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May 3, 2021

Senator Carla Nelson Representative Senator Representative Senator Jeremy Miller Representative Kaohly Vang Her Senator Thomas Bakk Representative Dave Lislegard Senator Representative

Chair Marquart, Chair Nelson, and HF991 Conferees:

On behalf of the Inter-County Association (MICA) and its fifteen member counties, thank you for the opportunity to provide input on HF991 and HF991-1UE, the Omnibus Tax Bill.

COVID Business Relief and Tax Aids

Counties have distributed over $300 million to help small businesses and non-profits impacted by the COVID-19 pandemic, including CARES Act, state, and local funds. State and federal funding is essential to county efforts provide COVID response, bolster local economic recovery, and maintain essential county functions. Consistent with those efforts, we support:

 Homeless Prevention Aid: House Article 8, section 4 creates a new program to address housing instability among youth and young adults statewide. By providing reliable, flexible, and dedicated funding, counties will be positioned to work with local partners to design solutions that best fit the housing stability needs of youth. Studies have shown that individuals who experience homelessness as youth are more likely to experience homelessness as adults. The proposed aid responds directly to a troubling policy challenge by promoting stable housing for young Minnesotans at a critical juncture in their social, educational, and career development.

 County Relief Grants to Local Businesses: House Article 8, section 4 appropriates $87.9 million for counties to make COVID relief grants to small businesses and non-profits impacted by the COVID-19 pandemic. This funding would build on the $115 million distributed to counties for relief grants under Chapter 2, 7th Special Session of 2020. We suggest the final language provide additional time for the counties to administer these grants, and broad flexibility to award grants to entities impacted by the pandemic.

Sales Tax & Use Tax – Construction Materials

 House Article 4, section 5 and Senate Article 3, section 4: MICA thanks the House and Senate for prioritizing action to move closer to a full refund exemption for all purchases of construction materials by local governments. We support the common House and Senate language that applies to public safety facilities. Increased investment in public infrastructure is essential. The payment of state sales tax on construction materials reduces funds available for other investments in critical road, bridge, and other public infrastructure. We encourage consideration of a full exemption for all local government purchases of construction materials if the committee target allows.

Property Taxes

 Housing and Class 4d Class Rate: MICA supports efforts across a variety of omnibus budget bills to address the shortage of emergency/shelter and affordable/workforce housing. We are concerned, however, that a reduction in the 4d class rate to 0.25% will shift over $40 million of property tax to other property types, including other renters, homeowners, and small businesses who may themselves be experiencing low or fixed incomes. We support the study requirement of House Article 13, section 24, and urge completion of such a study prior to considering a reduction in the 4d class rate.  For similar property tax base reasons, we also encourage that tax increment financing proposals remain closely tied to the traditional ‘but-for’ test, and discourage allowing the temporary use of TIF revenues for municipal general fund purposes (House Article 10, section 1).  MICA agrees with the goal of promoting access to affordable childcare services across Minnesota as intended by the creation of a Licensed In-Home Child Care Provider Credit (Senate Article 4, section 10 – 12). We would welcome additional discussion on how to simplify calculation and administration of the credit benefit.

Pertaining to housing, we support Chair Nelson’s approach to establishing a Minnesota Housing Tax Credit Contribution Fund (Senate Article 2, section 13). We also support the House’s appropriation of $15 million annually for Workforce and Affordable Housing (Article 13, section 23), increased appropriations for housing programs (HF1077), housing appropriation bonds, and potential allocation of ARPA funds for housing.

Finally, we thank Chair Marquart to seeking early feedback from local governments on the Minnesota Property Taxpayers’ Day proposal (House Article 7, sections 21 – 24). Member counties support the remote participation requirement but remain concerned that a single day of hearings for counties, cities, and schools may be less accommodating for many taxpayers. Taxpayers in large and rural counties who prefer to attend in-person may find it difficult to travel between venues in time to participate in multiple hearings on the same night. Counties

have suggested to perhaps instead hold a Property Taxpayer “Week,” or allow local officials to set the dates and times within established parameters that prevent scheduling overlap. Counties have also suggested establishing broad standards for the supplemental budget information requirement (section 23) but allow county auditors to coordinate locally how specifically to meet the established standard.

Again, thank you, all conferees, for your work on this important legislation, and for the opportunity to provide input to HF991/HF991-1UE. Our association is available to answer questions and provide information as you work toward agreement on a 2021 Omnibus Tax Bill.

Sincerely

Matt Massman, Executive Director Minnesota Inter-County Association