League Signs Joint Letter Urging Governor s Commitment to Transportation Funding

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2 Page 2 of 21 League Signs Joint Letter Urging Governor s Commitment to Transportation Funding The letter, which was signed by 17 organizations, requests a meeting with Gov. Dayton and supports his call for a long-term comprehensive transportation funding package. The League is one of 17 organizations that has signed onto a letter calling for Gov. Dayton to demand that the transportation budget that reaches his desk be a longterm comprehensive transportation funding package containing increased constitutionally dedicated money and funds from the sales tax on auto parts. View the letter to Gov. Dayton (pdf) (Link to: In addition to requesting a meeting with Gov. Dayton, the letter asks that as he works with legislative leaders to finalize a transportation budget bill for the coming biennium and a capital bonding bill, he argues for legislation that: Statutorily dedicates all of the sales tax attributable to the sale of auto parts to the Highway User Tax Distribution Fund. Increases constitutionally dedicated user fees that are deposited into the Highway User Tax Distribution Fund. Provides additional funding to address the shortfall faced by metropolitan area transit. Allows local governments authority to raise revenue and make plans for their communities to address future transportation needs, including transitways. Authorizes trunk highway bonds to fund the Corridors of Commerce program. Addresses funding needs for state highways, local roads and bridges, and transit systems serving residents in Greater Minnesota as well as the metropolitan area. The move comes after advocates failed to convince the Legislature to include key funding mechanisms in the conference committee report on HF 861 HF 861 (Link to: number=hf861&type=ccr&version=0&session=ls90.0&session_year=2017&session_number=0), the omnibus transportation finance bill. Read a Bulletin story about the transportation conference committee agreement (Link to:

3 Page 3 of 21 Gov. Dayton may receive and veto HF 861 as soon as May 15. Contact the governor and legislators City officials are urged to contact Gov. Dayton s office to support his position on a long-term comprehensive transportation funding package. Members are also encouraged to continue pushing legislators to work toward a transportation budget compromise that will make meaningful long-term investments in Minnesota s transportation system. Read a Bulletin story about Gov. Dayton s proposed transportation budget (Link to: Read a Session Daily story about the transportation conference committee agreement (Link to: Read the current issue of the Cities Bulletin (Link to:

4 Page 4 of 21 Upcoming Senate Vote: Ordinance Notification Mandate How would a mandate for a 10-day notice on all proposed city ordinances affect your city? (Published May 15, 2017) As we enter the last week of the legislative session, it is anticipated the Senate will soon hear SF 1224 (Link to: (Sen. Andrew Mathews (Link to: R-Milaca), a bill that would create a new state mandate for cities to provide a 10-day notice of proposed ordinances. The House passed the companion bill, HF 1242 (Link to: (Rep. Chris Swedzinski (Link to: R-Ghent), with a vote of on May 1. We need your help If you have concerns about the bill, please do the following: Contact Sen. Mathews (Link to: and your senator to express your concerns about how this bill would impact your city. Contact League staff member Irene Kao (ikao@lmc.org (Link to: mailto:ikao@lmc.org) ) with examples of how this bill would impact passing ordinances in your city. City concerns The League will provide a letter to the Senate floor explaining some problematic issues with a 10-day notice, including: Cities with biweekly city council meetings. For city councils that meet every other week, a 10-day notice leaves very little time (one to two days) for city staff to draft an ordinance when a city council requests it for the next meeting. It would be nearly impossible to meet this timeline, so the ordinance would need to wait until the following meeting (four to five weeks out). Almost 300 cities meet biweekly; over half of them have fewer than 5,000 residents. Small cities. With limited staff and fewer resources, it is difficult for small cities to responsibly study an issue, get legal guidance, draft an ordinance, and send notification or post notice 10 days before a council meeting. Over 700 of Minnesota s 853 cities have fewer than 5,000 residents.

5 Page 5 of 21 Interim ordinances. (Anticipated floor amendment to address this concern.) Cities use interim ordinances when they come across unanticipated situations and need to act quickly. A 10-day requirement would hinder a city s ability to respond as needed. (Earlier this session, the League worked on SF 201 (Link to: /HF 330 (Link to: which includes a threeday notice for interim ordinances related to residential housing development; this bill would likely extend the notice and delay housing development.) How notification would need to be provided Ten days before a city council meeting where the proposed ordinance is first discussed, a city would need to satisfy notification requirements by: Providing notification of any proposed ordinances if they are a city with an electronic notification system that distributes general city information or notices through . Posting of a physical copy of the notice of a proposed ordinance if a city doesn t have an electronic notification system. Updating the city website to reflect the notice information and proposed ordinance language if a city posts ordinances on its website. When a person applies for a new business license or business license renewal, a city must also share the above notification procedure. A floor amendment is anticipated to clarify this language. What are the consequences of not following these requirements? The bill contains language indicating that failure to provide this notice does not invalidate an adopted ordinance. For more background information about this topic, read a previous Bulletin article (Link to: Read the current issue of the Cities Bulletin (Link to: Your LMC Resource

6 Page 6 of 21 Contact Irene Kao IGR Counsel (651) or (800) ikao@lmc.org (Link to: mailto:ikao@lmc.org) Contact Gary Carlson IGR Director (651) or (800) gcarlson@lmc.org (Link to: mailto:gcarlson@lmc.org)

7 Page 7 of 21 Omnibus Tax Bill Awaits Final Approval from Legislators; Then Faces Likely Governor s Veto Out of the ashes, the House, Senate, and governor will almost certainly try to negotiate a replacement bill. (Published May 15, 2017) The fluid nature at the end of every legislative session is a bit more uncertain this year as progress on the state has ground to a halt with Gov. Dayton s veto on May 12 of the first five budget bills and an unforeseeable delay in action on the remaining four budget bills and the omnibus tax bill. With little time remaining in the regular legislative session, negotiations between the House, Senate, and governor will likely focus on provisions included in the vetoed bills, budget and tax initiatives originally proposed by the governor, and concerns enumerated in his veto messages to the Legislature. Encourage lawmakers to pass these tax provisions With the outcome of a final omnibus tax bill still uncertain, let legislators and the governor know that many tax provisions being discussed would positively impact cities. These provisions include: Simplified exemption for construction materials purchased for local government projects by contractors. The bill allows cities, other local units of government, or certain nonprofit entities using a contractor, subcontractor, or builder to secure the sales tax exemption on construction materials and supplies used in buildings and facilities used principally by the government entity. This sales tax exemption is estimated to reduce the cost of materials used in an array of public projects, including roads and projects funded in any approved bonding bill by roughly $20 million per year. Local government aid (LGA) appropriation increase. The current tax bill increases the LGA appropriation by only $6 million and for aids payable in 2018 only. The governor included a $20 million permanent increase in the LGA appropriation. The League s policies call for at least the restoration of LGA to the 2002 level of $587 million. LGA formula error fix. Without an appropriation increase in 2017 LGA, an error in the formula was discovered that impacted 20 cities by reducing their LGA. The agreement fixes the drafting error, but does not include the retroactive increase in the 2017 LGA for the 20 impacted cities that had been included in the House bill.

8 Page 8 of 21 Workforce housing tax increment financing (TIF). The current tax bill includes a new TIF authorization that provides an additional tool to encourage development of housing in qualifying areas where housing deficiencies exist. Adjusted income limits for existing affordable housing TIF districts that receive Minnesota Housing Finance Agency (MHFA) Challenge funds. In addition to the workforce housing TIF authorization, the current tax bill makes no changes to the existing income limits of MHFA s Challenge program; rather, it applies those higher income limits (80 percent of statewide median income, which is roughly $62,000) to affordable housing TIF districts that are also funded with Challenge funds. Current income limits for affordable housing TIFs are 20 percent of units need to be at 50 percent statewide median income, or 40 percent of units need to be at 60 percent statewide median income. Proposed levy certification date change for special taxing districts. The current tax bill changes, from Sept. 15 to Sept. 30, the date by which towns and special taxing districts must certify their proposed levy to the county auditor. Redefined agricultural containment exemption. The current tax bill significantly narrows the property tax exemption for agricultural chemical containment facilities. This change will benefit cities that are host to agricultural chemical containment facilities, which became exempt this year. City sales tax and TIF requests In addition to general law provisions, the bill includes a number of special law requests from cities. The adopted local sales tax provisions include: Duluth food and beverage tax and local lodging tax Mankato sales tax extension Hermantown sales tax extension New Ulm sales tax use expansion Proctor sales tax rate increase Albert Lea sales tax extension Worthington sales tax modification North Mankato sales tax extension East Grand Forks sales tax authorization Fairmont sales tax authorization Fergus Falls sales tax authorization Moose Lake sales tax authorization New London sales tax authorization Spicer sales tax authorization Walker sales tax authorization Sleepy Eye special lodging tax authorization

9 Page 9 of 21 The adopted local TIF provisions include: Burnsville Seaway Port Authority Edina Maple Grove Anoka Coon Rapids Cottage Grove Moorhead Richfield (two districts) St. Louis Park St. Paul Wayzata As the final week unfolds, watch for Capitol Updates from the League on the omnibus tax bill and other major legislation. For more information about the omnibus tax bill, read a previous Bulletin story. (Link to: Read the current issue of the Cities Bulletin (Link to: Your LMC Resource Contact Gary Carlson IGR Director (651) or (800) gcarlson@lmc.org (Link to: mailto:gcarlson@lmc.org)

10 Page 10 of 21 Transportation Conference Committee Report Completed The measure, which may be vetoed as soon as May 15, relies on general fund shifts and borrowing, and fails to adequately fund city streets and regional transit. (Published May 15, 2017) The transportation funding conference committee has ironed out differences between the House and Senate bills (SF 1060 (Link to: version=latest&session=ls90&number=sf1060&session_year=2017&session_number=0) /HF 861 (Link to: ) and sent a conference committee report to the floors of both bodies. A conference committee report is what the committee refers to the full House and Senate for a final vote before sending a compromise bill to Gov. Dayton. The measure passed off the House floor on May 10 on a vote of It is awaiting final action by the Senate before heading for Gov. Dayton s desk for consideration. The governor may receive the bill as early as May 15, and he is expected to veto it. The agreement The agreement is focused on infusing new funds into the Highway User Tax Distribution Fund (HUDTF), the account used to fund roads and bridges. It transfers about $328 million in auto parts tax revenues out of the general fund and into the HUDTF over the next two years. This is lower than the $450 million originally proposed in the House omnibus transportation bill, and the $400 million that was proposed in the Senate version. The measure also relies on substantial borrowing, proposing $600 million in bonding. It proposes that $300 million be dedicated to the Corridors of Commerce program and another $300 million for state road construction. See the conference committee report (Link to: number=hf861&type=ccr&version=0&session=ls90.0&session_year=2017&session_number=0) See the conference committee spreadsheet (pdf) (Link to: Short on city street and regional transit funding While the agreement does provide new revenue for roads and bridges funded with the HUDTF, it does not include the League s proposal to enact license tab fee and motor vehicle title transfer surcharges to fund city streets in large and small cities. The current conference committee report restores some of the cuts made to

11 Page 11 of 21 Metropolitan Transit in an earlier version of the bill. However, transit advocates maintain the funding level for transit in the agreement is inadequate. League position on record Last month, the League provided testimony before the conference committee, saying the League supports omnibus transportation funding that is comprehensive, multimodal, and sustainable. The League also raised concerns that neither the House nor the Senate bill provides enough revenue to assist cities with nonmunicipal state aid city streets. The League provided a letter for the record that more fully articulates the concerns of cities. View the League s letter (pdf) (Link to: With few exceptions, other testifiers expressed disappointment with the bills, saying neither adequately addresses Minnesota s growing transportation needs. The League also signed a joint letter to Gov. Dayton encouraging him to demand a long-term comprehensive transportation funding package containing increased constitutionally dedicated money and funds from the sales tax on auto parts. Read more about the letter to the governor (Link to: Next steps The governor has made public statements that he may be willing to sign a bill that dedicates revenues from motor vehicle parts to provide new funding for roads and bridges. This is a major shift from his longstanding position demanding a gas tax increase. The bill, as it emerged from conference committee, still falls short of many of the governor s demands, and he is expected to veto it as soon as May 15. Conferees and legislative leaders will be forced to rework the bill in order to reach a compromise with Gov. Dayton. For more background information about the omnibus transportation finance bills, read a previous Bulletin article (Link to: Read the current issue of the Cities Bulletin (Link to: Your LMC Resource Contact Anne Finn Assistant IGR Director

12 Page 12 of 21 (651) or (800) (Link to:

13 Page 13 of 21 Applications to Serve on LMC Board Due May 26 League members will elect new officers and directors at the Annual Conference in June. (Published ) Apply now to serve on the League of Minnesota Cities (LMC) Board of Directors and help to lead an organization that represents cities across the state. Serving on the LMC Board of Directors is both an honor and responsibility. One of the League s strengths has always been its broad and engaged membership. Its ability to serve members needs and exhibit leadership by anticipating and proactively addressing city challenges hinges on having a Board of Directors that is representative, responsible, strategic, and visionary. (The League is also accepting applications to serve on the Nominating Committee (Link to: that selects Board candidates.) Board responsibilities If you are interested in serving on the LMC Board, please review the Board s Governance Handbook before submitting an application to ensure you are aware of the roles and responsibilities. The League of Minnesota Cities Governance Handbook (pdf) (Link to: was developed by the Board to guide the manner in which Board business is conducted and to outline the values and expectations that drive Board service. Board meetings are typically held during the day on the third Thursday of the month. In addition, this year s Board planning retreat is scheduled for Sept at Ruttger s Bay Lodge in Deerwood. The League reimburses all direct expenses of Board members. Mileage is reimbursed at the current approved rate. Selection process A Nominating Committee appointed by the League president will interview candidates on June 14 at the LMC Annual Conference in Rochester. The nominated candidates will be presented to members at the annual business meeting on June 15. The committee considers the following guidelines when selecting nominees: Geographic representation City population Gender Race City position (appointed vs. elected)

14 Page 14 of 21 League experience and involvement Positions held in other organizations League members will elect a president, a first vice president, a second vice president, and four directors. If a current Board member is elected to an officer position, there would be one additional opening for a director position. How to apply To request an application packet, contact Kellie Sundheim, LMC, at (651) , (800) , or ksundheim@lmc.org (Link to: mailto:ksundheim@lmc.org). The deadline to apply is May 26. Read the current issue of the Cities Bulletin (Link to: Your LMC Resource Interested in applying for the LMC Board of Directors? Contact Kellie Sundheim Assistant to the Executive Director (651) or (800) ksundheim@lmc.org (Link to: mailto:ksundheim@lmc.org)

15 Page 15 of 21 Omnibus Pension Bill Contains Changes to PERA Plans The bill includes modifications designed to correct current funding deficiencies in several pension plans. (Published May 15, 2017) The Legislative Commission on Pensions and Retirement (Link to: completed its work last week on the omnibus pension bill, which includes changes to the Public Employees Retirement Association (PERA) Police and Fire (P&F) Plan and General Plan. The commission spent most of the past four months developing a bill designed to correct current funding deficiencies not only in the PERA plans, but also in the Minnesota State Retirement System, Teachers Retirement Association, and St. Paul Teachers Retirement Fund Association. PERA P&F modifications The bill, SF 545 (Link to: b=senate&f=sf0545&ssn=0&y=2017) /HF 565 (Link to: f=hf565&y=2017&ssn=0&b=house), contains modifications to the PERA P&F Plan recommended by the PERA Board of Trustees, including: Reducing the assumed rate of return from 8 percent to 7.5 percent. Resetting the amortization date to 2047 (the date by which the plan is projected to be fully funded). Eliminating the current law cost-of-living adjustment (COLA) trigger. The current COLA trigger is problematic because financial changes, including contribution increases, would first serve to accelerate the increase in the payment of the COLA rather than improving the plan s financial status. Eliminating deferred augmentation, which increases the benefit for individuals that leave covered public service. Providing direct state aid to the fund of $4.5 million per year beginning in 2017 and increasing to $9 million in The direct state aid will reduce the need for contribution increases. Increasing the employee contribution rate from 10.8 percent to 11.3 percent on Jan. 1, 2018, and then to 11.8 percent on Jan. 1, Increasing the employer contribution rate from 16.2 percent to percent on Jan. 1, 2018, and then 17.7 percent on Jan. 1, PERA General Plan modifications The PERA Board did not recommend changes to the PERA General Plan because the plan is projected to move slowly toward full funding. However, the plan has a

16 Page 16 of 21 funding deficiency equal to 3.5 percent of salary that will prevent it from reaching full funding by the current amortization date. The bill includes changes to the PERA General Plan to address this deficiency, including: Reducing the assumed rate of return from 8 percent to 7.5 percent. Resetting the amortization date to 2047 (the date by which the plan is projected to be fully funded). Eliminating the current law cost-of-living adjustment trigger. Eliminating deferred augmentation, which increases the benefit for individuals that leave covered public service. Eliminating early retirement augmentation. Eliminating COLAs for early retirees until normal retirement age. Reducing the interest rate applied to refunds of contributions from 4 percent to 3 percent. The bill does not include employee or employer contribution increases for the PERA General Plan. Next steps The recommendations of the Pension Commission must travel through the normal House and Senate committee process and ultimately be approved by each body. The Senate version of the bill has been considered by all committees, while the House version of the bill has two remaining committee stops before reaching the House floor. At this point, it is unclear whether the bill will make it to the governor, or whether he will sign it. For more background information about the pension bill, read a previous Bulletin story. (Link to: Read the current issue of the Cities Bulletin (Link to: Your LMC Resource Contact Gary Carlson IGR Director (651) or (800)

17 Page 17 of 21 (Link to:

18 Page 18 of 21 Interim Ordinance Bill Goes to Gov. Dayton The Senate clarified how abstentions affect the two-thirds majority vote that the bill requires to pass an interim ordinance related to housing proposals. (Published May 15, 2017) HF 330 (Link to: a bill that would increase requirements for certain interim ordinances, has been approved by both the House and Senate and will now go to Gov. Dayton. The Senate amended and passed HF 330 by a vote of on May 8. The House on May 10 voted in favor of the bill as amended. The bill is authored by Rep. Jim Nash (Link to: R-Waconia, and Sen. Dan Hall (Link to: R-Burnsville. The Senate addressed how abstentions by city councilmembers impact the supermajority requirement in this bill. Overview of bill The bill applies only to interim ordinances related to housing proposals. Provisions include: Definition of housing proposals. Written requests for projects primarily intended to provide residential dwellings and (1) either involve the subdivision or development of land, or (2) involve the demolition, construction, reconstruction, alteration, repair, or occupancy of residential dwellings. Supermajority voting requirement. A two-thirds vote of councilmembers who are (1) present at the meeting, and (2) eligible to vote is required. The Senate amendment includes this second consideration in determining how many councilmembers are needed to vote in favor to pass this type of interim ordinance. Public hearing required. After providing notice, the public hearing must be held at the next regularly scheduled meeting or within 10 days of the notice. Notice to certain individuals. At least three business days before the public hearing, written notice must be provided to any person who has: Submitted a housing proposal. A pending housing proposal. Provided a written request to be notified of this type of interim ordinance.

19 Page 19 of 21 No construction before public hearing. Activities to be restricted by the interim ordinance must not be undertaken before the public hearing. League s position The amended bill was the result of compromise. The League does not support this bill but appreciates the authors and proponents for addressing city concerns, which has allowed the League to move to a position of neutrality. For more background information about this topic, read a previous Bulletin article. (Link to: Read the current issue of the Cities Bulletin (Link to: Your LMC Resource Contact Irene Kao IGR Counsel (651) or (800) ikao@lmc.org (Link to: mailto:ikao@lmc.org)

20 Page 20 of 21 Help Select 2017 League Board Apply by May 26 to participate on the LMC Nominating Committee. (Published ) You can play an important role in the selection of new members of the 2017 League of Minnesota Cities (LMC) Board of Directors. Apply by May 26 to be part of the Nominating Committee that determines Board candidates worthy of serving the League and its more than 830 member cities. (The League is also accepting applications for the Board of Directors (Link to: LMC President Rhonda Pownell, mayor of Northfield, is expected to appoint the Nominating Committee by the end of May. The Nominating Committee is made up of eight to 12 city officials, consisting of both elected and appointed officials. Everyone is encouraged to apply. The League reimburses Nominating Committee members for expenses incurred for serving on this committee. Once the Nominating Committee has been selected and members have been notified, there will be an hour-long conference call to provide information on the Nominating Committee process and guidelines for conducting the Board candidate interviews and deliberation process. If you are providing a letter of reference for an individual who plans on applying to the LMC Board of Directors, we ask that you refrain from applying to be on the Nominating Committee. This will ensure that no conflicts of interest arise during the process. The committee will convene early on the morning of June 14 at the 2017 LMC Annual Conference in Rochester to interview candidates for the positions of president, first vice president, second vice president, and four director positions. The committee s recommendations will then be presented to the entire membership at the annual business meeting on June 15. City officials interested in serving on the Nominating Committee should contact Kellie Sundheim, LMC, by May 26 at (651) , (800) , or ksundheim@lmc.org (Link to: mailto:ksundheim@lmc.org). Read the current issue of the Cities Bulletin (Link to:

21 Page 21 of 21 Your LMC Resource Interested in serving on the Nominating Committee? Contact Kellie Sundheim Assistant to the Executive Director (651) or (800) (Link to:

22 Current Grant Opportunities Page 1 of 1 Current Grant Opportunities Disability Services Innovation Grants The Minnesota Department of Human Services is offering a new disability services innovation grants program. These grants promote innovative ideas to improve outcomes for people with disabilities. Funded projects will include new ways to help people with disabilities in Minnesota work in rewarding jobs, live where they choose, and connect with others in their communities. Learn more and apply for the grant (Link to: Aquatic Invasive Species Grants The Initiative Foundation announces an open process (no deadlines) to apply for funds for projects that implement or expand innovative and comprehensive pilot projects to prevent the introduction or spread of aquatic invasive species (AIS) into the surface waters of Minnesota. A total of $3.6 million will be awarded for pilot projects and an assessment of their effectiveness. The grant program was approved by the Minnesota Legislature from the Outdoor Heritage Fund, one of four funds of the Clean Water, Land, and Legacy Amendment passed in It is intended to fund pilot projects anywhere in Minnesota that are legal, effective, and financially sustainable methods of preventing the spread of AIS through a range of communication, education, and outreach efforts; inspection and decontamination; enforcement; containment; and/or other methods than can be administered locally. Learn more and apply for the grant (Link to: Read the current issue of the Cities Bulletin (Link to: Learn More! (Link to: