The tax bill: All or nothing at all

Gov. Pawlenty says there are a lot of good things in the tax bill. But he warned this week that the entire bill is "headed in the direction of a veto."

"It includes one thing that we told the DFL leadership would result in a veto if they didn't take it out," he said. "And that is putting government on autopilot, building back into the government forecast for spending that everything is going to go up automatically every year. And we told them during the negotiations sessions that that was a very large and substantial concern."

But a veto would also eliminate every other provision in the tax bill. Lawmakers included $1.5 million to help local governments in northeastern Minnesota rebound from the recent Gunflint Trail area fires.

Cook County Auditor/Treasurer Braidy Powers says the funds are needed to cover uninsured costs such as road repair, debris removal and employee overtime. If the money doesn't come, Powers says local property taxpayers would have to pick up the tab.

"It's going to affect our levy for next year for sure. I don't see how it wouldn't, because we'll be eating into our fund balance considerably this year in payroll costs and and other expenses. And that's really the only other method is your local tax bill," Powers said.

Property taxpayers statewide could feel the effects of a tax bill veto. The legislation included a $33 million boost in property tax refunds and $145 million of funding for local governments in coming years. Lawmakers say those payments to cities could help reduce the financial pressure that's been driving up property taxes.

Gary Carlson, lobbyist for the League of Minnesota Cities, says city leaders have been cutting costs for several years to make up for cuts in state aid. Carlson says a veto would put even more pressure on property taxes.

"There are not a lot of other alternatives left for cities to further streamline their operations," Carlson said. "So we are down to the point where many communities will be looking at the property tax as the one source revenue that they can tap. And it will obviously be a point of discussion at local budget meetings because of the increase in taxes over the last several years.

Many cities would lose more than state aid increases. The tax bill gives several cities the option to impose a sales tax. Another six cities are granted authority to establish special taxing districts for development projects. Eagan is counting on one of those districts to help publisher Thompson-West expand its operations and add 2,000 jobs. Eagan Mayor Mike Maguire says he's hoping the legislation comes through. But Maguire says a veto does not mean defeat.

"What it means is that on this specific expansion, our work together may be delayed. And hopefully we'll be able to get the enabling legislation and Thompson West moving. If not through a special session at some point, then perhaps in January or next year," he said.

Thompson-West would also be freed from paying sales taxes on construction materials and equipment. The city of Bloomington is counting on special taxing authority to help pay for an expansion of the Mall of America. The bill also helps fund a $180 million parking ramp at the mall.

Officials with the Minnesota Chamber of Commerce have mixed feelings about the tax bill. They're pleased that the bill accelerates a change in how business taxes are calculated.

Tom Hesse, vice president of governmental affairs, says the Chamber opposes an increase the property taxes paid by power plants, pipeline companies and other utilities. Hesse says there are also concerns about the Mall of America assistance.

"The mall is a valued member of the Minnesota Chamber, but the financing for their parking facility was done by increasing business property taxes in the seven-county metropolitan area to pay for the parking ramp. And I don't think that's an appropriate financing mechanism for that project," he said.

Hesse says the Minnesota Chamber of Commerce has not taken an official position either for or against the tax bill. He says the organization will wait with everyone else to see what action the Gov. Pawlenty decides to take.