County Option Revenue

Reform Initiative

Representative Paul Marquart

Monday, March 23, 2009
 Highlights of County Option Revenue
Reform Initiative
2

• Gives counties a new option to raise revenue to protect

property taxpayers, save jobs, and provide essential
services.

• Helps solve the state’s budget problems into the future.

• Provides counties with a more stable source of revenue than state

funded County Program Aid.

• Reforms and strengthens the state and local fiscal relationship.

• Moves toward elimination of inequities caused by individual city local

sales taxes.
 Property Tax Burdens are Increasing
3

In 2010, the property tax is projected to surpass the income tax

as the number one revenue source in Minnesota for the first time
in over a decade.

Under the Governor’s proposal, local property taxes will increase

$626 million over the next three years.

Since 2002 property taxes have increased 67 % ( $3.1 billion)

statewide and 86 % on homeowners.

Under this initiative, roughly 50 % of new revenues would go to

eliminate the property tax increases that would occur under the
Governor’s proposal.
 The share of Property Taxes have increased substantially
between 2004 and 2010, while Sales Taxes have decreased.

2004 2010

Sales
Sales 24.0%
Income Income
28.2 % Income Income
38.0 % 37.3%
Property Property
Sales Sales
Property
38.7%
Property
33.8 %

Price of Government Report

 County Option Revenue Reform Details
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The reform initiative gives all counties the option of imposing a

1/2 cent sales tax, subject to a reverse referendum, rather than
raising property taxes to recoup cuts in state aid proposed by the
Governor.

Counties choosing this revenue option would retain a portion of

state County Program Aid.

Aid payments are adjusted to equalize for varying sales tax

capacity between the counties.
 Why Local Control?
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Sales tax rates of more than 6 ½ % already exists in 23 cities and

cover more than 1/3 of the state’s population.

57 % of all taxable sales in Minnesota are subject to a local sales tax.

The initiative reduces the revenue inequities caused by the

patchwork of local option sales taxes imposed by cities across the
state. Under the proposal, counties that impose the sales tax would
take over the obligations funded by the city sales tax. The city-level
tax would be eliminated.

Helps property owners stay in their homes in tough economic times.

Taxpayers have more control over the level of sales tax they pay than
the property tax.
The Reform Protects Property Tax Payers,
Jobs, and Local Government Aid
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Reduces cuts to Local Government Aid.

Estimated to save up to 1,500 jobs across the state.

Essential services are protected.

Keeps property tax increases in check.

Realizes long term state budget savings of at least $ 100

million per year.
 Fillmore County Example
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Governor’s Proposal for 2010

2009 Fillmore County Base CPA $ 1,081,00

Fillmore County share of Governor’s proposed cut - $ 355,000

Total Fillmore County CPA under Governor $ 726,000

Reform Proposal for 2010

If Fillmore County imposes a ½ cent sales tax $ 601,000

CPA revenue after sales tax equalization reduction + $ 794,000

Total County Revenues under Reform plan $ 1,395,000

In 2010, Fillmore County could gain $669,000 more than under the
Governor’s proposal. More than 50% of the revenue, or $355,000, would go
to eliminate the property tax increases that might otherwise occur because of
the Governor’s proposed aid cuts. The remaining new revenue would go
toward funding essential services.
 Hennepin County Example
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Governor’s Proposal for 2010

2009 Hennepin County Base CPA $ 33 million

Hennepin County share of Governor’s proposed cut - $ 27 million

Total Hennepin County CPA under Governor $ 6 million

Reform Proposal for 2010

If Hennepin County imposes a ½ cent sales tax $ 63 million

CPA revenue after sales tax equalization reduction + $ 0 million

Total County Revenues under Reform plan $ 63 million

In 2010, Hennepin County could gain $57 million more than under the
Governor’s proposal. $27 million of that would go to eliminate property tax
increases that might otherwise occur because of the Governor’s proposed aid
cuts. The remaining new revenue would go toward funding essential services.