HomeMy WebLinkAboutSP June 18, 2002
" CITY OF ANDOVER
1685 CROSSTOWN BOULEVARD N,W. . ANDOVER, MINNESOTA 55304. (763) 755-5100
FAX (763) 755-8923 . WWW.CI.ANDOVER.MN.US
SPECIAL CITY COUNCIL MEETING
2003 BUDGET WORKSHOP
June 18,2002 - 5:30 p.m.
AGENDA
1. Call to Order
2, Proposed Council Fiscal Policies affecting 2003 Budget
Preparation
3, Legislative Issues affecting Municipal Finances
4. Council Budgetary Issues - Priorities/Questions
5. City Departments - Significant 2003 Budgeting Issues
6, Other Business
7, Adjourn
j
Proposed Council Budget Policies @
Mfecting 2003 Budget Preparation
/
Some of the key Council policy considerations that will guide the preparation of this
budget include:
I) A commitment to restrain any increase in the local tax capacity rate to a
percentage level no greater than the annual increase in the consumer price index
for the previous calendar year (2001 CPI= 1.6)\ while providing for the cost-
effective delivery of public services to a rapidly growing residential population. 2
2) A fiscal goal that works toward establishing the General Fund balance for working
capital at no less than 30% of planned 2003 General Fund expenditures.
3) A commitment to maintain the 2003 debt levy at no more than 25% of the total
levy,
4) A comprehensive review of the condition of capital equipment to ensure that the
most cost-effective replacement schedule is followed.
5) A team approach that encourages strategic planning to meet immediate and long-
term operational, staffing, infrastructure and facility needs.
6) A management philosophy that actively supports the implementation of Council
policies and goals, and recognizes the need to be responsive to changing
community conditions/concerns.
I Attachments from the Federal Bureau of Labor Statistics,
2 This assumption is dependent upon legislative impacts affecting state aids, tax capacity values, unfunded state
mandates, and other factors affecting community need including; but not limited to contracts for City services
provided by outside agencies, inflation, mandated personnel benefits, collective bargaining agreements, energy and
, fuel costs and other non-discretionary expenditure items,
I
J
News United States 4)
Department
of labor
Bureau of labor Statistics Washington, D.C. 20212
FOR TECHNICAL INFORMATION:
Patrick C. Jackman (202) 691-7000 USDL-02-289
CPI QUICKLINE: (202) 691-6994 TRANSMISSION OF
FOR CURRENT AND HISTORICAL MATERIAL IN THIS
INFORMATION: (202) 691-5200 RELEASE IS EMBARGOED
MEDIA CONTACT: (202) 691-5902 UNTIL 8:30 A.M. (EDT)
INTERNET ADDRESS: htto:/ /www.bls. gov/coi/ Wednesday, May 15, 2002
CONSUMER PRICE INDEX: APRIL 2002
The Consumer Price Index for All Urban Consumers (CPI-U) rose 0.6 percent in April, before seasonal
adjustment, to a level of179.8 (1982-84=100), the Bureau of Labor Statistics of the U.S, Department of Labor
reported today. For the 12-month period ended in April, the CPI-U increased 1,6 percent.
The Consumer Price Index for Urban Wage Eamers and Clerical Workers (CPI-W) also increased 0,6
percent in April, prior to seasonal adjustment. The April level of 175.8 was 1,3 percent higher than the index
in Apri12001.
CPI for All Urban Consumers (CPI-U)
On a seasonally adjusted basis. the CPI-U increased 0.5 percent in April. following a 0.3 fercent
increase in March, The energy index advanced sharply for the second consecutive month--up 4, percent in
April. The index forcfetroleum-based energy increased 9.4 percent, while the index for energy services was
unchanged, The foo index rose 0,1 percent in April. Grocefr store food prices were unchanged after
/ increasin~ 0.2 percent in each of the preceding two months. ruit and vegetablelrices. which rose sharply in
the first tree months of 2002, declined 1.8 percent in April. Excluding food an energy. the CPI-U rose 0.3
percent in Atril after increasing 0.1 percent in March. A larger increase in the index for shelter and an upturn
in the index or tobacco and smoking products accounted for the acceleration in April. .
Un-
Compound adjusted
Expenditure annual rate 12-mos,
Category 3-mos, ended ended
Oct. Dec. Jan. A r. '02 A r. '02
All Items -,3 -,1 .2 4.3 1.6
Food and beverages .4 .0 ,3 1.8 2.5
Housiny .0 .2 .2 3,0 2.3
Appare .4 -,6 -,7 4.6 -2.4
Transportation -2,1 -,9 .3 11.5 -1.5
Medical care .4 .3 .5 4.4 4,6
Recreation ,2 -.1 .2 2.3 1.4
Education and
communication .6 .0 .2 .3 .2 -,5 -,2 -1.9 2.0
Other goods and -.8 1.3 1.0 -.6 1.5 8.2 4.1
services -1.0 ,3
Special Indexes
EnergY -6.0 -4,9 -3.0 .9 -.8 3,8 4,5 34,1 -8,2
Foo .4 -.1 ,0 ,3 ,2 ,2 .1 1.8 2.5
All Items less
food and ener ,2 .4 ,1 .2 ,3 .1 .3 2.6 2.5
I See pages 4 through 6 for notes on chanRes introduced into the CPI in 2002 and for a note on a new
supplemental index of consumer price c ange,
During the first four months of2002, the CPI-U rose at a 3.8 percent seasonally adjusted annual rate
(SAAR), This compares with an increase of 1.6 percent for all of2001. The index for energy, which declined
13,0 percent in 2001, increased at a 28,0 percent SAAR in the first four months of2002, Petroleum-based *=
energy costs increased at a 77.5 percent annual rate, while charges for energy services declined at a 4.4 percent
annual rate. The food index has increased at a 2.4 percent SAAR thus far this year, following a 2.8 percent
rise for all of2001. Excluding food and energy, the CPI-U advanced at a 2.4 percent SAAR in the first four
months, following a 2.7 percent rise in all of2001
The food and beverages index increased 0.1 percent in April. The index for food at home was
unchanged in April, following a 0,2 percent rise in March, The index for fruits and vegetables, which had
risen sharply in each of the first three months of2002, declined 1.8 percent in April. Within the fruits and
vegetables group, the indexes for fresh fruits and for fresh vegetables declined 2.5 and 2.7 percent,
respectively, while prices for processed fruits and vegetables increased 1.0 percent. The indexes for dairy
products and for meats, poultry, fish, and eggs also registered declines in April. Within the latter category,
beef prices rose 0,3 percent, while pork and poultry prices fell 0.1 and 0.7 percent, respectively. The index for
cereals and bakery products, which fell 0.1 percent in March, increased 0.3 percent in April, reflecting a sharp
upturn in prices for flour and prepared flour mixes. The index for nonalcoholic beverages rose 0.4 percent and
the index for other food at home increased 1,1 percent. The other two components of the food and beverages
index--food away from home and alcoholic beverages--increased 0,1 and 0.2 percent, respectively.
The index for housing rose 0.3 percent in April. Shelter costs, which rose 0.1 percent in March,
advanced 0.4 percent in April. Within shelter, the indexes for rent rose 0,2 percent, owners' equivalent rent
increased 0,3 percent, and the index for lodging away from home advanced 1.6 percent. The index for fuels
and utilities increased 0,2 percent in April. The index for fuel oil rose 3.5 percent, following a 2,2 percent
increase in March. In April, the index for natural gas rose 2.4 percent, while the index for electricity declined
0,7 percent. The index for household furnishings and operations declined 0,1 percent in April.
The transportation index, which rose 1.2 percent in March, advanced 1.7 percent in April. The
increases in both months reflect the sharp runup in gasoline prices, The index for gasoline rose 8,0 and 10,1
percent in March and April, respectively, (Prior to seasonal adjustment, gasoline prices rose 9.7 and 12,8
I percent, respectively, in March and April.) In April, the indexes for new vehicles and for used cars and trucks
each declined for the fourth consecutive month, down 0.2 and 0.5 percent, respectively, During the last 12
months, the index for new vehicles has declined 1.6 percent and the index for used cars and trucks has fallen
4,9 percent. Airline fares increased for the fourth consecutive month--up, 0.9 percent in April--following
declines in each of the last six months of2001.
The index for apparel declined 0,6 percent in April, following increases of 0,5 and 1.2 percent in the
preceding two months. (Prior to seasonal adjustment, apparel prices rose 0,5 percent, reflecting the remaining
introduction of spring-summer wear,)
The medical care index rose 0.5 percent in April to a level4.6 percent above its level a year ago. The
index for medical care commodities--prescription drugs, nonprescription drugs, and medical supplies--
increased 0.2 percent. The index for medical care services rose 0.6 percent in April. Charges for professional
services rose 0.3 percent and those for hospital and related services increased 1.1 percent. The latter index has
increased at an 11.7 percent SAAR in the first four months of2002 and is 8.6 percent higher than its level in
April 2001.
The index for recreation rose 0,3 percent in April. The index for admissions to movies, theaters,
concerts, and sporting events rose 1.1 percent in April after advancing 0,9 percent in March.
The index for education and communication declined for the second consecutive month--down 0,2
percent in April. Education costs rose 0.4 percent, while the index for communication costs declined 0,9
percent. The index for telephone services declined 0,9 percent, reflecting decreases in both local and long
distance charges. Prices for personal computers and peripheral equipment continued to decline, down 0.9
percent in April and 27.8 percent during the last 12 months.
The index for other goods and services which declined 0.6 percent in March, rose 1,5 percent in April.
'\ Prices for cigarettes, which declined 3.8 percent in March, increased 6.8 percent in April, reflecting the pass
/
ftp://ftp.bls.gov/pub/news,release/History/cpi. 0 1 1 62002.news
FOR TECHNICAL INFORMATION:
Patrick C, Jackman (202) 691-7000 USDL-02-26
CPI QUICKLINE: (202) 691-6994 TRANSMISSION OF
\ FOR CURRENT AND HISTORICAL MATERIAL IN THIS
INFORMATION: (202) 691-5200 RELEASE IS EMBARGOED
MEDIA CONTACT: (202) 691-5902 UNTIL 8:30 A.M, (EST)
INTERNET ADDRESS: Wednesday, January 16, 2002
http://www.bls,gov/cpi/
CONSUMER PRICE INDEX: DECEMBER 2001
The Consumer Price Index for All Urban Consumers (CPI-U) declined 0,4
percent in December, before seasonal adjustment, to a level of 176,7 (1982-
84=100), the Bureau of Labor Statistics of the U,S, Department of Labor
reported today, For the 12-month period ended in December, the CPI-U
increased 2:.: 6 percent,
The Consumer Price Index for Urban Wage Earners and Clerical Workers
(CPI-W) decreased 0,5 percent in December, prior to seasonal adjustment,
The December level of 172,9 was 1,3 percent higher than the index in
December 2000,
CPI for All Urban Consumers (CPI-U)
On a seasonally adjusted basis, the CPI-U, which was unchanged in
November, declined 0,2 percent in December, The energy index declined
sharply for the third consecutive month, down 3,2 percent in December,
The index for petroleum-based energy declined 6,1 percent, and the index
for energy services fell 0,8 percent, The food index declined 0,1 percent
in December, the same as in November, Excluding food and energy, the CPI-
U rose 0,1 percent, following an increase of 0,4 percent in November,
Downturns in the indexes for tobacco and smoking products and for
recreation, coupled with smaller increases in the indexes for medical care
and for new vehicles, accounted for the deceleration in December,
Table A, Percent changes in CPI for All Urban Consumers (CPI-U)
Seasonally adjusted Un-
Compound adjusted
Expenditure Changes from preceding month annual rate l2-mos,
Category 2001 3-mos, ended ended
June July Aug, Sep, Oct. Nov, Dec, Dec. '01 Dec, '01
All Items .2 -.3 ,1 ,4 -.3 .0 -,2 -2.0 1.6
Food and beverages ,4 ,3 ,2 ,2 ,5 - , 1 - , 1 1,4 2,8
Housing ,4,0 .3 -.2 -.1 .4 .2 2.1 2,9
Apparel -,3 -,6 -.6 .6 ,6 -,9 -.6 -4,1 -3,2
Transportation -,2 -2,3 -,5 1,6 -2,2 -1,5 -,8 -16,6 -3,8
Medical care ,4,1,5.3,4,5,1 4,4 4,7
Recreation -.2.2,2.1,1,3 -,2 ,8 1.5
Education and
communication ,5 .5 ,5 ,0 ,6 ,1 ,1 3,1 3,2
Other goods and
services ,4 1,6 -,9 1,5 -,7 1,3 -1,0 -1,9 4,5
Special Indexes
Energy -,9 -5,6 -1.9 2.6 -6.3 -4,4 -3,2 -43,6 -13,0
Food ,4,3 ,2 ,2 ,5 -,1 -.1 1,2 2,8
All Items less
food and energy ,3 ,2 ,2 .2 ,2 ,4 ,1 2,6 2.7
See page 6 for a note on planned changes in the CPI in 2002,
1 of26 6/12/20029:54 AM
Changes in the Consumer Price Index in 2002
Expenditure Weight Update
As announced in December 1998, the Bureau of Labor Statistics (BLS) has updated the consumption
expenditure weights in the Consumer Price Index for all Urban Consumers (CPI-V) and in the Consumer Price
Index for Urban Wage Eamers and Clerical Workers (CPI-W) to the 1999-2000 period, effective with release of
data for January 2002. The newer weights replace the 1993-95 weights, which were first used in the index
effective with January 1998 data. Additionally, CPI expenditure weights will be updated at two-year intervals
subsequent to the 2002 updating. Thus, for example, CPI expenditure weights will be updated to the 2001-02
period effective with release of CPI data for January 2004.
Historically, the introduction of a comprehensive new set of expenditure weights attached to the
categories of goods and services in the CPI "market basket" has taken place in the context of the periodic major
revisions of the index. Such major revisions have taken place approximately once each decade-in 1940, 1953,
1964, 1978, 1987 and, most recently, in 1998.
The goal in employing more current expenditure weights is to have the CPI reflect, as much as possible,
the inflation currently experienced by consumers, More specifically, the use of more current weights will help
to ensure that the relative importance of CPI item categories, such as food away from home, college tuition, or
medical care services, more accurately reflects how consumers are allocating their spending.
Publication of Overlap CPIs
For the first six months of2002, BLS will continue to calculate and publish selected CPI-U and CPI-W
"overlap" indexes on a not seasonally adjusted basis. These indexes will be compiled using the 1993-95
expenditure pattem that was introduced into the CPI in 1998. Comparison of these index series to the
corresponding updated series will enable users of the CPI to observe the effects of the expenditure weight
change. The subsequent expenditure updates scheduled in 2004 and every two years thereafter also will be
I accompanied by the publication of overlap indexes for a six-month period using the previous expenditure
pattem,
Publication of CPI for the Phoenix Area
Effective with release of the July 2002 Consumer Price Index (CPI), BLS will initiate publication of
consumer price data specific to the Phoenix-Mesa, Arizona, Metropolitan Statistical Area. As with the national
CPI and other local area CPIs, data will be published for each of two population groups, that for all urban
consumers (CPI-V) and that for urban wage earners and clerical workers (CPI-W). The Phoenix-Mesa CPI will
be published on a semi-annual basis with a reference base of December 2001 = 100. The same amount of item
detail will be available for Phoenix-Mesa as is presently available for all other areas published on a semi-annual
basis,
Change to Published Item Structure
Effective with release of the January 2002 CPI, BLS began publishing an item index for leased cars and
trucks, This index series is available monthly at the U,S, City Average area level for both the CPI-U and CPI-W
with a December 2001 = 100 reference base.
ftp://ftp,bls.gov/pub/news.release/History/cpi. 0 1 1 62002,news
Consumer prices declined at a seasonally adjusted annual rate (SAAR)
of 2,0 percent in the fourth quarter, This followed increases in the
first three quarters at rates of 4.0, 3,7, and 0,7 percent, respectively,
/ For the 12-month period ended in December, the CPI-U rose 1.6 percent,
This compares with an increase of 3,4 percent for 2000 and was the
smallest annual advance since a 1,6 percent rise in 1998, The index for
energy, which registered double-digit increases in both 1999 and 2000,
decelerated sharply in 2001, declining 13.0 percent, Petroleum-based
energy costs decreased 24,5 percent, and charges for energy services fell
1,5 percent, Within the latter group, charges for natural gas declined
15,1 percent in 2001, following a 36,7 percent increase in 2000, while
charges for electricity rose 6,1 percent after increasing 2,6 percent in
2000, The food index rose 2,s-percent in 2001, the same as in the
previous year,
Excluding food and energy, the CPI-U advanced at a 2,6 percent SAAR
in the fourth quarter, following increases at rates of 3,5, 2,6, and 2,4
percent, respectively, in the first three quarters of 2001, The 2.7
percent rise in 2001 compares with a 2,6 percent rise in 2000, Larger
advances were recorded in the indexes for shelter --up 4,2 percent in 2001
compared with 3,4 percent in 2000--for communication--up 0,4 percent in
2001 after declining 3,0 percent in 2000--and for medical care, Partially
offsetting the acceleration in these components were downturns in the
indexes for airline fares and used cars and a larger decline in the index
for apparel, The annual changes for selected groups for the last eight
years are shown below,
Percentage change 12 months
ended in December
1994 1995 1996 1997 1998 1999 2000 2001
/ All items 2,7 2,5 3.3 1.7 1.6 2,7 3,4 1.6
Food and beverages 2,7 2,1 4,2 1.6 2,3 2,0 2,8 2.8
Housing 2,2 3,0 2.9 2.4 2.3 2,2 4.3 2,9
Apparel -1. 6 0.1 -0,2 1.0 -0,7 -,5 -1. 8 -3,2
Transportation 3.8 1.5 4,4 -1. 4 -1. 7 5.4 4.1 -3,8
Medical care 4,9 3,9 3.0 2,8 3,4 3,7 4.2 4,7
Recreation 1.4 2,8 3,0 1.5 1.2 ,8 1.7 1.5
Education and
communication 3,3 4.0 3,4 3,0 0,7 1.6 1.3 3,2
Other goods and
services 4,2 4,3 3,6 5,2 8,8 5,1 4,2 4,5
Special indexes
Energy 2,2 -1. 3 8,6 -3,4 -8,8 13,4 14,2 -13.0
Energy commodities 5.2 -3,3 13.8 -6.9 -15.1 29.5 15.7 -24,5
Energy services -,6 0.8 3.8 0,2 -3,3 1.2 12,7 -1. 5
All items less energy 2,6 2,9 2,9 2,1 2,4 2,0 2,6 2.8
Food 2,9 2,1 4.3 1.5 2.3 1.9 2,8 2,8
All items less food
and energy 2,6 3,0 2.6 2.2 2.4 1.9 2.6 2,7
The food and beverages index declined 0.1 percent in December, The
index for food at home decreased 0.2 percent, reflecting declines in four
of the six major grocery store food groups, The index for fruits and
vegetables declined for the second consecutive month--down 1,2 percent in
December, Within the fruits and vegetables group, the index for fresh
fruits decreased 1.8 percent, and the index for fresh vegetables fell 1,7
percent, (Prior to seasonal adjustment, fresh fruit and fresh vegetable
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prices each increased 0,8 percent,) The index for processed fruits and
vegetables rose 0,4 percent, For the 12-month period ended in December,
fresh fruit prices have risen 0.6 percent, while fresh vegetable prices
have fallen 4,1 percent, The indexes for meats, poultry, fish, and eggs
and for dairy products each declined 0,2 percent in December. Within the
former group, beef prices fell 0,5 percent, while the indexes for pork and
poultry increased 0.2 and 0,8 percent, respectively, For the 12-month
period ended in December, beef, poultry, and pork prices advanced 6,2,
4,4, and 3,7 percent, respectively, Among the other food at home groups,
the index for cereal and bakery products fell 0,1 percent in December,
while the indexes for nonalcoholic beverages and for other food at home
increased 0,1 and 0,5 percent, respectively, The other two components of
the food and beverages index--food away from home and alcoholic beverages-
-increased 0,1 and declined 0,2 percent, respectively, in December and
rose 3,0 and 2,5 percent in 2001,
The index for housing rose 0,2 percent in December, following a 0,4
percent increase in November. Shelter costs advanced 0,4 percent in
December, the same as in November, Within shelter, the indexes for rent
and for owners' equivalent rent each increased 0,4 percent, and the index
for lodging away from home rose 0,3 percent, During the 12-month period
ended in December 2001, the indexes for rent and for owners' equivalent
rent rose 4,7 and 4,5 percent, respectively, while the index for lodging
away from home fell 0.2 percent, In 2000, these indexes rose 4,0, 3,4,
and 2.8 percent, respectively, The index for fuels and utilities
decreased 0,9 percent in December and 2,1 percent in 2001, The index for
natural gas declined 2,1 percent in December and 15,1 percent during the
past 12 months after increasing 36.7 percent in 2000, In December, the
index for fuel oil declined 7,1 percent, Fuel oil prices, which increased
30,9 percent in 1999 and 40.5 percent in 2000, fell 26.7 percent in 2001,
Charges for electricity fell 0.3 percent in December but increased 6,1
percent over the past 12 months, The index for household furnishings and
operations was unchanged in December and up 0,2 percent in 2001,
,
The transportation component declined 0.8 percent in December,
reflecting a 6,0 percent decrease in the index for gasoline, (Prior to
seasonal adjustment, gasoline prices fell 8,1 percent in December,)
Gasoline prices have fallen 34.7 percent in the seven-month period
following the peak level reached in May 2001 and were 24.9 percent lower
than their level in December 2000. The index for new vehicles increased
0,2 percent in December, but was down 0.1 percent over the last 12 months,
(As of December, nearly three-fourths of the new vehicle sample was
represented by 2002 models. The 2002 models will continue to be phased
in, with appropriate adjustments for quality change, over the next several
months as they replace old models at dealerships, For a report on quality
changes for the 2002 vehicles represented in the Producer Price Index
sample, see news release USDL-01-405, dated November 9, 2001,) The index
for used cars and trucks increased 0,2 percent in December, following
declines in each of the preceding eight months. In 2001, the used car
index fell 1.9 percent after registering a 3.4 percent increase in 2000,
Airline fares decreased 0,4 percent in December, bringing their decline in
the last four months of 2001 to 6,3 percent. During 2001, airline fares
fell 3,9 percent after increasing 5,9 percent in 2000.
The index for apparel declined 0,6 percent in December, (Prior to
seasonal adjustment, apparel prices fell 3.4 percent, reflecting pre-
holiday discounting.) During the l2-month period ended in December,
apparel prices fell 3,2 percent, their fourth consecutive annual decline,
Medical care costs rose 0,1 percent in December, The index for
medical care commodities--prescription drugs, nonprescription drugs, and
medical supplies--increased 0,2 percent, The index for medical care
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Association of Metropolitan Municipalities http://www.ammI45,org/policies/revenuepolicy.htm
AMM's 2002 Policy Positions: @
(I) Municipal Revenue & Taxation
A. Levy Limits
B. Local Government Aid (LGA)
C. Sales Tax on Local Government Purchases
D. Price of Government
E. Fiscal Disparity Fund Distribution
F. Personal Property Taxation: Electric Utility
G. Revenue Diversification
H. Class Rate Tax System
I. Limited Market Value
J, City Revenue Stability & Fund Balance
K. Public Employees' Retirement Association (PERA) Under-Funding
Municipal Revenue & Taxation Committee
I-A Levy Limits
The AMM strongly opposes levy limits and urges the legislature to discontinue
them for 2003 or at a minimum not re-enact them for 2004 and beyond. The AMM
also opposes the imposition of artificial mechanisms such as valuation freezes,
payroll freezes, reverse referenda, super majority requirements for levy, or other
limitations to the local government budget and taxing process,
I-B Local Government Aid (LGA)
AMM supports the continuation of Local Government Aid (LGA), which provides
for revenue sharing between cities and the state, compensates cities for the cost of
carrying-out state mandates and helps provide all Minnesotans with an adequate
level of basic public services at a reasonable cost.
However, the program should be revised so that:
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Association of Metropolitan Municipalities http://www,ammI45.org/policies/revenuepolicy.htm
. the formula is simpler and easier to understand and communicate;
/ . the formula better reflects city "need," and utilizes more reasonable
need/ ability-to-pay criteria;
. a portion of the funds are distributed on a per capita basis;
. there is an established mechanism by which the total amount of money
appropriated for LGA grows with inflation and the economy,
Given the fact that the 2001 Omnibus Tax Bill increased the appropriation for LGA
by $140 million, no city should have received less LGA in 2002 than they did in
2001, Therefore, if the Legislature elects not to undertake an in-depth review and
updating of the LGA formula during the 2002 session, it should, at the very least,
return those cities that lost LGA to their 2001 LGA levels. This will cost less than
$4 million, which could be appropriated from the $14 million LGA reform account
created by the 2001 Legislature,
I-C Sales Tax on Local Government Purchases
The legislature should reinstate the sales tax exemption for all local government
purchases without requiring a reduction in other aids.
I-D Price of Government
The price of government calculation in regard to local governments should be
based on (1) changes in the sum of the levy and state aids, and (2) examination of
long-term trends, not single year events. In addition, consideration should be
given to service provision transfers between governmental units, increased
demand for services by citizens and legislative mandates or tax rate changes.
I-E Fiscal Disparity Fund Distribution
The AMM opposes the use of fiscal disparities to fund social or physical
metropolitan programs since it results in a metropolitan-wide property tax
increase hidden from the public,
/
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I-F Personal Property Taxation: Electric Utility
The AMM opposes proposals for exempting the Investor Owned Utilities (IOUs)
from the personal property tax, Under no circumstances should local units of
government and their taxpayers be required to shoulder the burdens of tax relief
for IOUs.
The personal property tax is a significant portion of the metropolitan fiscal
disparity pool and, if eliminated, would have a metropolitan-wide property tax
impact.
I-G Revenue Diversification
The AMM supports revenue diversification for cities to reduce the reliance on
local property taxes.
The AMM opposes legislated reduction or limitation on various license fees,
development fees, or other general fees which would force increased property tax
to pay for related services.
I-H Class Rate Tax System
The AMM opposes a change from the class rate tax system to a market value
system, which would cause tremendous shifts of tax burden between classes of
property, or applying future levy increases to market value, since this would
further complicate the property tax system.
I-I Limited Market Value
The AMM strongly opposes extension of artificial limits in valuing property at
market for taxation purposes since such limitation shifts taxes to other properties
and similar new properties will pay proportionately higher taxes. The legislature
implemented a six-year phase out of limited market value on homestead property
in the 2001 tax bill, which the AMM suggests be shortened to three years. The
AMM believes that enhanced targeting for special circumstances such as
low-income persons better serves the tax system.
I
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Association of Metropolitan Municipalities http://www,amm 145 .org/policies/revenuepolicy ,htm
I-J City Revenue Stability & Fund Balance
The legislature should not attempt to control or restrict city fund balances. These
funds are necessary to maintain fiscal viability to meet unexpected or emergency
resource needs of city governments, to purchase capital goods and infrastructure,
provide adequate cash flow and to maintain high-level bond ratings.
I-K Public Employees' Retirement Association (PERA) Under-Funding
Although the 2001 legislature increased employer and employee contributions by
.35 percent each, made some administrative changes in qualification, and
extended the amortization period from 20 to 30 years, there is still a significant
funding deficiency in PERA.
In addition to further employer/ employee contributions, the legislature should
consider the following alternatives:
. Supply PERA with state aid funded from TRA and MSRS sufficiency's as
was done in 1984 for TRA from PERA and MSRS,
. Allow former employees to take refunds enhanced by a portion of employer
contribu tions.
. Reduce guaranteed interest for deferred members' benefits,
. Increase vesting from three to five years.
. Restructure the POST fund by combining assets with the current fund,
redirect some of POST fund earnings to active funds, pay excess mortality
costs from POST rather than active funds, and extend investment returns
over a 10-year rather than 5-year period,
4of4 6/12/2002 II :57 AM
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AHociation of
Metropolitan
Municipalitie~
AMM Legislative Wrap-Up
Thursday, June 13, 2002
8:00 a.m.
AGENDA ,
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1. Introductions
2. 2002 Legislative Wrap-Up
(J - Budget Bills
- Capital Bonding
- Taxes (Economic Development)
- Public Finance
- Transportation
- Anti-Terrorism
- Proposals not adopted
3, Looking Ahead to 2003
4. Blueprint 2030 Update
5. Coming Up This Summer
- Housing Needs Discussion (June 14 at the LMc Bldg,)
- Metro Sessions @ LMc Conference
- AMM Policy Committees (beginning the week of July 15)
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145 University A venue West
Saint Paul, Minnesota 55103-2044
Telephone: (651) 215-4000
Fax: (651) 281-1299
E-mail: amm@amm145.org
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Budget Balancing
\ - No cuts to LGA or market value homestead credit reimbursement;
) Phase I cut $91 million TIF grant program;
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- Numerous state departments suffered significant staff cuts - expected to impact turn around
times on information requests, permit applications, etc.
Bonding Bill
- Legislature passed $983 million bonding bill, which included $888 million in G/O bonds;
- Governor vetoed $356,7 million, leaving $554.5 worth of projects
- Vetoed projects include $10 million for local share oftmnk highway projects, $10 million for
local routes of regional significance, $1 million for planning along the central corridor,
$500,000 for park and ride lots, and $9 million for LeA grants
Omnibus Tax Bill
- No changes in levy limits - they remain in place for 2003 - expect a very small inflationary
increase in your levy limit.
- TIF: Allows the development authority to adopt special deficit authority without pooling,
Prior law required pooling as a condition to use special deficit authority,
- Abatement: Allows twenty-year abatements for businesses where at least half of the payroll
, is for employees engaged in manufacturing, agricultural processing, mining, research and
/ development, warehousing or qualified high technology.
Omnibus Public Finance Bill
- Grants cities the authority to bond for street reconstruction, without going to a referendum,
The work has to be part of a five-year reconstruction plan, approved by a unanimous vote of
the city council, and it is subject to reverse referendum.
- Authorizes the Met Council to issue $54 million in capital bonds for Metro Transit
- Final bill did not include authorization for the Met Council to establish a Housing
Production Revolving Loan Fund.
Transportation
- no new funding for transportation;
- no gas tax increase;
- no referendum in the metro area;
- no change in the CSAH distribution formula;
- first budget balancing bill cut Metro Transit by $2,7 million, and cut $40 million previously
appropriated for the Riverview Busway in St. Paul.
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2002 Legislative Wrap-Up
AMM, June II, 2002
Anti-Terrorism - $13 Million
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) -Funding for (1) grants for local governments to purchase personal protection and chemical detection
equipment; (2) terrorism response training and setting up regional training centers; (3) coordinating
medical resources for disaster response; (4) training and equipment for 4 statewide bomb squads, (5)
adding new felons' DNA to the database, and (6) capitol security,
-Increased criminal penalties for acts of terrorism, weapons of mass destruction, and trespassing at
critical facilities such as power plants, Plus new authority to detain trespassers.
-Establishes a 27 member Homeland Security Advisory Council to distribute state and federal anti-
terrorism funding. The Council includes one city, one county, and one township official.
-NOT ENACTED was the authority for local governments to hold closed meetings to discuss
terrorism issues.
-6 cent increase in the 911 fee, starting in FY2005, 1.5 cents will go to local PSAPS for
enhancements and 1.5 cents to the 800MHz Radio Board.
-Gives the Met Council $12 million in bonding authority for 800MHz Radio sub-system and
gives counties levy authority to finance 800 MHz infrastructure.
/ Other things that did pass:
~ Restrictions on the Use of Phosphorus Lawn Fertilizers, In the metro area, zero phosphorus
fertilizer must be used unless a soil test shows the need for phosphorus or it is being used to
establish new turf. Cities can prohibit the sale of lawn fertilizers containing phosphorus, if
they do so before Aug, 1, State regulation goes into effect in 2004.
~ LeA housekeeping bill- cities no longer have to elect to participate every year- once you're
a participating city, you remain a participating city until you take action to stop. Also, LCA
grants can no be awarded to housing and redevelopment or economic development
authorities, in cases where the city agrees,
~ Met Council Reconveyance bilI- Council will be reconveying wastewater pipes that serve a
purely local purpose and will be providing a ten-year warranty on those pipes.
~ Affordable Housing - When approving a development application proposing affordable
housing, cities can negotiate with the developer to provide for the long-term affordability of
some of the housing units, through measures such as income limits, purchase price limits,
land trusts, and equity sharing.
/
2002 Legislative Wrap-Up
AMM, June 11, 2002
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, Things that did not pass:
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>- Elimination of municipal consent for roads that are part of the national highway system;
>- Prohibition on loading zone variances in MSA, CSAH and trunk highway right-of-ways;
>- Limitations on cities' authority to impose spring road weight restrictions;
>- Privatization of residential building inspections;
>- Requirement that cities allow accessory dwelling units;
>- Authorization for cities to collect a host community fee from operator of aggregate mines,
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2002 Legislative Wrap-Up
AMM, June II, 2002
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Looking Ahead
... to the remainder of 2002.
The Phase II budget balancing bill established a $300 million budget reserve (drawn from the
Tobacco Endowment), If tax collections continue to stumble and the budget shortfall worsens,
the Governor would have to use this fIrst, but then he could still unallott. With the next regularly
scheduled state forecast set for November and large payments to cities scheduled for December
(second half of LGA and market value homestead credit reimbursement), cities are at a
significant risk in any unallottment situation,
... to January, 2003.
Unless the economy and tax collections see a significant up swing in the near future, the new
legislature will convene in January facing a serious shortfall for the state's 2004 - 05 biennium,
which includes cities' 2003 aid payments. The Department of Revenue will have certified your
2003 aid payments in August of this year, but that doesn't guarantee you will receive those
amounts come July and December of2003.
Right now it is looking like the state will face a $1.4 billion shortfall for 2004 - 05 - before
inflation, Obviously, election results will have a significant impact on whether the shortfall is
addressed by raising revenues, reducing expenditures or a combination of both,
New Faces
Secondly, regardless of who controls the two houses of the legislature, there will be a significant
turn over in committee chairs, particularly in the House, A total of 44 legislators have
announced their retirements, so far, including the chairs of the following committees:
House of Representatives Senate
1. Transportation Finance (Molnau) I, Finance (Johnson, Doug)
2. Transportation Policy (Workman) 2, Rules (Moe, Roger)
3, Health & Human Services Finance (Goodno)
4, Crime Prevention (Tuma)
5. Ethics (Daggett)
6. Ag, & Rural Dev, Finance (Ness)
7, Ag. Policy (Finseth)
8, Education Policy (Mares)
9, Higher Education Finance (Leppik)
10. Regulated Industries (Wolf)
11. Ways & Means (Bishop)
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2002 Legis/ative Wrap-Up
AMM, June II, 2002