2015 City Visit and Legislative Update

Marty Seifert, Lobbyistmjseifert@flaherty-hood.com

CGMC Represents 85 Cities Across the State

• LGA/Property Taxes• Economic

Development• Annexation and Land

Use• Transportation• Environmental

Regulation

2015 Session Lay of the Land• Gubernatorial debate in Rochester:

CGMC hosts first debate between candidates

• 2014 House elections result in 10 seats flipping from DFL to GOP “Greater MN Session” (??)

• Divided government: Party, regional, ideological divides

• Budget year: Major budget bills must pass or government shuts down on

July 1, at least partially

CGMC Goals

• Return LGA to 2002 funding level• Pass Greater MN economic

development programs– Workforce housing– Job training– Greater MN Business Development Public

Infrastructure Program (“BDPI”)– Broadband

• Comprehensive transportation package• Environmental reforms

Budget Forecast Continues to Show Financial Health

• 2016-2017 General Fund Budget Forecast– Nov. Forecast = $1.037B surplus– Feb. Forecast = $1.8B surplus

• Budget Reserve = $1.344B• Revenues consistently above

projections

House GOP Goes Big for Tax Cuts

• Party pressure to “Give it all Back”• House GOP Budget

– $2B in tax cuts– $1.1B cut in health & human services– $156M increase for education– $53M increase for higher ed.– Cuts to economic development and

environment

• Cuts to LGA for first class cities

LGA Cuts for First Class Cities• Arguments:

– “LGA was originally for small cities”• 1971 LGA law directed $$ to Minneapolis and

Saint Paul specifically

– “First-class cities get too much”• Minneapolis, Saint Paul, and Duluth’s share of

LGA appropriation fell from 38% in 1986 to 32.6% in 2015.

– “First-class cities have a lot of tax base”• When compared to all other cities, no first class

city is in top 100 cities in property tax wealth/capita (Mpls ranks 115, St Paul is 207, Duluth is 240)

CGMC Presses for LGA Increase

• $22.75M increase for CY 2016, $22.75M for CY 2017

• Would help cities catch up on infrastructure, capital purchases, wages

• Lack of support from Governor ($0 increase)

• Included in Senate tax bill ($45M)• House proposed $85M cut (first-class

cities)

LGA Outcome• No tax bill!

– LGA will be funded at $519M in future years, unless increased

– LGA appropriation was $565M in 2002

$0

$100,000,000

$200,000,000

$300,000,000

$400,000,000

$500,000,000

$600,000,000

0%

20%

40%

60%

80%

100%

54.19%

34.33%

45.81%

65.67%

LGA Share By Region

Metro Greater Minnesota Greater Minnesota Share Metro Share

Regio

nal S

hare

$2,421,872 $2,427,968 $2,429,050

$2,469,048

$2,515,918

$2,427,968 $2,429,050

$2,360,000$2,380,000$2,400,000$2,420,000$2,440,000$2,460,000$2,480,000$2,500,000$2,520,000$2,540,000

2015 Current Law, 2016 Current Law, 2017 CGMC Proposal,2016

CGMC Proposal,2017

Enacted Law, 2016 Enacted Law, 2017

Marshall LGA Funding, Current Law Versus CGMC Proposal

$2,560,016

$2,203,178

$2,427,968

$0

$500,000

$1,000,000

$1,500,000

$2,000,000

$2,500,000

$3,000,000

2002 2004 2006 2008 2010 2012 2014 2016

Marshall LGA Funding, 2002-2017

Environmental Regulatory Reform – Challenges and Opportunities

• Challenges: – Rulemaking process that ignored

CGMC’s legitimate questions as well as valid science

– Multiple, expensive regulatory initiatives

– Aging or outdated city infrastructure

– Decreased funding and often loans instead of grants

• Opportunity– GOP and rural Democrats open to

regulatory reform after MPCA and Governor ignore requests

Environment – CGMC Proposals• Independent peer review for expensive or novel

regulations– Modeled after EPA Handbook– Public input on the questions and report– Suspend recently adopted rules to perform peer review

• Cost study– Look at the costs that cities will be facing so the state

can start planning how to fund and make good choices

• Legislative approval of expensive regulations• Prohibition on enforcement of un-adopted rules

Strong Pushback Leads to Modest Results for Cities

• No independent peer review required– Commissioner has discretion but must disclose

choice in SONAR

• Cost study funded• No legislative approval for expensive rules• Relief on wild rice sulfate standard• Additional MPCA staff to “work” with cities• Self-reporting for minor violations of

permit

Workforce Housing Finally Gets Attention

– What is workforce housing? Housing for middle-income residents, needed to grow a local economy

– What it’s not: “affordable housing”– Problem: Some of the fastest growing

companies are located in areas with broken housing markets (e.g. Worthington “hasn’t built a unit since bell bottoms were in style”)

– Why: Comparables, perceived risk, rents that are “stuck”

CGMC Supports Workforce Housing Plan

– $100M/biennium in tax credits for investors/developers, grant program, and a new Office of Workforce Housing in DEED

– What passed: • Expansion of 2014 pilot grant program

($5.4M over next biennium) to rest of Greater Minnesota

–Important: In DEED!–What it will do: Provide grants to cities

to assist local workforce housing projects

More Work Needed on Workforce Housing

Program Cost Units (~$100k/unit)

Expanded grant program(Passed in 2014)

$5.4M 108 units (50% match)

Workforce housing tax credits(Pending)

$60M 3,000 units (50% match, 40% tax credit)

Sen. Sparks and Austin City Administrator Craig Clark at 3/16/15 Senate Committee

Employer-Driven Job Training

• History: CGMC has sought to pass a job training program since 2013

• DEED: Created a pilot program last year – based on the CGMC proposal – without dedicated funding and with substantial changes

• This session: Passed CGMC proposal – funded at $1.8M over next biennium

Broadband Infrastructure– Created in 2014: Last year $20M, more than

$40M in requests in condensed application period

– Popular with press and residents & businesses (Greater MN still far behind metro in access; MN ranks 22nd).

– Future Priority: DEED program should have econ dev focus (and factors).– Letter of interest coming soon! DEED

form will allow communities to show interest without needing to fill out application.

Broadband Funding Recommendation

Broadband Experts $3B (connects state)

Governor Task Force $200M

Governor $30M

House $0! Then, $10M

Senate $17M

Outcome $10.838M2014 grant projects have begun construction – Becker Industrial Park installation pictured above

BDPI Grant Program• DEED-administered grants which match

local funds to provide infrastructure for business development

• CGMC bill for $20M (split bonding/general fund)– Language improvement: Allow for improvements

to private property associated with public infrastructure project

• Result: $4.2M over next biennium $1M in bonding, $3.2M from general fund ($1.9M earmarked for two cities in FY 2016)

• Will pursue additional funding next year

Bad Annexation Bill Stopped

• SF680/HF919 would have prohibited a city from pursuing annexation if subject area is covered by an Orderly Annexation Agreement with another city.

• Pits cities against each other and hampers economic development

• Working behind the scenes with assistance from Rep. O’Driscoll, bill was not heard

What Didn’t Happen: Transportation

• What everyone wanted: “Long-term comprehensive, transportation funding”

• Senate wanted gas tax; House wanted all general fund

• CGMC priorities: Corridors of Commerce and funding for city streets beyond MSA formula and for cities under 5,000

What Passed: Local Street Funding

• One-time, $12.5M funding will be available for cities under 5,000 for improvement and maintenance of city streets.

• Individual city data available at greatermncities.org

Lessons from 2015

• Despite strong bipartisan support in both Senate and House, legislature and Governor largely failed to deliver

• Focus on tax cuts crowds out investments in Greater Minnesota

• Success in 2016 depends on sustained engagement from CGMC members (LGA, transportation, workforce housing, etc.)

What’s Next

• 2016: Non-Budget Year– Tax bill? (LGA and workforce housing tax

credits)– Bonding bill?– Transportation funding?

• Significant policy changes unlikely • House and Senate up for election in

November

Upcoming Events

• CGMC Summer Conference, July 22-24 (Duluth)

• CGMC City Visits• Fall Conference, November 12-13

(Alexandria)

www.greatermncities.org

THANK YOU!