Legislature shapes Washington County's budget plan

  • Article by: JIM ANDERSON , Star Tribune
  • Updated: July 13, 2013 - 2:00 PM

Washington County will get more state aid and a sales tax break, but will be limited in how much it can levy for property taxes.

Actions by the Legislature always hold major implications for counties and their taxpayers, and results of the just-completed 2013 session will present a fresh set of challenges as the County Board starts shaping its next budget.

“One of the hallmarks of this past session was dealing with what’s seemed to be recurring shortfalls in the state’s finances,” said Keith Carlson, executive director of the Minnesota Inter-County Association, a nonprofit group of growing or urban counties in the state, including Washington County. “And this Legislature did that in spades, frankly.”

Carlson outlined how major policy changes approved by the DFL-controlled Legislature will affect the county during a recent presentation to county commissioners.

The Legislature approved about $2.1 billion in tax increases, mostly by establishing a fourth income tax tier that applies to couples making more than $250,000 a year ($150,000 for single filers) and a $1.60 per-pack cigarette tax increase. Sales taxes on some business services and several corporate tax loopholes also were tweaked.

In turn, the new revenue was directed mainly at plugging a $627 million budget deficit, restoring funding for both K-12 and higher education, and providing $410 million in new property tax relief.

Part of that tax relief is counted in county program aid — money distributed based on need and tax base — which was increased from $165 million to $205 million for 2014, about a 24 percent increase. Washington County received $6.9 million in CPA funds this year, and can expect to get at least $9 million next year, Carlson said, though numbers have not been finalized by the state. Aid paid to Washington County fell far below projections in 2010 and 2011, which has been a sore point with board members.

And after more than 20 years, counties and cities will be exempt from paying state sales taxes as of Jan. 1, with the exception of motor vehicle purchases. That will save counties $170 million a year, he said.

“Unfortunately, this all comes at a price,” Carlson added. Balanced against the new influx of aid and the sales tax break, counties face a restrictive one-year cap on how much they can levy in property taxes.

In Washington County’s case, he said, the levy could increase no more than 1 percent from the $86.1 million set in 2013.

The County Board has been diligent in keeping the rate flat for the past several years as the nation stumbled through a major recession and property values plummeted. Commissioners approved a no-increase property tax levy for 2013, but they also adopted a slightly more costly $158.6 million operating expense budget.

One tax assessed in Washington County will double on Jan. 1 unless the County Board decides otherwise, he said. The wheelage tax — a $5 fee levied as part of annual vehicle registrations — will increase to $10 per vehicle for the next four years, and then could increase to $20 in 2018 — again, if the board opts to do so.

Washington County is one of five in the state that collect the fee; the others are Anoka, Carver, Dakota and Scott. Along with those counties, Hennepin and Ramsey had been the only other counties allowed to assess the tax, but now all 87 also will be able to do so.

The money — about $1 million annually in Washington County — is used for the transportation system, from road upgrades to light-rail lines. Unlike the gasoline tax, however, the money collected from the wheelage tax goes to the county, rather than being dispersed across the state.

Washington County has been collecting the wheelage fee since 2007, and the county has supported its use because it is user-based and it reduces the need to use property taxes to pay for transportation needs.

The cap on the wheelage tax hasn’t been increased since it was first authorized in 1971, and the county’s legislative agenda urged increasing the limit because traffic has increased substantially over the past 42 years, along with inflation.

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