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97-1480Council File # g1- t� r� �. - RESOLUTION CITY OF SAINT PAUL, NIINNESOTA � sn�c # 5a aR a � Presented By Referred To Committee: Date 1 2 3 WHEREAS, the Property Tax Study Project is a unique collaborative effort with a 4 focus on benefiting ta�cpayers through change in the systems for funding and local 5 government service delivery; and 6 7 WHEREAS, the City of Saint Paul is a member of the Property Ta�c Study Project along 8 with the cities of Minneapolis and Duluth, the counties of Ramsey, Hennepin and 9 St. Louis and the school boards of saint Paul and Minneapolis; and 10 11 WHERSAS, the Property Tax Study Project has developed a set of joint legislative 12 initiatives for the 1998 sesaion which include property tax reform, school Einance 13 reform, mandate reform, improvements to the price of government law, funding for 14 redevelopment of polluted lands, diversification of local revenue sources and 15 utility derugulation tax issuea; and 16 17 WHEREAS, during the 1998 legislative session, the partners of the Property Tax Study 18 Project will work cooperatively toward achieving progress on the initiatives; 19 20 THEREFORE, 8E IT RESOLVED, that the City Council of the City of Saint Paul approves 21 of the Property Tax Study Project's legislative initiatives and asks that they be 22 included as a part of the City's legislative aqenda. 23 24 25 26 2 7 Requested by Department of: t r I R�.Qar'S a t�'G2 , —� BY= Adopted by Council: Date (�,�.\O ��\�i'�1 ,- Form ^ Approved by City Attorney Adoption Certified by Council Secretary / )� �� sY= �� lz -�_ .� $y: �,�.�� 1- �- -°-�---- _ Approved by Mayor: Date �"Z''Z0�4'a. Approved by Mayor for submission to Council By: a BY _ /� N° 52290 OEPAR7MENLOFFICFI�COUNC�L i DATE IN�TIATEO ` �� I �� rra Office 11/24/97 GREEN SHEE CON7AGT PERSON 8 PNONE INITIAVDATE INRIAVDATE � DEPARTMENT DIRECWA � qTY COUNCIL Mar -Helen M1,SCI10 2 6-8 33 ��N �CIT'ATfOqNEY OCITYCLERK MUST BE N CAUNCIL AGENpA BY (OATE) NUNBER FOR ❑��ET OIREGTOR O FIN 8 MGL SEflVICES DIR. POUTING OAOEH � MAVOR (OR ASSISTANn � e 1 1 TOTAL # OP SIGNATURE PAGES 1 (CLIP ALL LOCATIONS FOR SICaNATURE) ACiION REOUESTED. Passage of attached resolution by the City Council. RECOMMENDpTiONS: Approve (A) m Reject (R) pEHSONAL SERVICE CONTRAC7S MUST ANSWER THE FOLLOWING �UESTIONS: _ PLANNING COMMISSION _ CIVIL SERVIGE COMMISSION �� Hd5 thi5 DBrsOn/firm eV2t wOlked Untler a ContraCt for this department? _ CIB COMMITTEE _ �'ES NO _ STAFF 2- Has this person/firm ever been a city employee? — YES NO _ DISTRICT COURT _ 3. Does this person/irtm possess a skill not normall y possessetl by any current ciry employee? SUPPORTS WHICH COUNCIL OBJECTIVE? YES NO Explain all yes answers on separate sheet and ettach to green sheet INITIATING PROBLEM, ISSUE.OPPORTUNITY(Who. WM1at. When. Whem. Why): The Property Tax Study Project (made up of elected officials from the cities of Minneapolis Saint Pau1 and Duluth; the Saint Paul and Minneapolis school boards and Ramsey, Hennepin, and St. Louis Counties) has developed a set of legislative initiatives to be supported and pursued jointly by a11 members of the project. ADVANTAGES IFAPPROVED� ' Saint Paul would be a part of the Property Tax Study Project's coalition at the legislature woxking on issues which include property tax xeform, funding for redevelopment of polluted land, diversificazion of local revenue sources and utility deregulation. Saint Paul would also build valuable relationships and contaczs with the other Pxoject paxticipants. OISADVANTAGES IF APPROVEO� None. ��Y ` �'�fl �1:�8�� :.��u � �. i5�7 DiSADVAMAGES IF NOTAPPflOVED: . " - � .---. �..__ Saint Paul would not be a partner in pursuing the Property Tax Reform Project's initiatives TOTAL AMOUNTOF TRANSACTION S COS7/REVENUE BUDGETED (CIRCLE ONE) VES NO FUNDIHG SOURCE ACTIVITY NUMBER FINANCIAL INFORMATION (EXPLAIN) a'1-I`lP'D Proper-ty Tax Study Project Positions and Joint Initiatives for 1997 Draft -- Draft November 12,1997 Contents Project description 1 Principles and positions on fiscal reform issues 2 - Principies for fiscal reform 2 - Themes for fiscal reform 3 - Positions on key fiscal reform issues 4 Joint initiatives for 1998 fl] - Property tax reform priorities '7 - School finance reform 9 - Mandate reform 10 - Improvements to the "price of govemment" law ll - Funding for the redevelopment of polluted lands 12 - Diversification of local revenue sources 13 - Utility dereguladon and utility tax issues 14 a� -►yra Property Tax Study Project A collaborarive project involving the cities of Duluth, Minneapolis, and Saint Paul, Hennepin, Ramsey and St. Louis Counlies, and the Minneapolis and Saint Paui scLool districts. Positions and Joint Initiatives for 1998 Draft -- Draft November 12,1997 �t'1-1 y 8'a The Property Tax Study Project The Property Tax Study Project -- a unique collaboration of cities, counties and school districts designed to benefit taxpayers The Froperty Tax Study Project is a unique collaborative effort with a focus on benefiting taxpayers through change in the systems for funding and delivering local government services. The cities of Duluth, Minneapolis and Saint Paul, the Minneapolis and Saint Paul school districts, and Hennepin, Ramsey and St. Louis counties are participants in this project. This is an outgrowth of a project started in 1994, motivated by a sense of the long-term fiscal problems facing state and local governments -- and the limits of taxpayers' ability to shoulder ever-increasing property ta�c burdens. T1ie jurisdictions involved believe that a collaborate effort including cities, counties and school districts has a potential for developing creative joint solutions to common problems. Historically cities, counties and school districts have not worked together on issues of this nature. This collaboration is a new type of partnership where local officials can learn from each other, and it is an experiment in developing public policy alternatives designed to serve the jurisdictions' common interests of benefiting their taspayers and communiues. By working together, the jurisdictions hope to be better able to focus on effective solutions to common probiems. Many things about Minnesota's current property tax system work well. However, because of the potential for cuts in federal programs and long-term demographic factors driving state and local budgets, continued change is needed to prevent property taxes from spiraling out of controi. The purpose of this project is tQ work with each other to develop ideas for change that will benefit taxnavers. Althongh the recent improvement in the state's finances may have removed some of the immediacy and urgency of the fiscal pressures on the siate, ihis project is stiil focused on creating and adapting to change. The health and economic success of the urban areas represented by these jurisdictions aze essential to the health and success of the state. The jurisdictions involved in this project intend for the project and the ideas it will generate to benefit the entire state. '1 Property Tax Study Project Principles for Fiscal Reform Fiscal reform -- a reevaluation of priorities and responsibitities Fiscal reform means a reevaluation of service priorities and responsibilitees. T'he state aad local govemments must decide which services will be provided, who will provide them and how they will be funded. Involvement of the affected levels of govemment in these decisions is fundamental to accountability. The following principles wiIi guide the project's participants in developing proposals and in evatuacing proposais put forward by others. These principles are aiso a fust step in defining a vision for the state/local fiscal system that is the ultimate goal of reform. Accountability and clarity in the system Accountability and the ability of taxpayers to understand their taJCes are important for all levels of government. A basic requirement for accountability is a cleaz connection between the services demanded from government, the officials who decide which services will be provided, the cost of those services and the taxes needed to pay for tfiem. The system must be cIear enough so that taxpayers can understand those connections. Equity and taxpayer impact Minnesota's property tax system has been weighted toward principles of equity and the protection of homeowners from unacceptable property tax burdens. Fiscal reform should emphasize these principles of equity and reasonable property tax burdens. Revenue adequacy For local government the most basic output of the state/local fiscal system is the revenue to pay for needed and mandated services. This revenue must be adequate to fund appropniate and needed services and to allow local governmenis to participate in the revitalization of the state's urban areas, but without placing unacceptable burdens on ta�cpayers. Focused state assistance for local services State resources should be better focused on priorities and needs. For property ta�c relief this may mean better targeting of state revenue to the local governments with the greatest needs through formulas based an iden�ed need factors that are indicators of the demand for services and the ability to pay for those services. Flexibility to redesign services and improve effectiveness In order to improve effectiveness, government must be able to redesign services and programs and collaborate with each other and the private sector. The state should assist local governments in this by removing barriers to change. 2 °[�-t�ls'o Property Tax Study Project Themes for fiscal reform Traditionally, property tax reform initiatives have focused on changes in the property classification system and changes in the formulas for distributing state aid to lacal govemments. However, the jurisdiciions involved in this project believe that two other themes are vital for lasting fiscal reform: 1. Realignment of service and funding responsibilities. Lasting fiscal reform must go beyond shifting taac burdens among different types of taxpayers. The alignment of service and funding responsibilities among the state and local governments must aiso be evaluated. Generally, the level of govemment that provides a service (or decides the level of service to be provided) should also be responsible for paying for that service. Too often, the state or the courts determine the services needed, but local govemmenu are expected to pay for those services with local property ta�ces. Several years ago the state recognized its statewide policy interest and funding responsibility for income maintenance programs when it took over the cost of income maintenance payments. This is an important example of how reatignment of service and funding responsibilities can help reduce the long- term demand for and cost of services, and ultimately reduce the reliance on the property tax. 2. Diversification of revenue sources. This second theme is related to the first. In some cases, the wrong level of government is paying for certain services. In other cases, local governmenu are £unding services with the property taac, even though that may not be the best or most appropriate source of revenue. Local governments aze often forced to use the property taY because they have relatively few other options for general revenue. Diversification of revenues for local governmenu providing services on behalf of the state can help reduce the reliance on the property tax. It also would allow local governments to more appropriately match revenue sources to the services being provided. Local officials are accountabie to their electorate and will use the authority to diversify their revenues responsibiy to create the best mix of revenues for the local community. Property TaX Study Project Positions on Key Fiscal Reform Issues Restatement of the Project's intent and criteria for evaluating fiscal reform proposals This project is unique because it is a collaboration among cities, counties and school districts. We will evaluate proposals for fiscal reform primarily in terms of the net impact on property tazcpayers and our ability to provide services -- not necessarily in terms of the impact on szate funding going to each of our individual jurisdictions. Lasting fiscal reform must go beyond shifting tax burdens among different types of taxpayers. The alignment of service and funding responsibilities aznong the state and local governments must also be evatuated. Reaiignment of those responsibilities and diversification of revenues for iocal govemments providing services on behalf of the state could help reduce the long-term demand for and cost of services, and ultimately reduce the reliance on the property tax. Position on class rate compression a) Although apamnents and commercial propeny may need property taac relief, class rate reform or compression of the class rate system must not shift more of the property tax burden onto homeowners. A shift can increase homeowner tax burdens, especially in communities where needs are increasing. b) Class rate reform or compression of the class rate system must not weaken the tax base for local governments, or result in reductions in local government revenues. c) It is not reatistic to expect that substantial property ta.e relief can be provided without some replacement revenne source. If property tax relief is provided to businesses or other classes of property, the lost revenue must be replaced through other changes in the state/local tas system. Position on school finance reform a} T'he reliance on property taxes for funding schools should be reduced, and the state share of funding should be increased. The state made some progress on this in 1997. However, 0 q�- 1�tga any system for funding schools must preserve local school district accountability and autonomy, revenue stability, and the ability to raise some revenues locally. b) Increases in state funding for schooLs should be tazgeted through programs and formulas that better reflect special needs and costs imposed on urban and Greater Minnesota districts where a high proportion of children live in poverty. A re]ated priority for increased school funding is greater equalization of property tax burdens for education and reductions in the tax rate differences among school districts. c} School aid formulas shouid be fully funded and should reflect the actuai costs of public education. Balancing state budget projections for future years with artificial caps on education funding is unrealistic and disrupts rational budgeting processes for the state and for school districts. Position on Loca1 Government Aid The purpose of local government aid (LGA) is to reduce the differences in municipal tau rates due to differences in tax base and/or expenditure need. LGA should be distributed to municipalities through a formula that most effectively accomplishes this purpose. For LCiA, a city's "expenditure need" should be determined based on demographic and other measurable characteristics of the city that contribute to the need for city services. A"local effort formula" is the fairest and simplest way to incorporate measures of expenditure need and tax base in an aid distribuuon formula* and therefore is most effective in achieving the purpose of city LGA. For that reason, city LGA should be distributed through a"local effort formula". A local effort fommla distributes aid based on expenditure need minus tl�e "local effort" (local tax capaciry times a unifoim tax rate). Position on development and urban sprawl Inefficient growth pattems in and around the state's urban areas place ever-increasing burdens on state and local taxpayers. State and regional tax, land use and infrastructure policies should encourage efficient development pattems and livable communities, and they should provide incentives for strengthening the urban cores. For example, impact fees should be considered as one way of containing sprawl. Tax, land use and infrastructure policies that subsidize and encourage inefficient sprawl will increase public costs in the long term. These incentives and policies should be eliminated or reversed. Position on levy limits Local government levy limits should be eliminated. Levy limits reduce accountability by unnecessarily complicating the system and artificiaily limiting the ability of local govemmenu to determine their own budget requirements. With state-set levy limits, it is no longer clear whether the state or the local officials are responsible for the amount of the property tas levy. Position on business t�ation and the business activities tas (BAT) Business groups have criticized the property tax system for being unfair to businesses. However, basinesses must recognize their responsibiliry to help fund Iocal services, and the business community must participate in a dialogue with government about those responsibilities. As part of this dialogue, the state should review the overall system of business taxation and consider a more broad-based "business activities tax" (BAT) as one of the options to address these concerns. A state BAT could heIp diversify and stabilize state revenues. If Iocal business property taxes aze further reduced and a state BAT is imposed, locai govemments should receive a portion of the BAT revenues to help diversify local revenues and replace the lost business tax base. Any proposals to further reduce the business property tas base must be carefully reviewed for potential secondary impacts on local budgeu, economic development initiatives and taat increment districts, and local bond ratings. Position on residential non-homestead property t� reiief Rental duplexes and triplexes are in need of property tax relief. Duplexes and iriplexes did not enjoy the same amount of property tax relief in the 1997 ta�c bill as did single unit rental property. There is no policy rationale for distinguishing between single unit rental, duplexes and triplexes; therefore, these types of property should be ta�ced alike. Eliminating the distinction between them wili simpiify the property tax system by eliminating a class of properry. However, granting rentai progerty all the ta7c advantages of homesteaded property wilt encourage increased rentership and decreased homeownership and will have a destabilizing impact upon Minnesota cides. Homestead property should continue to enjoy preferential tax treatment relative to rentat properry. Under no circumstances should the class rate applied to residential non-homestead property be less than the class rate that is applied to second tier homestead properry. The 1.25 percent target class rate for single unit non-homestead residential property should be eliminated. The Property Tax Study Projea supports combining all one- to three-unit non-homestead residential property into a single class so that the class rates agplied to daplexes and triplexes are the same as those applied to single unit rental property. The Froperty Ta�c Study Project also supports maintaining a meaningful property tax distinction between homestead and rental property. q� _ �+{pa Property Tax Study Project Joint Legislative Initiative 1. Property tax reform priorities. The "property taY reform account" established in last year s tax bill commits a significant share of any future state budget surplus to pay for more ciass rate compression, more education funding, and increased education homestead credit for homeowners. Proposal description a) Money in the "property ta�c reform account" should aiso be earmarked to pay for the realignment of service and funding responsibilities where such realignment would irnprove efficiency, reduce the demand for services or fund services with revenue sources more appropriate than the property tax. ._ b) The fust priority for use of this money should be to support children at risk of out-of- home placement or corrections placements. Counties have experienced tremendous growth in costs to serve these chiidren. School district and city budgeu have aiso been unpacted by the financial limitations of counties to provide the needed services. State funding directed to support the costs of day ueaunent, family based services and }uvenile probarion services would reduce the incidence of out-of-home placemenu and would reduce the upward pressure on property taxes. The state has a policy interest in the coordinated delivery of these services to children. This use of money in the property tax reform account for this purpose is a high priority because it would permanently reduce the demand for costly services (out-of-home placements) currendy funded with the property tax. c) Additional class rate compression should be approached with caution because of the potential for future shifts onto homeowners and the increasing state cost for the education homestead credit required to prevent those shifu. Other property tas reform priorities These local governments will evaluate proposais for fiscal reform primarily in terms of the net impact on property taxpayers and local govemment's abiliry to provide services -- not necessarily in terms of the impact on state funding going to each of the individual jurisdictions. The following are the key priorities for evaluating proposals. The full text of the principles and posirions on property tax reform are available elsewhere. a) Reform must not shift more of the property tax burden onto homeowners. b) Reform must not weaken the tax base for local governments, or result in arbitrary cuis in local govemment revenues. If property tax relief is provided to homes businesses or other classes of property, the lost local revenue must be replaced through other changes in the state/local tax system. c) The reliance on property talces for funding schools should be reduced, and the state share of funding should be increased, while greserving local school disaict accountability, revenue stability, and the ability to raise some revenues locally. d) Changes in education funding should better equalize ta�c burdens and better recognize the higher costs for school districts and children with special needs. e) The funding aztd formulas for aid ro cities must continue to reflect the need to reduce the differences in city ta�c rates due to differences in tas base and/or expenditure need. State aid to counties helps pay for services counties provide on behalf of the state, and funding for this state aid should better reflect the cost of those essential and mandated county services. November 12, 1997 9'1-1 �{8'a Property Tax Study Project Joint Legislative Initiative 2. School finance reform Rising school property taYes, perceived inequities in school funding, and increasing difficulty in funding the special needs of urban school districts are some of the key school finance issues affecting the urban school districts represented in this project. Further changes in the school finance system are needed to address these issues. Proposal description The reliance on property taxes for funding schools should be reduced, and the state share of funding should be increased. One key priority for this state money should be more adequate funding for mandates and populations that pose significandy higher costs for districts with a high proportion of children living in poverty. Greater equalizarion of property tax bnrdens for education is aiso important. The following are some specific proposals that may be developed to implement these general statemenu: a) Improve the compensatory formula so that it more fully reflecu the additional cosu due to high concentrations of poor children in urban school districu. b) State funding for education costs for out-of-home placements of juveniles. c) Full state funding for inflation of special educadon costs. d) Continue state funding for existing and new alternative bonding levies. e) Fold the district cooperaflon levy into the general education formula and fully equalize it. � Provide state bonding for voluntary integration ptograms and other collaborative programs such as "Achievement Plus" schools. g) Average sales ratios over three years to smooth out the year-to-year variation in levies. November 12, 199� Property Tax Study Project Joint Legislative Initiative 3. Mandate reform Mandates can drive costs up when the state requires local governmenu to provide services without adequate consideration of the costs of those services. Safeguards are needed to assure that the demand for services is batanced against the costs of those services. Last year the legislature passed legislation creating a new fisca! note process for state mandates that could affect city and counry property ta�ces. These jurisdictions will participate in the fiscal note process as appropriate and suggest changes that may be needed to assure that it is effective. Proposal description a) Expand the new local mandate fiscal note process so that it also applies to school district mandates that could affect school district property taxes. November 12, 1997 10 �� -� �tr Property Tax Study Project ,Ioint Legislative Initiative 4. Improvements to the Price of Government law The "price of government" law requires that state and local revenues be measured (and projected for future years) as a percentage of personai income. It also requires the legislature to adopt a resolution establishing this percentage as a maYimum "price of government " While the law may have some use for evaluating trends, the "price of govemment" is flawed because it focuses on "price" without considering government's responsibilities, and it is being misused as a guideline or limit on total revenues. Proposal description The following amendmenu could discourage the law's misuse as a potentially misleading political tool, and refocus it as a stafisuc for evaluating fiscai trends. a) The governor's recommended maximum revenue target should be expressed as a range of percentages (rather than a single percentage) and be based on the govemor's proposed budget and revenue estimates. The percentage range would reflect the high and low figures for personal income based on the optimistic and pessimisdc scenarios used for the state's revenue projections. b) The legislature's revenue targets for the next two bienniums should also be expressed as a range of percentages. Passage of the resolurion should be delayed until after passage of the major budget bills. This would assure that the legislature's revenue targets reflect the cost implications of the legislature's budget decisions, linking "price" with level of service. c) The "price of government" letters from the Department of Revenue to locai governments should be eliminated. d) 'The report to the governor and legislature comparing local revenue decisions to the growth in personal income should focus on long-term trends rather than single-year events, and should be accompanied by demographic or other statistics explaining changes in local revenues as a percentage of personal income. e) The local revenue projections should be based on demographic changes, changes in state and federal programs, tax base changes and other factors that are projected to affect the need for local revenues. fl Exclude fees from the calculation. Exclude exported taxes, or include business income. g) Base the price of govemment calculation for cities on growth in the "revenue base" (levy plus state aid). November 12, 1997 til Property Tax Study Project Joint Legislative Initiative 5. F�nding for the redevelopment of polluted lands Much of the avaitable Iand within the state's urban areas has pollution or other environmental problems that act as barriers to its redevelopmen� Despite these problems, this land is an important urban asset, and its redevelopment can provide needed jobs and housing. Funding for the redevelopmant of polluted lands would be a good use for a portion of the state budget surplus becaase these are one-rime expendinues that have tong—term benefits. Proposal description Several specific proposals are being developed by staff from the jurisdicfions involved in this project 'I'hese proposals may include: a) Addidonal sources of funding to assist with polluted lands clean up and redevelopment, such as access to the state's deed taY revenues; b) Improved access to the polluted lands money for urban redevelopment; and c) Limits on the liability for environmental and related problems for new owners/developers. The specific proposals as developed by the jurisdictions and approved by their governing bodies are a part of the package of initiatives supported by the Property Tax Study Project. November I2, 1997 12 a�-r�trD Property Tax Study Project 3oint Legislative Initiative 6. Diversification of lceal revenue sources. Because they have few other sources of local revenue, local governments are often forced to fund services with the property ta�c, even though that is not the best or most appropriate source of revenue. Diversification of revenues for local governments providing services on behalf of the state can help reduce the reliance on the property ta�c. It also wouid allow locai govemments to more appropriately match revenue sources to the services being provided. Proposal description a) Sales taz� for iocal governments. The state should share a portion of its sales tax base with cities and counties. For example, the state sales tas could be reduced by 1 percent and a new local sales tax of 1 percent would be imposed. The total net sales tax on purchases would not change. In exchange for the HACA currently paid to cities and counties, the state could provide constitutional guarantees that the sales tax revenue would flow to these local governments. Each city and county should be guaranteed a sales tax distribution at least equal to the amount of HACA they received in 1998. Any local sales tac revenues in a given year in excess of the guaranteed amounts distributed in the first year wouid be allocated among the jurisdictions based on a formula that includes point of origin and households as formula factors. This change would provide local governments with a second major source of revenue with the potential for growth without raising rates -- instead of forcing them to rely on a static source af state aid (FIACA). Local officials would be accountable for managing the growth and decline of this new revenue source within their budgeu. b) Mortgage and deed tax. Counties should retain the mortgage and deed taxes they currendy collect for the state. This money could be used by counties for clean up of polluted land, redevelopment, housing or economic development, or to fund other property related initiatives. November 12, 1997 13 Property Tax Study Project Joint Legislative Initiative 7. Utility deregulation and utility taY issues. The potential for restructuring and deregulation of the electric utility industry raises many complex issues for Iocal governments. A basic orinciole is that the taxation of utilities must not be considered se,parate from other asnects of dereEUlation With that basic principle in mind, the following are some of the areas in which these local govemmenu believe they have a stake. • Taxation. Utility property is a significant component of the ta�c base for many communities. Any change in the taxation of utility property must come with guarantees that the taxes currently paid by the utilities will be replaced without increasing the property taxes paid by homeowners and other residential property. • Other revenues. The abil4ty of these local governments to raise revenues through franchise fees and the sale of electricity and refuse derived fuel must not be impaired. • Universal service. Assuring universal service at reasonabie cost is vital to tfie health of coiurnunities throughout the state. • Aggregation and marl;et power. Restructuring should allow local govemments the opportunity to combine electric loads and negotiate purchases of electricity. Restructuring should aLso provide for safeguazds to protect small users. • Right-of-way. I.ocal govern�nents must preserve the ability to control and regulate the use of the public right-of-way. • Transition. The transition to dereguladon should allow local governments, business and citizens time to adapt to the new environment. November 12, 1997 14 Council File # g1- t� r� �. - RESOLUTION CITY OF SAINT PAUL, NIINNESOTA � sn�c # 5a aR a � Presented By Referred To Committee: Date 1 2 3 WHEREAS, the Property Tax Study Project is a unique collaborative effort with a 4 focus on benefiting ta�cpayers through change in the systems for funding and local 5 government service delivery; and 6 7 WHEREAS, the City of Saint Paul is a member of the Property Ta�c Study Project along 8 with the cities of Minneapolis and Duluth, the counties of Ramsey, Hennepin and 9 St. Louis and the school boards of saint Paul and Minneapolis; and 10 11 WHERSAS, the Property Tax Study Project has developed a set of joint legislative 12 initiatives for the 1998 sesaion which include property tax reform, school Einance 13 reform, mandate reform, improvements to the price of government law, funding for 14 redevelopment of polluted lands, diversification of local revenue sources and 15 utility derugulation tax issuea; and 16 17 WHEREAS, during the 1998 legislative session, the partners of the Property Tax Study 18 Project will work cooperatively toward achieving progress on the initiatives; 19 20 THEREFORE, 8E IT RESOLVED, that the City Council of the City of Saint Paul approves 21 of the Property Tax Study Project's legislative initiatives and asks that they be 22 included as a part of the City's legislative aqenda. 23 24 25 26 2 7 Requested by Department of: t r I R�.Qar'S a t�'G2 , —� BY= Adopted by Council: Date (�,�.\O ��\�i'�1 ,- Form ^ Approved by City Attorney Adoption Certified by Council Secretary / )� �� sY= �� lz -�_ .� $y: �,�.�� 1- �- -°-�---- _ Approved by Mayor: Date �"Z''Z0�4'a. Approved by Mayor for submission to Council By: a BY _ /� N° 52290 OEPAR7MENLOFFICFI�COUNC�L i DATE IN�TIATEO ` �� I �� rra Office 11/24/97 GREEN SHEE CON7AGT PERSON 8 PNONE INITIAVDATE INRIAVDATE � DEPARTMENT DIRECWA � qTY COUNCIL Mar -Helen M1,SCI10 2 6-8 33 ��N �CIT'ATfOqNEY OCITYCLERK MUST BE N CAUNCIL AGENpA BY (OATE) NUNBER FOR ❑��ET OIREGTOR O FIN 8 MGL SEflVICES DIR. POUTING OAOEH � MAVOR (OR ASSISTANn � e 1 1 TOTAL # OP SIGNATURE PAGES 1 (CLIP ALL LOCATIONS FOR SICaNATURE) ACiION REOUESTED. Passage of attached resolution by the City Council. RECOMMENDpTiONS: Approve (A) m Reject (R) pEHSONAL SERVICE CONTRAC7S MUST ANSWER THE FOLLOWING �UESTIONS: _ PLANNING COMMISSION _ CIVIL SERVIGE COMMISSION �� Hd5 thi5 DBrsOn/firm eV2t wOlked Untler a ContraCt for this department? _ CIB COMMITTEE _ �'ES NO _ STAFF 2- Has this person/firm ever been a city employee? — YES NO _ DISTRICT COURT _ 3. Does this person/irtm possess a skill not normall y possessetl by any current ciry employee? SUPPORTS WHICH COUNCIL OBJECTIVE? YES NO Explain all yes answers on separate sheet and ettach to green sheet INITIATING PROBLEM, ISSUE.OPPORTUNITY(Who. WM1at. When. Whem. Why): The Property Tax Study Project (made up of elected officials from the cities of Minneapolis Saint Pau1 and Duluth; the Saint Paul and Minneapolis school boards and Ramsey, Hennepin, and St. Louis Counties) has developed a set of legislative initiatives to be supported and pursued jointly by a11 members of the project. ADVANTAGES IFAPPROVED� ' Saint Paul would be a part of the Property Tax Study Project's coalition at the legislature woxking on issues which include property tax xeform, funding for redevelopment of polluted land, diversificazion of local revenue sources and utility deregulation. Saint Paul would also build valuable relationships and contaczs with the other Pxoject paxticipants. OISADVANTAGES IF APPROVEO� None. ��Y ` �'�fl �1:�8�� :.��u � �. i5�7 DiSADVAMAGES IF NOTAPPflOVED: . " - � .---. �..__ Saint Paul would not be a partner in pursuing the Property Tax Reform Project's initiatives TOTAL AMOUNTOF TRANSACTION S COS7/REVENUE BUDGETED (CIRCLE ONE) VES NO FUNDIHG SOURCE ACTIVITY NUMBER FINANCIAL INFORMATION (EXPLAIN) a'1-I`lP'D Proper-ty Tax Study Project Positions and Joint Initiatives for 1997 Draft -- Draft November 12,1997 Contents Project description 1 Principles and positions on fiscal reform issues 2 - Principies for fiscal reform 2 - Themes for fiscal reform 3 - Positions on key fiscal reform issues 4 Joint initiatives for 1998 fl] - Property tax reform priorities '7 - School finance reform 9 - Mandate reform 10 - Improvements to the "price of govemment" law ll - Funding for the redevelopment of polluted lands 12 - Diversification of local revenue sources 13 - Utility dereguladon and utility tax issues 14 a� -►yra Property Tax Study Project A collaborarive project involving the cities of Duluth, Minneapolis, and Saint Paul, Hennepin, Ramsey and St. Louis Counlies, and the Minneapolis and Saint Paui scLool districts. Positions and Joint Initiatives for 1998 Draft -- Draft November 12,1997 �t'1-1 y 8'a The Property Tax Study Project The Property Tax Study Project -- a unique collaboration of cities, counties and school districts designed to benefit taxpayers The Froperty Tax Study Project is a unique collaborative effort with a focus on benefiting taxpayers through change in the systems for funding and delivering local government services. The cities of Duluth, Minneapolis and Saint Paul, the Minneapolis and Saint Paul school districts, and Hennepin, Ramsey and St. Louis counties are participants in this project. This is an outgrowth of a project started in 1994, motivated by a sense of the long-term fiscal problems facing state and local governments -- and the limits of taxpayers' ability to shoulder ever-increasing property ta�c burdens. T1ie jurisdictions involved believe that a collaborate effort including cities, counties and school districts has a potential for developing creative joint solutions to common problems. Historically cities, counties and school districts have not worked together on issues of this nature. This collaboration is a new type of partnership where local officials can learn from each other, and it is an experiment in developing public policy alternatives designed to serve the jurisdictions' common interests of benefiting their taspayers and communiues. By working together, the jurisdictions hope to be better able to focus on effective solutions to common probiems. Many things about Minnesota's current property tax system work well. However, because of the potential for cuts in federal programs and long-term demographic factors driving state and local budgets, continued change is needed to prevent property taxes from spiraling out of controi. The purpose of this project is tQ work with each other to develop ideas for change that will benefit taxnavers. Althongh the recent improvement in the state's finances may have removed some of the immediacy and urgency of the fiscal pressures on the siate, ihis project is stiil focused on creating and adapting to change. The health and economic success of the urban areas represented by these jurisdictions aze essential to the health and success of the state. The jurisdictions involved in this project intend for the project and the ideas it will generate to benefit the entire state. '1 Property Tax Study Project Principles for Fiscal Reform Fiscal reform -- a reevaluation of priorities and responsibitities Fiscal reform means a reevaluation of service priorities and responsibilitees. T'he state aad local govemments must decide which services will be provided, who will provide them and how they will be funded. Involvement of the affected levels of govemment in these decisions is fundamental to accountability. The following principles wiIi guide the project's participants in developing proposals and in evatuacing proposais put forward by others. These principles are aiso a fust step in defining a vision for the state/local fiscal system that is the ultimate goal of reform. Accountability and clarity in the system Accountability and the ability of taxpayers to understand their taJCes are important for all levels of government. A basic requirement for accountability is a cleaz connection between the services demanded from government, the officials who decide which services will be provided, the cost of those services and the taxes needed to pay for tfiem. The system must be cIear enough so that taxpayers can understand those connections. Equity and taxpayer impact Minnesota's property tax system has been weighted toward principles of equity and the protection of homeowners from unacceptable property tax burdens. Fiscal reform should emphasize these principles of equity and reasonable property tax burdens. Revenue adequacy For local government the most basic output of the state/local fiscal system is the revenue to pay for needed and mandated services. This revenue must be adequate to fund appropniate and needed services and to allow local governmenis to participate in the revitalization of the state's urban areas, but without placing unacceptable burdens on ta�cpayers. Focused state assistance for local services State resources should be better focused on priorities and needs. For property ta�c relief this may mean better targeting of state revenue to the local governments with the greatest needs through formulas based an iden�ed need factors that are indicators of the demand for services and the ability to pay for those services. Flexibility to redesign services and improve effectiveness In order to improve effectiveness, government must be able to redesign services and programs and collaborate with each other and the private sector. The state should assist local governments in this by removing barriers to change. 2 °[�-t�ls'o Property Tax Study Project Themes for fiscal reform Traditionally, property tax reform initiatives have focused on changes in the property classification system and changes in the formulas for distributing state aid to lacal govemments. However, the jurisdiciions involved in this project believe that two other themes are vital for lasting fiscal reform: 1. Realignment of service and funding responsibilities. Lasting fiscal reform must go beyond shifting taac burdens among different types of taxpayers. The alignment of service and funding responsibilities among the state and local governments must aiso be evaluated. Generally, the level of govemment that provides a service (or decides the level of service to be provided) should also be responsible for paying for that service. Too often, the state or the courts determine the services needed, but local govemmenu are expected to pay for those services with local property ta�ces. Several years ago the state recognized its statewide policy interest and funding responsibility for income maintenance programs when it took over the cost of income maintenance payments. This is an important example of how reatignment of service and funding responsibilities can help reduce the long- term demand for and cost of services, and ultimately reduce the reliance on the property tax. 2. Diversification of revenue sources. This second theme is related to the first. In some cases, the wrong level of government is paying for certain services. In other cases, local governmenu are £unding services with the property taac, even though that may not be the best or most appropriate source of revenue. Local governments aze often forced to use the property taY because they have relatively few other options for general revenue. Diversification of revenues for local governmenu providing services on behalf of the state can help reduce the reliance on the property tax. It also would allow local governments to more appropriately match revenue sources to the services being provided. Local officials are accountabie to their electorate and will use the authority to diversify their revenues responsibiy to create the best mix of revenues for the local community. Property TaX Study Project Positions on Key Fiscal Reform Issues Restatement of the Project's intent and criteria for evaluating fiscal reform proposals This project is unique because it is a collaboration among cities, counties and school districts. We will evaluate proposals for fiscal reform primarily in terms of the net impact on property tazcpayers and our ability to provide services -- not necessarily in terms of the impact on szate funding going to each of our individual jurisdictions. Lasting fiscal reform must go beyond shifting tax burdens among different types of taxpayers. The alignment of service and funding responsibilities aznong the state and local governments must also be evatuated. Reaiignment of those responsibilities and diversification of revenues for iocal govemments providing services on behalf of the state could help reduce the long-term demand for and cost of services, and ultimately reduce the reliance on the property tax. Position on class rate compression a) Although apamnents and commercial propeny may need property taac relief, class rate reform or compression of the class rate system must not shift more of the property tax burden onto homeowners. A shift can increase homeowner tax burdens, especially in communities where needs are increasing. b) Class rate reform or compression of the class rate system must not weaken the tax base for local governments, or result in reductions in local government revenues. c) It is not reatistic to expect that substantial property ta.e relief can be provided without some replacement revenne source. If property tax relief is provided to businesses or other classes of property, the lost revenue must be replaced through other changes in the state/local tas system. Position on school finance reform a} T'he reliance on property taxes for funding schools should be reduced, and the state share of funding should be increased. The state made some progress on this in 1997. However, 0 q�- 1�tga any system for funding schools must preserve local school district accountability and autonomy, revenue stability, and the ability to raise some revenues locally. b) Increases in state funding for schooLs should be tazgeted through programs and formulas that better reflect special needs and costs imposed on urban and Greater Minnesota districts where a high proportion of children live in poverty. A re]ated priority for increased school funding is greater equalization of property tax burdens for education and reductions in the tax rate differences among school districts. c} School aid formulas shouid be fully funded and should reflect the actuai costs of public education. Balancing state budget projections for future years with artificial caps on education funding is unrealistic and disrupts rational budgeting processes for the state and for school districts. Position on Loca1 Government Aid The purpose of local government aid (LGA) is to reduce the differences in municipal tau rates due to differences in tax base and/or expenditure need. LGA should be distributed to municipalities through a formula that most effectively accomplishes this purpose. For LCiA, a city's "expenditure need" should be determined based on demographic and other measurable characteristics of the city that contribute to the need for city services. A"local effort formula" is the fairest and simplest way to incorporate measures of expenditure need and tax base in an aid distribuuon formula* and therefore is most effective in achieving the purpose of city LGA. For that reason, city LGA should be distributed through a"local effort formula". A local effort fommla distributes aid based on expenditure need minus tl�e "local effort" (local tax capaciry times a unifoim tax rate). Position on development and urban sprawl Inefficient growth pattems in and around the state's urban areas place ever-increasing burdens on state and local taxpayers. State and regional tax, land use and infrastructure policies should encourage efficient development pattems and livable communities, and they should provide incentives for strengthening the urban cores. For example, impact fees should be considered as one way of containing sprawl. Tax, land use and infrastructure policies that subsidize and encourage inefficient sprawl will increase public costs in the long term. These incentives and policies should be eliminated or reversed. Position on levy limits Local government levy limits should be eliminated. Levy limits reduce accountability by unnecessarily complicating the system and artificiaily limiting the ability of local govemmenu to determine their own budget requirements. With state-set levy limits, it is no longer clear whether the state or the local officials are responsible for the amount of the property tas levy. Position on business t�ation and the business activities tas (BAT) Business groups have criticized the property tax system for being unfair to businesses. However, basinesses must recognize their responsibiliry to help fund Iocal services, and the business community must participate in a dialogue with government about those responsibilities. As part of this dialogue, the state should review the overall system of business taxation and consider a more broad-based "business activities tax" (BAT) as one of the options to address these concerns. A state BAT could heIp diversify and stabilize state revenues. If Iocal business property taxes aze further reduced and a state BAT is imposed, locai govemments should receive a portion of the BAT revenues to help diversify local revenues and replace the lost business tax base. Any proposals to further reduce the business property tas base must be carefully reviewed for potential secondary impacts on local budgeu, economic development initiatives and taat increment districts, and local bond ratings. Position on residential non-homestead property t� reiief Rental duplexes and triplexes are in need of property tax relief. Duplexes and iriplexes did not enjoy the same amount of property tax relief in the 1997 ta�c bill as did single unit rental property. There is no policy rationale for distinguishing between single unit rental, duplexes and triplexes; therefore, these types of property should be ta�ced alike. Eliminating the distinction between them wili simpiify the property tax system by eliminating a class of properry. However, granting rentai progerty all the ta7c advantages of homesteaded property wilt encourage increased rentership and decreased homeownership and will have a destabilizing impact upon Minnesota cides. Homestead property should continue to enjoy preferential tax treatment relative to rentat properry. Under no circumstances should the class rate applied to residential non-homestead property be less than the class rate that is applied to second tier homestead properry. The 1.25 percent target class rate for single unit non-homestead residential property should be eliminated. The Property Tax Study Projea supports combining all one- to three-unit non-homestead residential property into a single class so that the class rates agplied to daplexes and triplexes are the same as those applied to single unit rental property. The Froperty Ta�c Study Project also supports maintaining a meaningful property tax distinction between homestead and rental property. q� _ �+{pa Property Tax Study Project Joint Legislative Initiative 1. Property tax reform priorities. The "property taY reform account" established in last year s tax bill commits a significant share of any future state budget surplus to pay for more ciass rate compression, more education funding, and increased education homestead credit for homeowners. Proposal description a) Money in the "property ta�c reform account" should aiso be earmarked to pay for the realignment of service and funding responsibilities where such realignment would irnprove efficiency, reduce the demand for services or fund services with revenue sources more appropriate than the property tax. ._ b) The fust priority for use of this money should be to support children at risk of out-of- home placement or corrections placements. Counties have experienced tremendous growth in costs to serve these chiidren. School district and city budgeu have aiso been unpacted by the financial limitations of counties to provide the needed services. State funding directed to support the costs of day ueaunent, family based services and }uvenile probarion services would reduce the incidence of out-of-home placemenu and would reduce the upward pressure on property taxes. The state has a policy interest in the coordinated delivery of these services to children. This use of money in the property tax reform account for this purpose is a high priority because it would permanently reduce the demand for costly services (out-of-home placements) currendy funded with the property tax. c) Additional class rate compression should be approached with caution because of the potential for future shifts onto homeowners and the increasing state cost for the education homestead credit required to prevent those shifu. Other property tas reform priorities These local governments will evaluate proposais for fiscal reform primarily in terms of the net impact on property taxpayers and local govemment's abiliry to provide services -- not necessarily in terms of the impact on state funding going to each of the individual jurisdictions. The following are the key priorities for evaluating proposals. The full text of the principles and posirions on property tax reform are available elsewhere. a) Reform must not shift more of the property tax burden onto homeowners. b) Reform must not weaken the tax base for local governments, or result in arbitrary cuis in local govemment revenues. If property tax relief is provided to homes businesses or other classes of property, the lost local revenue must be replaced through other changes in the state/local tax system. c) The reliance on property talces for funding schools should be reduced, and the state share of funding should be increased, while greserving local school disaict accountability, revenue stability, and the ability to raise some revenues locally. d) Changes in education funding should better equalize ta�c burdens and better recognize the higher costs for school districts and children with special needs. e) The funding aztd formulas for aid ro cities must continue to reflect the need to reduce the differences in city ta�c rates due to differences in tas base and/or expenditure need. State aid to counties helps pay for services counties provide on behalf of the state, and funding for this state aid should better reflect the cost of those essential and mandated county services. November 12, 1997 9'1-1 �{8'a Property Tax Study Project Joint Legislative Initiative 2. School finance reform Rising school property taYes, perceived inequities in school funding, and increasing difficulty in funding the special needs of urban school districts are some of the key school finance issues affecting the urban school districts represented in this project. Further changes in the school finance system are needed to address these issues. Proposal description The reliance on property taxes for funding schools should be reduced, and the state share of funding should be increased. One key priority for this state money should be more adequate funding for mandates and populations that pose significandy higher costs for districts with a high proportion of children living in poverty. Greater equalizarion of property tax bnrdens for education is aiso important. The following are some specific proposals that may be developed to implement these general statemenu: a) Improve the compensatory formula so that it more fully reflecu the additional cosu due to high concentrations of poor children in urban school districu. b) State funding for education costs for out-of-home placements of juveniles. c) Full state funding for inflation of special educadon costs. d) Continue state funding for existing and new alternative bonding levies. e) Fold the district cooperaflon levy into the general education formula and fully equalize it. � Provide state bonding for voluntary integration ptograms and other collaborative programs such as "Achievement Plus" schools. g) Average sales ratios over three years to smooth out the year-to-year variation in levies. November 12, 199� Property Tax Study Project Joint Legislative Initiative 3. Mandate reform Mandates can drive costs up when the state requires local governmenu to provide services without adequate consideration of the costs of those services. Safeguards are needed to assure that the demand for services is batanced against the costs of those services. Last year the legislature passed legislation creating a new fisca! note process for state mandates that could affect city and counry property ta�ces. These jurisdictions will participate in the fiscal note process as appropriate and suggest changes that may be needed to assure that it is effective. Proposal description a) Expand the new local mandate fiscal note process so that it also applies to school district mandates that could affect school district property taxes. November 12, 1997 10 �� -� �tr Property Tax Study Project ,Ioint Legislative Initiative 4. Improvements to the Price of Government law The "price of government" law requires that state and local revenues be measured (and projected for future years) as a percentage of personai income. It also requires the legislature to adopt a resolution establishing this percentage as a maYimum "price of government " While the law may have some use for evaluating trends, the "price of govemment" is flawed because it focuses on "price" without considering government's responsibilities, and it is being misused as a guideline or limit on total revenues. Proposal description The following amendmenu could discourage the law's misuse as a potentially misleading political tool, and refocus it as a stafisuc for evaluating fiscai trends. a) The governor's recommended maximum revenue target should be expressed as a range of percentages (rather than a single percentage) and be based on the govemor's proposed budget and revenue estimates. The percentage range would reflect the high and low figures for personal income based on the optimistic and pessimisdc scenarios used for the state's revenue projections. b) The legislature's revenue targets for the next two bienniums should also be expressed as a range of percentages. Passage of the resolurion should be delayed until after passage of the major budget bills. This would assure that the legislature's revenue targets reflect the cost implications of the legislature's budget decisions, linking "price" with level of service. c) The "price of government" letters from the Department of Revenue to locai governments should be eliminated. d) 'The report to the governor and legislature comparing local revenue decisions to the growth in personal income should focus on long-term trends rather than single-year events, and should be accompanied by demographic or other statistics explaining changes in local revenues as a percentage of personal income. e) The local revenue projections should be based on demographic changes, changes in state and federal programs, tax base changes and other factors that are projected to affect the need for local revenues. fl Exclude fees from the calculation. Exclude exported taxes, or include business income. g) Base the price of govemment calculation for cities on growth in the "revenue base" (levy plus state aid). November 12, 1997 til Property Tax Study Project Joint Legislative Initiative 5. F�nding for the redevelopment of polluted lands Much of the avaitable Iand within the state's urban areas has pollution or other environmental problems that act as barriers to its redevelopmen� Despite these problems, this land is an important urban asset, and its redevelopment can provide needed jobs and housing. Funding for the redevelopmant of polluted lands would be a good use for a portion of the state budget surplus becaase these are one-rime expendinues that have tong—term benefits. Proposal description Several specific proposals are being developed by staff from the jurisdicfions involved in this project 'I'hese proposals may include: a) Addidonal sources of funding to assist with polluted lands clean up and redevelopment, such as access to the state's deed taY revenues; b) Improved access to the polluted lands money for urban redevelopment; and c) Limits on the liability for environmental and related problems for new owners/developers. The specific proposals as developed by the jurisdictions and approved by their governing bodies are a part of the package of initiatives supported by the Property Tax Study Project. November I2, 1997 12 a�-r�trD Property Tax Study Project 3oint Legislative Initiative 6. Diversification of lceal revenue sources. Because they have few other sources of local revenue, local governments are often forced to fund services with the property ta�c, even though that is not the best or most appropriate source of revenue. Diversification of revenues for local governments providing services on behalf of the state can help reduce the reliance on the property ta�c. It also wouid allow locai govemments to more appropriately match revenue sources to the services being provided. Proposal description a) Sales taz� for iocal governments. The state should share a portion of its sales tax base with cities and counties. For example, the state sales tas could be reduced by 1 percent and a new local sales tax of 1 percent would be imposed. The total net sales tax on purchases would not change. In exchange for the HACA currently paid to cities and counties, the state could provide constitutional guarantees that the sales tax revenue would flow to these local governments. Each city and county should be guaranteed a sales tax distribution at least equal to the amount of HACA they received in 1998. Any local sales tac revenues in a given year in excess of the guaranteed amounts distributed in the first year wouid be allocated among the jurisdictions based on a formula that includes point of origin and households as formula factors. This change would provide local governments with a second major source of revenue with the potential for growth without raising rates -- instead of forcing them to rely on a static source af state aid (FIACA). Local officials would be accountable for managing the growth and decline of this new revenue source within their budgeu. b) Mortgage and deed tax. Counties should retain the mortgage and deed taxes they currendy collect for the state. This money could be used by counties for clean up of polluted land, redevelopment, housing or economic development, or to fund other property related initiatives. November 12, 1997 13 Property Tax Study Project Joint Legislative Initiative 7. Utility deregulation and utility taY issues. The potential for restructuring and deregulation of the electric utility industry raises many complex issues for Iocal governments. A basic orinciole is that the taxation of utilities must not be considered se,parate from other asnects of dereEUlation With that basic principle in mind, the following are some of the areas in which these local govemmenu believe they have a stake. • Taxation. Utility property is a significant component of the ta�c base for many communities. Any change in the taxation of utility property must come with guarantees that the taxes currently paid by the utilities will be replaced without increasing the property taxes paid by homeowners and other residential property. • Other revenues. The abil4ty of these local governments to raise revenues through franchise fees and the sale of electricity and refuse derived fuel must not be impaired. • Universal service. Assuring universal service at reasonabie cost is vital to tfie health of coiurnunities throughout the state. • Aggregation and marl;et power. Restructuring should allow local govemments the opportunity to combine electric loads and negotiate purchases of electricity. Restructuring should aLso provide for safeguazds to protect small users. • Right-of-way. I.ocal govern�nents must preserve the ability to control and regulate the use of the public right-of-way. • Transition. The transition to dereguladon should allow local governments, business and citizens time to adapt to the new environment. November 12, 1997 14 Council File # g1- t� r� �. - RESOLUTION CITY OF SAINT PAUL, NIINNESOTA � sn�c # 5a aR a � Presented By Referred To Committee: Date 1 2 3 WHEREAS, the Property Tax Study Project is a unique collaborative effort with a 4 focus on benefiting ta�cpayers through change in the systems for funding and local 5 government service delivery; and 6 7 WHEREAS, the City of Saint Paul is a member of the Property Ta�c Study Project along 8 with the cities of Minneapolis and Duluth, the counties of Ramsey, Hennepin and 9 St. Louis and the school boards of saint Paul and Minneapolis; and 10 11 WHERSAS, the Property Tax Study Project has developed a set of joint legislative 12 initiatives for the 1998 sesaion which include property tax reform, school Einance 13 reform, mandate reform, improvements to the price of government law, funding for 14 redevelopment of polluted lands, diversification of local revenue sources and 15 utility derugulation tax issuea; and 16 17 WHEREAS, during the 1998 legislative session, the partners of the Property Tax Study 18 Project will work cooperatively toward achieving progress on the initiatives; 19 20 THEREFORE, 8E IT RESOLVED, that the City Council of the City of Saint Paul approves 21 of the Property Tax Study Project's legislative initiatives and asks that they be 22 included as a part of the City's legislative aqenda. 23 24 25 26 2 7 Requested by Department of: t r I R�.Qar'S a t�'G2 , —� BY= Adopted by Council: Date (�,�.\O ��\�i'�1 ,- Form ^ Approved by City Attorney Adoption Certified by Council Secretary / )� �� sY= �� lz -�_ .� $y: �,�.�� 1- �- -°-�---- _ Approved by Mayor: Date �"Z''Z0�4'a. Approved by Mayor for submission to Council By: a BY _ /� N° 52290 OEPAR7MENLOFFICFI�COUNC�L i DATE IN�TIATEO ` �� I �� rra Office 11/24/97 GREEN SHEE CON7AGT PERSON 8 PNONE INITIAVDATE INRIAVDATE � DEPARTMENT DIRECWA � qTY COUNCIL Mar -Helen M1,SCI10 2 6-8 33 ��N �CIT'ATfOqNEY OCITYCLERK MUST BE N CAUNCIL AGENpA BY (OATE) NUNBER FOR ❑��ET OIREGTOR O FIN 8 MGL SEflVICES DIR. POUTING OAOEH � MAVOR (OR ASSISTANn � e 1 1 TOTAL # OP SIGNATURE PAGES 1 (CLIP ALL LOCATIONS FOR SICaNATURE) ACiION REOUESTED. Passage of attached resolution by the City Council. RECOMMENDpTiONS: Approve (A) m Reject (R) pEHSONAL SERVICE CONTRAC7S MUST ANSWER THE FOLLOWING �UESTIONS: _ PLANNING COMMISSION _ CIVIL SERVIGE COMMISSION �� Hd5 thi5 DBrsOn/firm eV2t wOlked Untler a ContraCt for this department? _ CIB COMMITTEE _ �'ES NO _ STAFF 2- Has this person/firm ever been a city employee? — YES NO _ DISTRICT COURT _ 3. Does this person/irtm possess a skill not normall y possessetl by any current ciry employee? SUPPORTS WHICH COUNCIL OBJECTIVE? YES NO Explain all yes answers on separate sheet and ettach to green sheet INITIATING PROBLEM, ISSUE.OPPORTUNITY(Who. WM1at. When. Whem. Why): The Property Tax Study Project (made up of elected officials from the cities of Minneapolis Saint Pau1 and Duluth; the Saint Paul and Minneapolis school boards and Ramsey, Hennepin, and St. Louis Counties) has developed a set of legislative initiatives to be supported and pursued jointly by a11 members of the project. ADVANTAGES IFAPPROVED� ' Saint Paul would be a part of the Property Tax Study Project's coalition at the legislature woxking on issues which include property tax xeform, funding for redevelopment of polluted land, diversificazion of local revenue sources and utility deregulation. Saint Paul would also build valuable relationships and contaczs with the other Pxoject paxticipants. OISADVANTAGES IF APPROVEO� None. ��Y ` �'�fl �1:�8�� :.��u � �. i5�7 DiSADVAMAGES IF NOTAPPflOVED: . " - � .---. �..__ Saint Paul would not be a partner in pursuing the Property Tax Reform Project's initiatives TOTAL AMOUNTOF TRANSACTION S COS7/REVENUE BUDGETED (CIRCLE ONE) VES NO FUNDIHG SOURCE ACTIVITY NUMBER FINANCIAL INFORMATION (EXPLAIN) a'1-I`lP'D Proper-ty Tax Study Project Positions and Joint Initiatives for 1997 Draft -- Draft November 12,1997 Contents Project description 1 Principles and positions on fiscal reform issues 2 - Principies for fiscal reform 2 - Themes for fiscal reform 3 - Positions on key fiscal reform issues 4 Joint initiatives for 1998 fl] - Property tax reform priorities '7 - School finance reform 9 - Mandate reform 10 - Improvements to the "price of govemment" law ll - Funding for the redevelopment of polluted lands 12 - Diversification of local revenue sources 13 - Utility dereguladon and utility tax issues 14 a� -►yra Property Tax Study Project A collaborarive project involving the cities of Duluth, Minneapolis, and Saint Paul, Hennepin, Ramsey and St. Louis Counlies, and the Minneapolis and Saint Paui scLool districts. Positions and Joint Initiatives for 1998 Draft -- Draft November 12,1997 �t'1-1 y 8'a The Property Tax Study Project The Property Tax Study Project -- a unique collaboration of cities, counties and school districts designed to benefit taxpayers The Froperty Tax Study Project is a unique collaborative effort with a focus on benefiting taxpayers through change in the systems for funding and delivering local government services. The cities of Duluth, Minneapolis and Saint Paul, the Minneapolis and Saint Paul school districts, and Hennepin, Ramsey and St. Louis counties are participants in this project. This is an outgrowth of a project started in 1994, motivated by a sense of the long-term fiscal problems facing state and local governments -- and the limits of taxpayers' ability to shoulder ever-increasing property ta�c burdens. T1ie jurisdictions involved believe that a collaborate effort including cities, counties and school districts has a potential for developing creative joint solutions to common problems. Historically cities, counties and school districts have not worked together on issues of this nature. This collaboration is a new type of partnership where local officials can learn from each other, and it is an experiment in developing public policy alternatives designed to serve the jurisdictions' common interests of benefiting their taspayers and communiues. By working together, the jurisdictions hope to be better able to focus on effective solutions to common probiems. Many things about Minnesota's current property tax system work well. However, because of the potential for cuts in federal programs and long-term demographic factors driving state and local budgets, continued change is needed to prevent property taxes from spiraling out of controi. The purpose of this project is tQ work with each other to develop ideas for change that will benefit taxnavers. Althongh the recent improvement in the state's finances may have removed some of the immediacy and urgency of the fiscal pressures on the siate, ihis project is stiil focused on creating and adapting to change. The health and economic success of the urban areas represented by these jurisdictions aze essential to the health and success of the state. The jurisdictions involved in this project intend for the project and the ideas it will generate to benefit the entire state. '1 Property Tax Study Project Principles for Fiscal Reform Fiscal reform -- a reevaluation of priorities and responsibitities Fiscal reform means a reevaluation of service priorities and responsibilitees. T'he state aad local govemments must decide which services will be provided, who will provide them and how they will be funded. Involvement of the affected levels of govemment in these decisions is fundamental to accountability. The following principles wiIi guide the project's participants in developing proposals and in evatuacing proposais put forward by others. These principles are aiso a fust step in defining a vision for the state/local fiscal system that is the ultimate goal of reform. Accountability and clarity in the system Accountability and the ability of taxpayers to understand their taJCes are important for all levels of government. A basic requirement for accountability is a cleaz connection between the services demanded from government, the officials who decide which services will be provided, the cost of those services and the taxes needed to pay for tfiem. The system must be cIear enough so that taxpayers can understand those connections. Equity and taxpayer impact Minnesota's property tax system has been weighted toward principles of equity and the protection of homeowners from unacceptable property tax burdens. Fiscal reform should emphasize these principles of equity and reasonable property tax burdens. Revenue adequacy For local government the most basic output of the state/local fiscal system is the revenue to pay for needed and mandated services. This revenue must be adequate to fund appropniate and needed services and to allow local governmenis to participate in the revitalization of the state's urban areas, but without placing unacceptable burdens on ta�cpayers. Focused state assistance for local services State resources should be better focused on priorities and needs. For property ta�c relief this may mean better targeting of state revenue to the local governments with the greatest needs through formulas based an iden�ed need factors that are indicators of the demand for services and the ability to pay for those services. Flexibility to redesign services and improve effectiveness In order to improve effectiveness, government must be able to redesign services and programs and collaborate with each other and the private sector. The state should assist local governments in this by removing barriers to change. 2 °[�-t�ls'o Property Tax Study Project Themes for fiscal reform Traditionally, property tax reform initiatives have focused on changes in the property classification system and changes in the formulas for distributing state aid to lacal govemments. However, the jurisdiciions involved in this project believe that two other themes are vital for lasting fiscal reform: 1. Realignment of service and funding responsibilities. Lasting fiscal reform must go beyond shifting taac burdens among different types of taxpayers. The alignment of service and funding responsibilities among the state and local governments must aiso be evaluated. Generally, the level of govemment that provides a service (or decides the level of service to be provided) should also be responsible for paying for that service. Too often, the state or the courts determine the services needed, but local govemmenu are expected to pay for those services with local property ta�ces. Several years ago the state recognized its statewide policy interest and funding responsibility for income maintenance programs when it took over the cost of income maintenance payments. This is an important example of how reatignment of service and funding responsibilities can help reduce the long- term demand for and cost of services, and ultimately reduce the reliance on the property tax. 2. Diversification of revenue sources. This second theme is related to the first. In some cases, the wrong level of government is paying for certain services. In other cases, local governmenu are £unding services with the property taac, even though that may not be the best or most appropriate source of revenue. Local governments aze often forced to use the property taY because they have relatively few other options for general revenue. Diversification of revenues for local governmenu providing services on behalf of the state can help reduce the reliance on the property tax. It also would allow local governments to more appropriately match revenue sources to the services being provided. Local officials are accountabie to their electorate and will use the authority to diversify their revenues responsibiy to create the best mix of revenues for the local community. Property TaX Study Project Positions on Key Fiscal Reform Issues Restatement of the Project's intent and criteria for evaluating fiscal reform proposals This project is unique because it is a collaboration among cities, counties and school districts. We will evaluate proposals for fiscal reform primarily in terms of the net impact on property tazcpayers and our ability to provide services -- not necessarily in terms of the impact on szate funding going to each of our individual jurisdictions. Lasting fiscal reform must go beyond shifting tax burdens among different types of taxpayers. The alignment of service and funding responsibilities aznong the state and local governments must also be evatuated. Reaiignment of those responsibilities and diversification of revenues for iocal govemments providing services on behalf of the state could help reduce the long-term demand for and cost of services, and ultimately reduce the reliance on the property tax. Position on class rate compression a) Although apamnents and commercial propeny may need property taac relief, class rate reform or compression of the class rate system must not shift more of the property tax burden onto homeowners. A shift can increase homeowner tax burdens, especially in communities where needs are increasing. b) Class rate reform or compression of the class rate system must not weaken the tax base for local governments, or result in reductions in local government revenues. c) It is not reatistic to expect that substantial property ta.e relief can be provided without some replacement revenne source. If property tax relief is provided to businesses or other classes of property, the lost revenue must be replaced through other changes in the state/local tas system. Position on school finance reform a} T'he reliance on property taxes for funding schools should be reduced, and the state share of funding should be increased. The state made some progress on this in 1997. However, 0 q�- 1�tga any system for funding schools must preserve local school district accountability and autonomy, revenue stability, and the ability to raise some revenues locally. b) Increases in state funding for schooLs should be tazgeted through programs and formulas that better reflect special needs and costs imposed on urban and Greater Minnesota districts where a high proportion of children live in poverty. A re]ated priority for increased school funding is greater equalization of property tax burdens for education and reductions in the tax rate differences among school districts. c} School aid formulas shouid be fully funded and should reflect the actuai costs of public education. Balancing state budget projections for future years with artificial caps on education funding is unrealistic and disrupts rational budgeting processes for the state and for school districts. Position on Loca1 Government Aid The purpose of local government aid (LGA) is to reduce the differences in municipal tau rates due to differences in tax base and/or expenditure need. LGA should be distributed to municipalities through a formula that most effectively accomplishes this purpose. For LCiA, a city's "expenditure need" should be determined based on demographic and other measurable characteristics of the city that contribute to the need for city services. A"local effort formula" is the fairest and simplest way to incorporate measures of expenditure need and tax base in an aid distribuuon formula* and therefore is most effective in achieving the purpose of city LGA. For that reason, city LGA should be distributed through a"local effort formula". A local effort fommla distributes aid based on expenditure need minus tl�e "local effort" (local tax capaciry times a unifoim tax rate). Position on development and urban sprawl Inefficient growth pattems in and around the state's urban areas place ever-increasing burdens on state and local taxpayers. State and regional tax, land use and infrastructure policies should encourage efficient development pattems and livable communities, and they should provide incentives for strengthening the urban cores. For example, impact fees should be considered as one way of containing sprawl. Tax, land use and infrastructure policies that subsidize and encourage inefficient sprawl will increase public costs in the long term. These incentives and policies should be eliminated or reversed. Position on levy limits Local government levy limits should be eliminated. Levy limits reduce accountability by unnecessarily complicating the system and artificiaily limiting the ability of local govemmenu to determine their own budget requirements. With state-set levy limits, it is no longer clear whether the state or the local officials are responsible for the amount of the property tas levy. Position on business t�ation and the business activities tas (BAT) Business groups have criticized the property tax system for being unfair to businesses. However, basinesses must recognize their responsibiliry to help fund Iocal services, and the business community must participate in a dialogue with government about those responsibilities. As part of this dialogue, the state should review the overall system of business taxation and consider a more broad-based "business activities tax" (BAT) as one of the options to address these concerns. A state BAT could heIp diversify and stabilize state revenues. If Iocal business property taxes aze further reduced and a state BAT is imposed, locai govemments should receive a portion of the BAT revenues to help diversify local revenues and replace the lost business tax base. Any proposals to further reduce the business property tas base must be carefully reviewed for potential secondary impacts on local budgeu, economic development initiatives and taat increment districts, and local bond ratings. Position on residential non-homestead property t� reiief Rental duplexes and triplexes are in need of property tax relief. Duplexes and iriplexes did not enjoy the same amount of property tax relief in the 1997 ta�c bill as did single unit rental property. There is no policy rationale for distinguishing between single unit rental, duplexes and triplexes; therefore, these types of property should be ta�ced alike. Eliminating the distinction between them wili simpiify the property tax system by eliminating a class of properry. However, granting rentai progerty all the ta7c advantages of homesteaded property wilt encourage increased rentership and decreased homeownership and will have a destabilizing impact upon Minnesota cides. Homestead property should continue to enjoy preferential tax treatment relative to rentat properry. Under no circumstances should the class rate applied to residential non-homestead property be less than the class rate that is applied to second tier homestead properry. The 1.25 percent target class rate for single unit non-homestead residential property should be eliminated. The Property Tax Study Projea supports combining all one- to three-unit non-homestead residential property into a single class so that the class rates agplied to daplexes and triplexes are the same as those applied to single unit rental property. The Froperty Ta�c Study Project also supports maintaining a meaningful property tax distinction between homestead and rental property. q� _ �+{pa Property Tax Study Project Joint Legislative Initiative 1. Property tax reform priorities. The "property taY reform account" established in last year s tax bill commits a significant share of any future state budget surplus to pay for more ciass rate compression, more education funding, and increased education homestead credit for homeowners. Proposal description a) Money in the "property ta�c reform account" should aiso be earmarked to pay for the realignment of service and funding responsibilities where such realignment would irnprove efficiency, reduce the demand for services or fund services with revenue sources more appropriate than the property tax. ._ b) The fust priority for use of this money should be to support children at risk of out-of- home placement or corrections placements. Counties have experienced tremendous growth in costs to serve these chiidren. School district and city budgeu have aiso been unpacted by the financial limitations of counties to provide the needed services. State funding directed to support the costs of day ueaunent, family based services and }uvenile probarion services would reduce the incidence of out-of-home placemenu and would reduce the upward pressure on property taxes. The state has a policy interest in the coordinated delivery of these services to children. This use of money in the property tax reform account for this purpose is a high priority because it would permanently reduce the demand for costly services (out-of-home placements) currendy funded with the property tax. c) Additional class rate compression should be approached with caution because of the potential for future shifts onto homeowners and the increasing state cost for the education homestead credit required to prevent those shifu. Other property tas reform priorities These local governments will evaluate proposais for fiscal reform primarily in terms of the net impact on property taxpayers and local govemment's abiliry to provide services -- not necessarily in terms of the impact on state funding going to each of the individual jurisdictions. The following are the key priorities for evaluating proposals. The full text of the principles and posirions on property tax reform are available elsewhere. a) Reform must not shift more of the property tax burden onto homeowners. b) Reform must not weaken the tax base for local governments, or result in arbitrary cuis in local govemment revenues. If property tax relief is provided to homes businesses or other classes of property, the lost local revenue must be replaced through other changes in the state/local tax system. c) The reliance on property talces for funding schools should be reduced, and the state share of funding should be increased, while greserving local school disaict accountability, revenue stability, and the ability to raise some revenues locally. d) Changes in education funding should better equalize ta�c burdens and better recognize the higher costs for school districts and children with special needs. e) The funding aztd formulas for aid ro cities must continue to reflect the need to reduce the differences in city ta�c rates due to differences in tas base and/or expenditure need. State aid to counties helps pay for services counties provide on behalf of the state, and funding for this state aid should better reflect the cost of those essential and mandated county services. November 12, 1997 9'1-1 �{8'a Property Tax Study Project Joint Legislative Initiative 2. School finance reform Rising school property taYes, perceived inequities in school funding, and increasing difficulty in funding the special needs of urban school districts are some of the key school finance issues affecting the urban school districts represented in this project. Further changes in the school finance system are needed to address these issues. Proposal description The reliance on property taxes for funding schools should be reduced, and the state share of funding should be increased. One key priority for this state money should be more adequate funding for mandates and populations that pose significandy higher costs for districts with a high proportion of children living in poverty. Greater equalizarion of property tax bnrdens for education is aiso important. The following are some specific proposals that may be developed to implement these general statemenu: a) Improve the compensatory formula so that it more fully reflecu the additional cosu due to high concentrations of poor children in urban school districu. b) State funding for education costs for out-of-home placements of juveniles. c) Full state funding for inflation of special educadon costs. d) Continue state funding for existing and new alternative bonding levies. e) Fold the district cooperaflon levy into the general education formula and fully equalize it. � Provide state bonding for voluntary integration ptograms and other collaborative programs such as "Achievement Plus" schools. g) Average sales ratios over three years to smooth out the year-to-year variation in levies. November 12, 199� Property Tax Study Project Joint Legislative Initiative 3. Mandate reform Mandates can drive costs up when the state requires local governmenu to provide services without adequate consideration of the costs of those services. Safeguards are needed to assure that the demand for services is batanced against the costs of those services. Last year the legislature passed legislation creating a new fisca! note process for state mandates that could affect city and counry property ta�ces. These jurisdictions will participate in the fiscal note process as appropriate and suggest changes that may be needed to assure that it is effective. Proposal description a) Expand the new local mandate fiscal note process so that it also applies to school district mandates that could affect school district property taxes. November 12, 1997 10 �� -� �tr Property Tax Study Project ,Ioint Legislative Initiative 4. Improvements to the Price of Government law The "price of government" law requires that state and local revenues be measured (and projected for future years) as a percentage of personai income. It also requires the legislature to adopt a resolution establishing this percentage as a maYimum "price of government " While the law may have some use for evaluating trends, the "price of govemment" is flawed because it focuses on "price" without considering government's responsibilities, and it is being misused as a guideline or limit on total revenues. Proposal description The following amendmenu could discourage the law's misuse as a potentially misleading political tool, and refocus it as a stafisuc for evaluating fiscai trends. a) The governor's recommended maximum revenue target should be expressed as a range of percentages (rather than a single percentage) and be based on the govemor's proposed budget and revenue estimates. The percentage range would reflect the high and low figures for personal income based on the optimistic and pessimisdc scenarios used for the state's revenue projections. b) The legislature's revenue targets for the next two bienniums should also be expressed as a range of percentages. Passage of the resolurion should be delayed until after passage of the major budget bills. This would assure that the legislature's revenue targets reflect the cost implications of the legislature's budget decisions, linking "price" with level of service. c) The "price of government" letters from the Department of Revenue to locai governments should be eliminated. d) 'The report to the governor and legislature comparing local revenue decisions to the growth in personal income should focus on long-term trends rather than single-year events, and should be accompanied by demographic or other statistics explaining changes in local revenues as a percentage of personal income. e) The local revenue projections should be based on demographic changes, changes in state and federal programs, tax base changes and other factors that are projected to affect the need for local revenues. fl Exclude fees from the calculation. Exclude exported taxes, or include business income. g) Base the price of govemment calculation for cities on growth in the "revenue base" (levy plus state aid). November 12, 1997 til Property Tax Study Project Joint Legislative Initiative 5. F�nding for the redevelopment of polluted lands Much of the avaitable Iand within the state's urban areas has pollution or other environmental problems that act as barriers to its redevelopmen� Despite these problems, this land is an important urban asset, and its redevelopment can provide needed jobs and housing. Funding for the redevelopmant of polluted lands would be a good use for a portion of the state budget surplus becaase these are one-rime expendinues that have tong—term benefits. Proposal description Several specific proposals are being developed by staff from the jurisdicfions involved in this project 'I'hese proposals may include: a) Addidonal sources of funding to assist with polluted lands clean up and redevelopment, such as access to the state's deed taY revenues; b) Improved access to the polluted lands money for urban redevelopment; and c) Limits on the liability for environmental and related problems for new owners/developers. The specific proposals as developed by the jurisdictions and approved by their governing bodies are a part of the package of initiatives supported by the Property Tax Study Project. November I2, 1997 12 a�-r�trD Property Tax Study Project 3oint Legislative Initiative 6. Diversification of lceal revenue sources. Because they have few other sources of local revenue, local governments are often forced to fund services with the property ta�c, even though that is not the best or most appropriate source of revenue. Diversification of revenues for local governments providing services on behalf of the state can help reduce the reliance on the property ta�c. It also wouid allow locai govemments to more appropriately match revenue sources to the services being provided. Proposal description a) Sales taz� for iocal governments. The state should share a portion of its sales tax base with cities and counties. For example, the state sales tas could be reduced by 1 percent and a new local sales tax of 1 percent would be imposed. The total net sales tax on purchases would not change. In exchange for the HACA currently paid to cities and counties, the state could provide constitutional guarantees that the sales tax revenue would flow to these local governments. Each city and county should be guaranteed a sales tax distribution at least equal to the amount of HACA they received in 1998. Any local sales tac revenues in a given year in excess of the guaranteed amounts distributed in the first year wouid be allocated among the jurisdictions based on a formula that includes point of origin and households as formula factors. This change would provide local governments with a second major source of revenue with the potential for growth without raising rates -- instead of forcing them to rely on a static source af state aid (FIACA). Local officials would be accountable for managing the growth and decline of this new revenue source within their budgeu. b) Mortgage and deed tax. Counties should retain the mortgage and deed taxes they currendy collect for the state. This money could be used by counties for clean up of polluted land, redevelopment, housing or economic development, or to fund other property related initiatives. November 12, 1997 13 Property Tax Study Project Joint Legislative Initiative 7. Utility deregulation and utility taY issues. The potential for restructuring and deregulation of the electric utility industry raises many complex issues for Iocal governments. A basic orinciole is that the taxation of utilities must not be considered se,parate from other asnects of dereEUlation With that basic principle in mind, the following are some of the areas in which these local govemmenu believe they have a stake. • Taxation. Utility property is a significant component of the ta�c base for many communities. Any change in the taxation of utility property must come with guarantees that the taxes currently paid by the utilities will be replaced without increasing the property taxes paid by homeowners and other residential property. • Other revenues. The abil4ty of these local governments to raise revenues through franchise fees and the sale of electricity and refuse derived fuel must not be impaired. • Universal service. Assuring universal service at reasonabie cost is vital to tfie health of coiurnunities throughout the state. • Aggregation and marl;et power. Restructuring should allow local govemments the opportunity to combine electric loads and negotiate purchases of electricity. Restructuring should aLso provide for safeguazds to protect small users. • Right-of-way. I.ocal govern�nents must preserve the ability to control and regulate the use of the public right-of-way. • Transition. The transition to dereguladon should allow local governments, business and citizens time to adapt to the new environment. November 12, 1997 14