House Begins Unveiling Omnibus Tax Bill

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2 Page 2 of 19 House Begins Unveiling Omnibus Tax Bill The League opposes several provisions that are being recommended for the omnibus tax bill. The House Property Tax and Local Government Finance Division (Link to: finalized a delete-all amendment (Link to: to HF 465 (Link to: on April 20. That bill now contains the division s recommendations to the full House Taxes Committee. The League testified in opposition to a number of provisions in the bill including a reverse referendum requirement for certain franchise fees; a reverse referendum requirement for certain lease-purchase arrangements; modifications to move a number of special election requirements to the November general election; additional local government aid (LGA) penalties for legal defense spending for undocumented aliens; and an LGA withholding penalty for policies that are defined as sanctuary city policies. After several hours of review, testimony, and consideration of more than 20 amendments, the committee approved the bill and referred it to the full House Taxes Committee where many of the recommendations will be added to the omnibus tax bill. Standardizing referendum dates The bill would require elections on city, county, and school district referendum questions related to property taxes, debt, and spending to be conducted on the first Tuesday after the first Monday in November of even- or odd-numbered years. It would be effective for referendums held on or after Aug. 1, Franchise fees The bill would require public notice, a hearing, and reverse referendum on whether a city may impose a franchise fee that raises revenue in excess of the increased municipal costs due to gas or electric utility operations. The city must identify what will constitute a cost to the city, and the notice must explain the intended uses of the franchise fee revenue, the likely increase to customers utility bills, and alternative revenues the city could consider instead of imposing the fee. An ordinance or agreement that imposes a franchise fee that raises revenue in excess of the increased municipal costs related to gas and electric operations may remain in place for up to five years, and existing franchise fees that raise revenue

3 Page 3 of 19 beyond utility operational costs that would otherwise remain in place after Aug. 1, 2023, would be subject to these publication and reverse referendum requirements. It would be effective for license, permit, right, or franchise agreements entered into on or after Aug. 1, 2018, and to existing agreements that are still in effect Aug. 1, Reverse referendum approval for qualified leases The bill would require that city, county, and town lease-purchase arrangements of three or more years for real property with a housing and redevelopment authority (HRA), port authority, economic development authority (EDA), or other similar entity, when the real property was acquired or improved with obligations (bonds or other debt instruments) issued by the authority are subject to a reverse referendum requirement if petitioned by a number equal to 10 percent of those voting in the last general election. This would be effective for qualified leases entered after July 1, LGA penalties and withholding The bill would reduce a city s LGA by any amount appropriated by the city for undocumented alien legal defense. The bill would also withhold a city s LGA if the city is designated as a sanctuary city by the U.S. Department of Homeland Security, or if the city has policies in place that prohibit or in any way restrict an official or employee from: Inquiring about a person s citizenship or immigration status. Lawfully cooperating with or aiding federal officials or employees charged with enforcing immigration laws. Providing or receiving information from federal officials or employees charged with enforcing immigration laws. Maintaining citizenship and immigration status data. Exchanging citizenship and immigration status data with other federal, state, or local government entities. The mayor of each city would be required to certify the status of the city and a citizen could challenge a city s status in court. If the court changes a city s status, it may order the city to file an amended certification and notify the state auditor of the changed status. This would be effective the day after final enactment and apply beginning with the December 2018 LGA payments. Additional provisions The bill includes a number of additional provisions including:

4 Page 4 of 19 Tax abatement for medical facilities in underserved areas. Hermantown LGA adjustment for previously reduced LGA. Lilydale one-time LGA adjustment ($150,000 within FY 2019 LGA appropriation). Allocation of Hennepin County Transportation sales tax to cities of Plymouth and Maple Grove. Prohibition on local spending for zip rail in Regions 10 and 11 include the counties of Anoka, Carver, Dakota, Dodge, Fillmore, Freeborn, Goodhue, Hennepin, Houston, Mower, Olmsted, Rice, Scott, Steele, Wabasha, Washington, and Winona. Authorization for district heating projects owned by for-profit entities to qualify as public facilities projects under the Minnesota s bond allocation process. St. Cloud liquor and food tax increase. St. Cloud lodging tax increase. Cloquet local sales tax adjustment. Fire remediation grant of $2,600 to the city of Mazeppa and $2,400 to Wabasha County. TIF special laws for Minneapolis and Champlin. Property exemption from the state general property tax levy for natural gas pipeline distribution systems Read the current issue of the Cities Bulletin (Link to:

5 Page 5 of 19 House and Senate Processing Omnibus Transportation Bills Both bills address the flawed rollout of the Minnesota Licensing and Registration System, and the House version contains $101 million in general funds for transportation. (Published Apr 23, 2018) The Minnesota House and Senate Transportation committees have passed omnibus bills containing policy and funding provisions. HF 4160 (Link to: authored by Rep. Paul Torkelson (Link to: (R-Hanska), passed out of the House Transportation Finance Committee to the Ways and Means Committee (Link to: on April 18. The Senate companion, SF 3806 (Link to: f=sf3806&y=2018&ssn=0&b=senate), authored by Sen. Scott Newman (Link to: (R-Hutchinson), passed out of the Senate Transportation Finance and Policy Committee (Link to: on April 18. It was referred to the Finance Committee (Link to: cmte_id=1007&ls=90). MNLARS provisions Both bills contain substantial provisions to address the flawed rollout of the Minnesota Licensing and Registration System (MNLARS), the state s system for issuing drivers licenses, tracking ownership of motor vehicles and collecting registration fees. Gov. Dayton had recommended about $28 million in additional general fund dollars to assist with the technology problems, along with $10 million to reimburse deputy registrars. The Senate bill includes $15 million for Driver and Vehicle Services (Link to: and $9 million for deputy registrars, while the House bill contains just $9 million for deputy registrars. House bill funding With a projected general fund surplus of $329 million for the fiscal year (FY) biennium, the House set budget targets that provided $101 million in general fund revenue for transportation. The new funding in the House bill is distributed as follows: Highway Trust Fund: $75.27 million Rochester airport equipment: $2 million

6 Page 6 of 19 New Freight Economic Development (FRED) program: $5 million Small Cities Assistant Account: $7 million Township Roads: $2 million Utility relocation costs related to the TH53 project: $5.4 million Suburb-to-suburb transit pilot project: $3.5 million In addition to the general fund dollars, the House omnibus bill authorized an additional $250 million in trunk highway bonds with $145 million for the Corridors of Commerce program, $75 million for railroad grade separation projects with trunk highways, and $30 million for a new Transportation Facilities Program that provides funding for improvements to Minnesota Department of Transportation (MnDOT) facilities. Policy provisions Many policy provisions are included in the bills, despite the fact Gov. Dayton has repeatedly stated he will veto bills that bundle budget and policy provisions. Policy provisions include: Conformity with federal weight laws. Turnback of seven segments of trunk highway to counties. Increased limit on direct negotiations for trunk highway projects from $150,000 to $250,000. Changes to reporting requirements for the Metropolitan Council. A requirement in the Senate bill that Corridors of Commerce funds be distributed so that at least 49 percent goes to the metropolitan area and 49 percent goes to Greater Minnesota. Authorization in the Senate bill for counties to increase or decrease the speed limit on county roads by resolution. Feasibility studies for expanding I-94 from St. Michael to St. Cloud and building an interchange at I-35 and County Road 9 in Rice County. Funding for a project to increase the height of a levee related to construction on a segment of Highway 169 north and Highway 14. Authorization in the House bill for state airport funds to be used for municipal airport planning. Expansion of Metro Mobility in the House bill to include Lakeville. A requirement in the House bill for MnDOT to negotiation with BNSF railroad to extend the Northstar Commuter Rail line to St. Cloud. Read the current issue of the Cities Bulletin (Link to:

7 Page 7 of 19 Your LMC Resource Contact Anne Finn Assistant IGR Director (651) or (800) afinn@lmc.org (Link to: mailto:afinn@lmc.org)

8 Page 8 of 19 Transportation Constitutional Amendment Introduced in House The measure creates a new Road and Bridge Fund in the Minnesota Constitution using revenue from the sales tax on motor vehicle repair and replacement parts and rental vehicles. (Published Apr 23, 2018) The House companion to a constitutional amendment bill advancing in the Senate was introduced on April 18. The measure, HF 4437 (Link to: f=hf4437&b=house&y=2018&ssn=0), authored by Rep. Paul Torkelson (Link to: (R-Hanska), creates a new Road and Bridge Fund in the Minnesota Constitution. This fund would receive the revenue from the sales tax on motor vehicle repair and replacement parts and rental vehicles. The League does not have a position on the measure, but will be monitoring it in the legislative process. The bill will be heard by the House Transportation Finance Committee (Link to: on April 26. The Senate companion, SF 3837 (Link to: f=sf3837&y=2018&ssn=0&b=senate), is authored by Transportation Committee Chairman Scott Newman (Link to: (R-Hutchinson). It was amended with a delete-everything amendment (Link to: in the Senate Transportation Policy and Finance Committee (Link to: on March 28 and passed to the Rules Committee (Link to: on a roll-call vote of 8-7. For more background information about this bill, read a previous Cities Bulletin article (Link to: Read the current issue of the Cities Bulletin (Link to: Your LMC Resource Contact Anne Finn

9 Page 9 of 19 Assistant IGR Director (651) or (800) afinn@lmc.org (Link to: mailto:afinn@lmc.org)

10 Page 10 of 19 Omnibus State Government Finance Bills Advance to Final Committee Stops The House bill has several policy provisions that would impact cities. (Published Apr 23, 2018) The House omnibus state government finance and policy bill, HF 4016 (Link to: authored by Rep. Sarah Anderson (Link to: (R-Plymouth), was passed, as amended, out of both the State Government Finance Committee (Link to: and the Taxes Committee (Link to: last week. The bill, which contains several provisions of interest to cities, can now be heard in the House Ways and Means Committee. Volunteer fire relief associations The bill was unexpectedly amended to include two provisions related to volunteer fire relief associations. The language would require that when a relief association is dissolved, any funds remaining after all relief association liabilities are fulfilled would revert to the state s general fund unless the city has made a required contribution to the relief association within the last 10 years. This would possibly make any future transition to a full-time department more financially challenging for cities that would have to return remaining funds to the state. The bill would also increase the annual lump-sum benefit maximum for vested members from $10,000 per year of service to $12,500 if the relief association is funded at a level of 100 percent or more and the current relief association annual lump-sum benefit maximum is at least $9,500. If you have concerns about this, please contact Gary Carlson, LMC, at gcarlson@lmc.org (Link to: mailto:gcarlson@lmc.org). Data Practices Office move to the Office of Administrative Hearings The League opposes multiple provisions in Article 2 (sections 24-34, 37, 77, 83, and 84) that would move the Data Practices Office (Link to: (DPO) to the Office of Administrative Hearings (OAH). While the League does not have a position on what agency houses the DPO, this proposed move would likely result in increased litigation and conflict of interest issues. The current language sets the stage to increase the number of litigated data practices cases in OAH, which means increased costs to taxpayers. There is also an issue with the chief administrative law judge supervising the data practices coordinator, who would be charged with providing informal advice and

11 Page 11 of 19 written advisory opinions. The concern is whether the coordinator s legal analysis would be compromised if it differs or conflicts with the chief administrative law judge. For more information on these provisions, contact Irene Kao, LMC, at ikao@lmc.org (Link to: mailto:ikao@lmc.org). Funding for OSS cybersecurity projects The bill includes a required state match of $220,000 to receive $6.59 million in federal funds for cybersecurity upgrades to be conducted by the Office of the Secretary of State (OSS). The bill appropriates $1.53 million for the purposes of modernizing, securing, and updating the Statewide Voter Registration System and for cybersecurity upgrades as authorized by federal law. Senate bill The Senate omnibus state government finance and policy bill, SF 3764 (Link to: authored by Sen. Mary Kiffmeyer (Link to: (R-Big Lake), was also heard last week and passed out of the Senate State Government Finance and Policy and Elections Committee (Link to: cmte_id=3101&ls=90). It was re-referred to the Senate Finance Committee (Link to: The Senate bill includes the elections funding, but does not include the volunteer fire relief association or DPO transfer language. Read the current issue of the Cities Bulletin (Link to: Your LMC Resource Contact Ann Lindstrom IGR Representative (651) or (800) alindstrom@lmc.org (Link to: mailto:alindstrom@lmc.org ) Contact Gary Carlson IGR Director (651) or (800) gcarlson@lmc.org (Link to: mailto:gcarlson@lmc.org)

12 Page 12 of 19 House Passes Bill on Competitive Bidding Increase The bill would increase the competitive bidding threshold, which has been the same for a decade. (Published Apr 23, 2018) A bill increasing the competitive bidding threshold from $100,000 to $175,000, HF 3841 (Link to: (Rep. Jim Nash (Link to: R-Waconia), was passed by the full House (124-1) on April 16. The bill was non-controversial as there were no questions or comments after its presentation. Only one more step is required before the bill is ready for Gov. Dayton s signature. SF 3399 (Link to: (Sen. Dan Hall (Link to: R-Burnsville) needs to be passed by the full Senate. Support from all local government associations The competitive bidding thresholds haven t been increased in a decade. Construction costs have increased at a greater rate than general cost of living. Small construction projects easily hit the current threshold of $100,000. Simply stripping a bike lane for a couple of miles or only doing an overlay for a parking lot hits this threshold. The League, the Association of Minnesota Counties, the Minnesota Association of Townships, and the Minnesota School Boards Association support this bill. Read the joint letter of support (pdf) (Link to: For more background information about this bill, read a previous Cities Bulletin article (Link to: Read the current issue of the Cities Bulletin (Link to: Your LMC Resource

13 Page 13 of 19 Contact Irene Kao IGR Counsel (651) or (800) (Link to:

14 Page 14 of 19 Broadband Funding Gets Nod in House and Senate Jobs Bills The House jobs bill also includes dedicated funding for satellite providers, which marks a significant policy change from previous years. (Published Apr 23, 2018) The House and Senate jobs committees both passed omnibus jobs bills last week that included $15 million for broadband. The bills, HF 4289 (Rep. Pat Garofalo (Link to: R- Farmington) and SF 3945 (Link to: (Sen. Jeremy Miller (Link to: R-Winona), will go to their final committee stops this week before heading for a vote by the entire House and Senate. The House Job Growth and Energy Affordability Policy and Finance Committee (Link to: also adopted an amendment (Link to: offered by Chair Garofalo that carves out $750,000 of the $15 million allocated to the Border-to- Border Broadband Grant Program to cover a new program for satellite technology. The money can be used for satellite equipment installed for the broadband user in an unserved area of the state, as well as to fund monthly satellite service for a year. Get more information about the House jobs and energy finance bill from a Session Daily article (Link to: The Senate Jobs and Economic Growth Finance and Policy Committee (Link to: indicated in discussions that it is not seeking any policy changes this year only funding. Legislative leaders have indicated that the jobs bill will be combined with other larger omnibus bills to craft a single omnibus supplemental budget bill to send to Gov. Dayton in the coming weeks. Read the current issue of the Cities Bulletin (Link to: Your LMC Resource Contact Laura Ziegler

15 Page 15 of 19 Sr. IGR Liaison (651) or (800) (Link to:

16 Page 16 of 19 City Groups Respond to Article on City Roles in Housing The League, along with other city organizations, responded to a Star Tribune commentary by defending the role of cities in housing regulations and fees. (Published Apr 23, 2018) The League of Minnesota Cities, Metro Cities, Minnesota Association of Small Cities, and the Coalition of Greater Minnesota Cities joined forces to respond to a lengthy commentary that said, among other things, that city regulations and fees are an obstacle to affordable housing in Minnesota. The city response was published in the Star Tribune on April 20. The original commentary, written by Peter Coyle, a shareholder and past president at the Larkin Hoffman law firm who is also a representative for Builders Association of the Twin Cities/Housing First Minnesota, was published in the Star Tribune on April 6. It provided a one-sided and misleading view on affordable housing and cities roles and responsibilities, specifically related to local fees and regulations. Read the response from the city groups (Link to: Read Coyle s commentary (Link to: -subsidies-in-minnesota-we-need-fewer-rules-and-fees/ /) The joint city response described the roles and responsibilities of cities, including identifying and addressing local housing needs in their own communities, and promoting housing types best suited to address their specific needs. It maintained the importance of local decision-making authority. Housing affordability is one important piece of a complex system with many stakeholders, perspectives, and cost drivers, the city groups stated in their response. Peter Coyle opines that the solution to affordable housing is primarily on the backs of state and local government. This is simply a false premise. Real solutions require a partnership between the public-private sectors. We need your input If you are interested in working further on the issue of local housing regulations and fees in the coming months, please contact League IGR Counsel Irene Kao at ikao@lmc.org (Link to: mailto:ikao@lmc.org) or (651)

17 Page 17 of 19 Additional counterpoint response A related response to the original commentary was also authored by state Rep. Alice Hausman. Read Rep. Hausman s commentary (Link to: Read the current issue of the Cities Bulletin (Link to: Your LMC Resource Contact Heather Corcoran IGR Member Relations Coordinator (651) or (800) hcorcoran@lmc.org (Link to: mailto:hcorcoran@lmc.org) Contact Irene Kao IGR Counsel (651) or (800) ikao@lmc.org (Link to: mailto:ikao@lmc.org)

Page 18 of 19 Bill Capping Wireless Application Fee Removed from Omnibus Bill Despite not receiving a hearing in the House this year, the provision showed up in the newly released House jobs bill on

18 Page 18 of 19 Bill Capping Wireless Application Fee Removed from Omnibus Bill Despite not receiving a hearing in the House this year, the provision showed up in the newly released House jobs bill on April 18, but was removed two days later. (Published Apr 23, 2018) HF 3497 (Link to: a bill that would cap local government application fees for installing wireless equipment on city property at $3,000, was included as a provision in a larger House omnibus jobs bill authored by Chair Pat Garofalo (Link to: (R-Farmington) released on April 18, but was removed two days later. The original author of the provision, Rep. Marion O Neill (Link to: (R-Buffalo), offered an amendment to remove the surprising language from the omnibus bill. That amendment was approved by the House Job Growth and Energy Affordability Policy and Finance Committee (Link to: on April 20. The original stand-alone bill is not within the committee s jurisdiction and the bill has not received a hearing in the House Government Operations and Elections Policy Committee (Link to: The language is also not included in the Senate s larger omnibus jobs bill. The understanding among stakeholders was that the bill would be heard on an informational basis, which means the committee would take public testimony, ask questions, and refrain from moving the bill to the next committee stop or the floor. An informational hearing has already occurred in the Senate. Watch a video of the League s testimony in the House Job Growth and Energy Affordability Policy and Finance Committee (Link to: v=iozjmzehoou) (T-Mobile s testimony begins at 1:15:20, and the League s comments begin at 1:20:20.) For more background information about this bill, read a previous Cities Bulletin article (Link to: Read the current issue of the Cities Bulletin (Link to:

19 Page 19 of 19 Your LMC Resource Contact Laura Ziegler IGR Senior Liaison (651) or (800) (Link to:

Governor Vetoes Supplemental Budget Bill and Second

Governor Vetoes Supplemental Budget Bill and Second Tax Bill https://www.lmc.org/page/1/omnibusbillvetoes18.jsp?ssl=true Page 1 of 3 Governor Vetoes Supplemental Budget Bill and Second Tax Bill Some city