ST. PAUL -- Minnesota's main rural economic development program would be history, but local governments would get more state aid, under a bill senators are considering.
Sen. Tom Bakk's proposal, expected to pass out of his Senate Taxes Committee today, contains a list of items Republican Gov. Tim Pawlenty does not support. Bakk, DFL-Cook, has not talked to Pawlenty about the bill, but said he expects the governor to be involved in negotiations as the House and Senate negotiate differences between their tax bills.
Bakk's bill looks far different than one pushed by House Taxes Chairwoman Ann Lenczewski, DFL-Bloomington, that features the elimination of most state businesses subsidies.
A common feature in both bills is elimination of the Job Opportunity Building Zones that provides deep tax breaks to new and expanding rural businesses, a program Pawlenty hails as his premier rural economic development program.
Lenczewski would end tax breaks for businesses already in JOBZ, but Bakk said it is not fair to go that far; he would not allow new businesses to sign up for it, but would allow existing tax breaks to continue.
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Bakk said the increased state aids -- $70 million to cities, $40 million to counties and $5 million to townships -- could help local property taxes fall next year. The idea behind increasing state payments is it would allow local governments to lower property taxes.
"People just don't have the money to pay property taxes," the Senate Taxes Committee chairman said.
House Property Taxes Chairman Paul Marquart, DFL-Dilworth, was thrilled to see senators are looking into increasing state payments to local governments, but admitted it will be tough to pass in light of Pawlenty's opposition and the fact that lawmakers face a $935 million budget deficit in a slumping economy.
"I don't think anyone has any false illusions in this type of climate," Marquart said.
The House probably will produce its own bill increasing local aids.
Bakk and Marquart said there are no guarantees any certain person's property taxes actually would fall if more money were given to local governments.
The major way the Bakk bill raises money is requiring multinational corporations to pay more Minnesota taxes. As it is, many companies with foreign operations get tax breaks.
That would bring in $109 million, Bakk said.
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Pawlenty's spokesman said the governor does not like the Senate DFL bill.
"It seems like DFLers have one solution for everything: increase taxes," Brian McClung said. "This bill is another overall tax hike on top of the $6.6 billion in new (transportation) taxes already passed by DFLers this year. In addition, this proposal hits job providers the hardest -- not a good strategy in an already challenged economy."
Other provisions included in the Bakk bill, which probably will be debated by the full Senate next week:
-- Taconite taxes would relax slightly, but Bakk said that would happen only if mining companies agree to fund more mining-related education programs.
-- Farmers who eradicate cow herds due to bovine tuberculosis would get tax breaks.
-- Companies that operate electric plants would be returned to a higher tax rate that lawmakers earlier had lowered.
-- Cabin owners would have to pay toward property tax referendums in school districts where their cabins are located, but not pay statewide property taxes.
-- St. Louis County would receive state payments to make up for property tax losses if a state park is established along Lake Vermilion.
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-- Moorhead, Dilworth, Breckenridge, Ortonville and East Grand Forks would continue to be able to offer tax breaks to new businesses, but only to firms headquartered or doing most of their businesses in one of those communities.
-- St. Louis and Dakota counties could impose taxes on mortgages and deeds, with proceeds to be used for environmental purposes.
-- Cloquet would be given permission to collect a half-percent sales tax for park and related improvements.
-- Cook County could impose a 1 percent sales tax, if voters approve by the end of 2009, for a community center, Grand Marais Public Library and other uses.
-- Ely could add a 1 percent sales tax to fund an entry to the Boundary Waters Canoe Area, a swimming pool and other improvements.
-- Fergus Falls could give tax breaks to someone who renovates part of the former regional treatment center.
Don Davis works for Forum Communications Co., which owns the Bemidji Pioneer.
