to :be l.evied. is set: by a formula in the statute. :In the past this amount was certified by the Met Council to 1evy 1.00% of the tax. opt-out cities now have the option or levying- 88% of the transit tax 'to be assessed to their communities, which funds must be kept in a separat:.a rund entitled IIreilacement )) frans1"t: lI11qt1." Ifh.lle :tunas cai1B\en~~. uie~ to pa 1!~r "ni-" '\ o eratin an ca ital c or the apt-out transit systems in ) ase communit~es. The choice of the opt-out citr to levy the transit tax bas no affec~ on that city'S ~eVY ~~m~t. The benefit to the opt-ou~ cities in choosing to levy the tax is that the opt-out cities will have full use or the 88t of the transit tax dollars without having to submit a budqet for approval to the Met council. Further, the cities can use the full 88% of taxes levied far projects and service in their area by carrying over funds not expended in a year's time rather than losinq those funds to the reqion. If the opt-out city chooses not to levy the tax at all, the tax will be levied by the Met Council and the opt-out systems will qo through the same budget process that they have used in the past. if the opt-out city chooses to levy the tax, it must levy an amount sufficient to provide the same leve~ of service as the existinq service. The city cannot choose to cut taxes by levying a lesser amount ror the transit tax because the amount o~ the transit tax is set by the legislature and any amount not 1evied by the city will be levied by the Met Council. For example, if the city chose to levy on~y 50% of the transi~ ~ax ~o be levied in i~s city, the Met Council would 1evy the other 50'. Therefore, the sta~u~e does not affect the amount of the transit tax that will be levied in opt-out cities, what it does is give the cities the option of levying the tax directly and baing able to use tho.. ~unds without the added step of requesting financial assistance from the Met counci1. -")- MN VALLEY TRANSIT I~U'UlL ,i,}'j J0:71 Prior Lake 19] 005 r. UU..J . _____Q5L10/96 FRI 16:19 FAX 6128827600 -. -. -. ..1.... 4" .IU\II\,I/ 4Y..... UL..JI 1.1. funl,nUn.I ( The City will conduct:. its 'rruth in 'laxation hearinqs as in the past, with the transit tax included. J:t is in the 1:>es"t interest af Minn..ota Valley that all of its Member Cities make a consistent decision with respect to the transit 1:.ax. :r recomaend that the cities consider amending the 301nt Powers Agreement to provide that all six cities wi11 elect each year to levy the transii: tax. Since i:he amount o"! the transit 'tax is set by statute, the affect of this agreement is for the cities to choose to levy the tax themselves rather than permittinq the tax to be levied by the Met Ccunc:il. 10252-9607'2\32192 -"\- MINNESOTA Department of Revenue Property Tax Division Mail Station 3340 Phone (612) 296-3155 St. Paul, MN 55146-3340 Fax (612) 297-2166 May 28, 1996 Frank Boyles .City Manager City of Prior Lake 16200 Eagle Creek Ave. Prior Lake, Minnesota 55372-1714 Dear Mr. Boyles: The payable 1997 transit services levy limitation for operating costs and capital expenditures for the city of Prior Lake has been determined. This levy limitation is determined and certified under Laws 1996, Chapter 455, Article 5, Section 4 (M.S. 473.388, Subd. 7). The enclosed table shows the determination of this levy limitation. The "PUT hV"IT TPl}1l1res th~t ~ mYBieipality ~)/hich.-i"tp.nd~ to exercise the transit services / local levy option for the taxes payable year 1997 must notify the Department of Revenue V 'and the Metropolitan CounciL of its inteQl..Q..ILQtbefore June 30, 1996. The notification must i c . ~e..mwHGipa~:S proposed transit tax for ievy year 1996-:- taxes payable 1991-. If your city intends to levy a transit tax under the transit services local levy option for the taxes payable year 1997, please send us a certification of your city's intent along with a certification of your city's proposed payable 1997 transit tax on or before June 30, 1996. If the required certification is not received by the due date, your city may not levy a transit tax for the taxes payable year 1997. If you have any questions concerning this letter or the enclosed table, please contact me. Sincerely, iicM4~ Richard B. Gardner Research Analyst Supervisor Senior Enclosure cc: Richard P. Johnson, Associate Regional Administrator Metropolitan Council Tim Fleetham, Budget Coordinator Metropolitan Council An equal opportunity employer TTYITDD: (612) 215-0069 1. Payable 1996 Met. Council Transit Tax Revenues in City a. Net Tax Payable (Spread Levy) $ 197,370 b. Fiscal Disparity Distribution Tax 34,151 c. Homestead and Agricultural Credit Aid (HACA) 67,804 d. Total (a + b + c) $ 299,325 2. Beginning Levy Limit Base for City (88% of Line 1 d) $ 263,406 3. Payable 1995 Total Taxable Market Value * $ 470,730,200 4. Payable 1996 Total Taxable Market Value* $ 538,220,400 5. Payable 1996/Payable 1995 City Market Value Ratio (4/3) 1.143373 6. Payable 1997 Levy Limit (2 x 5) $ 301,171 "..- * Includes tax increment values, fiscal disparity values, and powerline credit values. However, the amounts shown are after (1) limited market value adjustments and (2) market value exclusions for improvements made to qualifying homestead property ("This Old House" exclusions). Prepared by: Minnesota Department of Revenue Property Tax Division May 28, 1996