Legislative update: Garofalo talks business tax relief

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Minnesota House Rep. Pat Garofalo, R-Farmington, provided local officials on Monday, July 18, with an update on how legislative changes will impact the city and school district.

From the city side of taxes, Garofalo explained the most noticeable change will be substantial tax relief for businesses, especially small businesses and commercial properties.

"Specifically, there is something called the citywide property tax, which use to have an automatic increase in it that would automatically raise a portion of taxes that small businesses would pay," Garofalo said.

Business tax relief

"Every single commercial industrial property in Farmington and across the state will see substantial tax relief, and I think it is something you as elected officials understand but the general public may not understand," Garofalo said.

Garofalo said a "huge" amount of property tax burden is shouldered by businesses, adding how the new tax reforms are permanent relief to businesses, and particularly small business that those businesses that own properties.

Garofalo said there is a "modest increase" in the state portion of the Local Government Aid formula, a payment made to cities.

Farmington Mayor Todd Larson commented on how over the years, the city has learned how to not anticipate LGA funds.

"But, don't get me wrong, we do appreciate the money," Larson said.

Garofalo said a 2013 income tax increase was shouldered by high-income individuals.

"This may be more progressive in nature, based on the ability to pay and it has introduced unprecedented volatility in the state's tax code, so you are prudent not to count those chickens until they have hatched and you should wait until the money is in the bank before using it," he added.

Garofalo said LGA funding would be reduced in a future state budget deficit.

"At some point, we are going to have a deficit, and whenever that is I don't know when, but when that takes place, it will be a very difficult deficit and now we have large budget reserve, but a simple correction could take place with the stock market or unemployment and that could result in a multi-billion dollar deficit," Garofalo said.

Eliminating seniority privileges

Garofalo said the state Legislature eliminated the mandate from the state requiring the recognition of state seniority privileges and retention of school district staff. Commonly, this legislation was referred the last in, first out policy in regard to hiring and letting go of teaching and district staff.

"This year, that is limited so now there is more local control to allow local school boards to make those decisions" with local bargaining units, Garofalo said. "I think it is a good, positive reform and I would recommend to you the school board to use your newfound authority to focus on students' achievement and focuse on teacher quality."

Secondly, Garofalo said from a school board perspective, the way school construction is financed is changing.

"There will be substantial tax relief for those who own farmland in our community," he said.

The third school district impact from a state legislative point of view is the increase in the per-pupil funding formula, Garofalo said adding he understands there is always a need for greater school funding.

"Overall, it was a pretty positive session — we had a budget surplus and it was pretty nice to be talking about how to help people versus when we had deficit and we were having discussions about how to hurt people" Garofalo said. "All in all, it was a happy session, even though we spent more than I wanted to but that is all part of compromise in the legislative process."