VIRGINIA — Details of the state tax bill came into public view Thursday as the compromise between Gov. Tim Walz and legislative leaders was released, with gains on the Iron Range highlighted by increases to Local Government Aid, County Program Aid and Taconite Municipal Aid.
For the city of Virginia, a long-awaited $5.4 million funding gap for Highway 53 is included in the agreement, as is the city’s request for a 1% sales tax for the Miners Memorial project.
Nonpartisan staff walked House and Senate members through the bill Thursday as the Legislature pushes toward a one-day special session, which is on tap for 10 a.m. today and a targeted adjournment of 7 a.m. Saturday.
The broad priorities of the bill lowers the second-tier income tax rate by a quarter of a percent, reduces the statewide business property tax and conforms to the federal tax law, netting the state about $600 million. Appealing to state Republican wishes, the bill doesn’t raise taxes on Minnesotans and instead dips into the state’s reserves.
More than $50 million is set to go back to cities and counties through increases to Local Government Aid and County Program Aid, the former returning to 2002 funding levels.
“This was a really good session for the region,” said State Rep. Dave Lislegard, DFL-Aurora, who is the vice chair of the House Tax Committee and chief author of the bill restoring LGA levels.
Under the CPA increase, St. Louis County can expect to receive $13.6 million in 2020, an increase of more than $1.3 million from 2019. Cities receiving LGA funding will see a total increase of $631,180 (5.47%) with the breakdown is as follows:
• Aurora: $16,150 (2.49%)
• Biwabik: $4,558 (1.92%)
• Eveleth: $140,515 (5.28%)
• Gilbert: $12,969 (1.82%)
• Hoyt Lakes: $14,662 (3.62%)
• Mountain Iron: $36,417 (2.73%)
• Tower: $5,758 (6.23%)
• Virginia: $399,256 (7.49%)
Other cities across the Range including Grand Rapids, Hibbing and Ely will experience LGA increases, but specific breakdowns were unavailable as of press time.
Under the increase to Taconite Municipal Aid, also chief authored by Lislegard, cities can see total numbers of $424,000 in 2021, $422,000 in 2022 and $474,000 in 2023. A city-by-city breakdown was not available from House analysts, but the tax bill does include $5,000 a year for Iron Junction and $15,000 a year for Breitung Township.
“This session was about compromise and moving forward,” Lislegard said. “We didn’t get everything that we wanted but we moved our region forward and we moved the state forward.”
For Virginia, the $5.4 million funding gap is scheduled to be paid out by Aug. 1, 2021, but filling the void left by state during construction of the Highway 53 bridge is critical for the city’s budget.
The gap was created when the state elected to hire Nebraska-based construction company Kiewit as the primary contractor for the bridge project and costs to run utility lines along the structure exceeded projections. Virginia was forced to take out a loan and pay Kiewit in order for the company to complete the work.
Former Gov. Mark Dayton said the funding would be provided to make the city whole, but he ultimately vetoed the tax bill last session.
Virginia Mayor Larry Cuffe Jr. said the city will have to adjust its budget and levy until the payment is made, and that they’re still operating on a thin budget margin, but finalizing the funding was a success for the session.
“It’s really a win,” he said. “We need the money and it should have been allocated. It shouldn't have been this complicated of a process. With the increases in the budget with LGA and Taconite Municipal Aid, the city will get a significant chunk of money to help us bridge the gap of the $5.4 million. It eases the pain a little bit.”
The 1% sales tax inclusion completes the back end of a ballot measure passed by Virginia voters last November, which sent the tax to the Legislature for approval.
Cuffe said planning for the new Miners Memorial project is ongoing in the design and build phase, which is expanding city ownership of the property for parking, public-private partnerships and a potential hotel and restaurant.
The city is still meeting with user groups and expects the tax will be in place by January 2020, with construction beginning that spring.
“We’re not all the way there yet, but we’re pretty close,” Cuffe said of the tax, which like all measures of the tax bill, have to be approved by Legislature during the special session. “A 99% chance that this going to move forward.”
During the special session, the Legislature will convene to try and pass several key budget bills after they couldn’t reach agreements Monday. The nine outstanding bills are open to amendments and House Minority Leader Kurt Daudt said late Thursday that there was no agreement on rules for the special session.
Lawmakers have until June 20 to pass a budget and avoid a government shutdown. The tax bill is among the bills that isn’t part of the budget bills, but is expected to clear the Legislature and be signed by Walz.