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Levy potential may spur tax hikes

The prospect of Minnesota legislators reinstating caps on property tax hikes has convinced some local officials to raise taxes now to avoid future budget cuts.

The prospect of Minnesota legislators reinstating caps on property tax hikes has convinced some local officials to raise taxes now to avoid future budget cuts.

In 2003 and 2004, state law forbid sharp jumps in city and county property taxes, limiting increases based on size and growth level, said Jim Mulder, executive director of the Association of Minnesota Counties.

No such limits exist on the 2005 budgets local officials are now preparing.

But some worry that the limits may be reinstated in the coming years as the state faces a projected $1 billion budget shortfall.

"I think county boards and city councils have been put in a really difficult position trying to guess what the Legislature is going to do," Mulder said.

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That's the case in Clay County, where commissioners are considering raising taxes in case future levy restrictions are based on 2005.

One of the three suggested levy proposals from Clay County Administrator Vijay Sethi calls for a 4 percent levy increase, even though the county will get three times the state aid next year as it did this year.

"If we were to reduce our levy and then they chose 2005 as the benchmark, we'd be in a pickle again," said Commission Chairman Jerry Waller.

The nightmare scenario would be a drop in state aid in combination with the return of levy limits, forcing steep cuts in service, Commissioner Jon Evert said.

"Our big fear is the re-imposition of levy limits," said Commissioner Ben Brunsvold.

Not all local government officials are as worried about the potential return of levy limits as Clay County.

Dilworth City Administrator Ken Parke said the city's property taxes will likely increase, but that's to make up for lost state aid, not to pad the levy for future limits.

Moorhead Mayor Mark Voxland said the proposed city budget makes no concession for possible levy restrictions.

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Voxland said raising taxes in anticipation of levy limits might backfire, convincing state legislators that the limits are needed.

"They don't like that. They get angry about that. They think you're overtaxing people," he said.

Voxland, who also serves as president of the Minnesota League of Cities, said both House and Senate leadership have vowed levy limits are gone for good.

Tax bills by the Democratic Senate and Republican House in this year's session did not include any sort of limit on local tax authority, though neither bill became law, said Gary Carlson legislative director for the League of Minnesota Cities.

Carlson said support for levy limits has typically been strongest among House Republicans.

Rep. Dean Simpson, R-New York Mills, said while he does not think lawmakers will bring limits back at the 2005 session, he believes they will be discussed.

"I'm sure somebody's going to bring it forward," said Simpson, a member of the House Tax Committee.

Moorhead Republican Morrie Lanning, also a member of the House Tax Committee, also doubts limits will return.

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"I'm glad that they have been lifted. I hope that it remains that way," he said.

Readers can reach Forum reporter Dave Roepke at (701) 241-5535

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