MARSHALL - In an effort to address long-term issues relating to tax reform in Minnesota, a group of mayors has been tapped by Gov. Mark Dayton to make up a Local Government Aid panel.
The group, which met Thursday in St. Paul, includes 15 mayors from throughout the state. One of those mayors, Dave Smiglewski of Granite Falls, said Thursday that cities both large and small are in the same boat when it comes to facing LGA and property tax issues.
"LGA is such a big deal in rural Minnesota, but it is in the suburbs, too," he said. "Richfield, for example, has a lot of property tax revenue but a lot of needs, too. Greater Minnesota - Cloquet, Worthington, Buffalo Lake, Granite Falls - we've got some good representation on the panel. LGA and property tax issues mean different things to different towns."
The group is called the Tax Reform Advisory Group for Local Government Aid. It will review and discuss policy issues related to Local Government Aid, specifically on how to best pay for local services while holding local property taxes down. The work of this advisory group will directly support Dayton's comprehensive tax reform proposal, which will be presented to the 2013 Legislature.
According to a news release from Dayton's office, the amount of LGA distributed to Minnesota cities is about half of what it was a decade ago, "which has hurt cities' ability to provide critical services like police, fire, snow plowing and street maintenance. Legislative decisions to reduce local aid has also resulted in the state shifting budget deficit problems onto local governments, forcing them to reduce their budgets and increase local property taxes - the most regressive and unfair of all state and local taxes."
Smiglewski said one member of the panel used a three-legged stool as a visual in how taxes affect cities, with three separate taxes - sales, income and property - each representing one of the legs. He said while the stool stood fine 10 years ago, today, that wouldn't be the case because of the tax imbalance shifting because of steadily rising property taxes.
"Those are the three main sources of funding for public services in Minnesota, be it local or statewide," Smiglewski said. "So we need to look at this long-term, not just responding to an immediate crisis - how can we really fix what's going on. The governor's reaching out to cities as partners with the state, so we can continue to deliver critical services to residents. We've seen property taxes go up and up and up, and the idea is to get a balanced look at all of it."
Smiglewski said the panel will look out for both homeowners and businesses, since the loss of the Market Value Homestead Credit has resulted in some shifts in property taxes to commercial properties as well as homeowners.
"We need those businesses to have the tools they need to keep people employed," Smiglewski said.
The group, which is co-chaired by Minneapolis Mayor R.T. Rybak and St. Cloud Mayor Dave Kleis, will meet periodically throughout the year and will receive support from the Department of Revenue.