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April 30, 2008
Citizens League Opposes Fiscal Disparities Exemption for MOA
The Citizens League sent the following letter to all members of the Minnesota House of Representatives on April 21, 2008. (For more information on fiscal disparities, see the Citizens League property tax studies page.)
****Members of the Minnesota House of Representatives:
We urge you to oppose any efforts to exempt the Mall of America Phase II from the fiscal disparities pool. The provision that is included in the Senate Omnibus Tax Bill is directly counter to the intended purpose of fiscal disparities and should not be part of the House bill. The provision attempts to use fiscal disparities as a subsidy tool. Fiscal disparities is not a subsidy tool, it is a structural part of the property tax base in two important regions of Minnesota: the Twin Cities Metropolitan Area (since 1971) and the Iron Range (since 1995). Fiscal disparities is intended to reduce disparities in property tax base wealth among communities in a given region.
Why Fiscal Disparities is Fundamentally Different from Subsidy Tools
Fiscal disparities is designed to reduce competition between communities for commercial-industrial (CI) tax base. Subsidy tools and payments (TIF, abatement, bonding, LGA) tend to promote competition between communities rather than reduce it. When important decisions are made regarding subsidy tools and payments, we require processes such as local government approval or a statewide weighing of priorities. Without applying these processes, we have yet to determine whether there is a need for a subsidy for MOA Phase II.
Fiscal disparities has no evaluative process as a subsidy tool because it is based on a fundamentally different premise and perspective than subsidy tools, namely that each community benefits from being part of the region. In other words, we are all in this together.
From the perspective of fiscal disparities, the provision in the Senate Tax Bill essentially says that MOA Phase II does not benefit from being part of the metro region. This inversion of the policy purpose would quickly lead to more perverse effects when implemented.
- The end-of-session proposal in 2007 would have had the effect of increasing rates directly on other CI property in the region. That provision essentially required other business property owneres -- in some cases direct competitors -- to pay for the MOA Phase II parking ramp.
- The proposal for 2008 tries to dampen the direct effect on other businesses by spreading the subsidy to renters and homeowners. This is achieved by essentially exempting MOA Phase II from the fiscal disparities pool and allowing that tax base to be used to build the parking ramp.
The 2008 proposal more directly violates the structure of fiscal disparities by spreading the effect beyond CI property to homeowners and renters.
There is No Precendent
Some have stated that the precedent already exists for use of the fiscal disparities pool as a subsidy tool, but MOA Phase I did not employ either of the above options. MOA PHase I was allowed to take out a loan from the fiscal disparities pool. Although a loan approach does not as directly violate the structure of fiscal disparities, the Citizens League did not and does not support that option either. The problem with the loan arrangement continues today as the repayment has been deferred from its original date and could be deferred again.
There have also been questions raised about the exemptions of pre-1979 TIF districts throughout the metro area. Legislators did not want to disrupt the payments from existing TIF districts in the wake of the first statewide TIF law in 1979, so they provided exemptions. This one-time "grandfathering" of TIF districts more than 20 years ago does not set the precendent that MOA Phase II would set today.
Setting a Bad Precedent
The precedent set by either of these proposals would make fiscal disparities a desired approach for subsidy, since there are no established processes to evaluate who should receive it. On what policy basis could we then deny use of the pool to others who compete with the MOA? Why should other malls and the myriad other businesses that may compete with the MOA first be required to subsidize their competitor and then not be subsidized in the same manner when they build or expand? Why should other projects of regional and statewide importance not seek a subsidy through fiscal disparities?
Fiscal Disparities Should Operate the Same on the Iron Range as it does in the Metro Area
Because it has been in place for a shorter period, the Iron Range fiscal disparities pool is not discussed as much, but it has now been in place for 13 years. The Citizens League would not support violation of the Iron Range fiscal disparities pool in this manner either.
Fortunately, a similar type of project on the Iron Range (infrastructure to support a private interest of regional and statewide significance) has gone through the usual legislative process for bonding and has had to compete with other projects of state and regional significance to be included. The bonding bill that was signed into law on April 7 included $28 million for infrastructure to support a new steel plant in Itasca County, one of the counties in the Iron Range fiscal disparities pool. What if the proposal was to exempt that steel plant from the Iron Range fiscal disparities pool? The Citizens League would also oppose that based on the same policy grounds and would see no good reason why that steel plant should not contribute to the health of the Iron Range regional tax base.
Bonding would also be an appropriate way to consider subsidizing MOA Phase II if legislators deem it is more appropriate than using TIF (providing that state exemptions are required; otherwise it is a local decision).
We are all in this together, and we respectfully request that legislators oppose the use of th metro fiscal disparities pool to subsidize the MOA Phase II.
Sincerely,
Sean KershawExecutive Director
Bob DeBoer
Director of Policy
Posted by Annie Levenson-Falk at April 30, 2008 10:27 AM