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Fiscal Disparities Program

Fiscal Disparities Program. Presented to Board of Estimate and Taxation. Fiscal Disparities: The Concept. Unique to Minnesota since early 1970s The Atlantic “The Miracle of Minneapolis” March 2015 Iron Range added in mid-1990s Automatic System of Tax Base Redistribution 7 county metro area

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Fiscal Disparities Program

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  1. Fiscal Disparities Program Presented to Board of Estimate and Taxation

  2. Fiscal Disparities: The Concept • Unique to Minnesota since early 1970s • The Atlantic “The Miracle of Minneapolis” March 2015 • Iron Range added in mid-1990s • Automatic System of Tax Base Redistribution • 7 county metro area • No annual vote (unlike LGA) • Formula driven (tax base, tax rates, population) • Amount contributed to pool not directly correlated to the amount received from the pool

  3. Goals of Fiscal Disparities • Promote regionalism • Equalize tax base among all jurisdictions • Reduce competition for businesses • Flatten business’ tax bill to reduce incentive to locate only in low tax rate communities • Primary author: Charlie Weaver (R) Anoka

  4. Reality • Most business do not understand how taxes are calculated • 30% to 40% of a business local tax bill is an attributable to an “area-wide tax rate” that is higher than local rate • Communities still compete • Not as intensely as in other states • Tax base disparities among communities have been reduced • Communities change over time

  5. Minneapolis’ History: Net from Fiscal Disparities Pool

  6. Why the Dramatic Change? • More Contribution to Pool • Commercial/Industrial (C/I) values increased by 16% in pay 2016 from new growth and inflation • Less Distribution from Pool • With residential, apartment, and C/I values rising more rapidly than rest of region, Minneapolis’ market value/capita is rising. • When tax rates drop, distribution dollar amount drops

  7. Fiscal Disparities: The Math • Contribution to the Pool • 40% of C/I growth since 1971 • Now measured in tax capacity • Minneapolis for Taxes Payable in 2017 • $180,058,727 is C/I tax capacity (lagged by one year) • $24,376,294 was 1971 C/I value • = Increase of $155,682,433 • Times 40% is $62,272,973 = contribution value • This is 31% of total C/I value or contribution ratio

  8. Contribution Value: History

  9. Fiscal Disparities: Distribution • Fiscal capacity compared to average metro fiscal capacity • Fiscal capacity defined as equalized market value per capita • Minneapolis 1.0645% for 2017 • Distribution comes in the form of a dollars to reduce the levy of cities, counties, and school districts

  10. Distribution Value (Dollars)

  11. How Does Minneapolis Compare$ Amount of Net Contribution

  12. How Does Minneapolis Compare? • Minneapolis is 4x to 5x the tax base of the other larger Hennepin County cities • If fiscal disparities was eliminated, net tax base would increase by 2% to 2.5% • Rate of change for Minneapolis is accelerated • Likely to continue for next few years

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