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HomeMy WebLinkAboutCity Council Packet 03-11-1998 SpecialY PLYMOUTH CITY COUNCIL SPECIAL MEETING MARCH 11, 1998 7:00 PM Council Chambers I. Presentation on Supermajority Proposal II. General Discussion on Supermajority Proposal Agenda Number: TO: Mayor and City Council Plymouth Charter Commission FROM: Dwight Johnson, City Manager; Kathy Lueckert, Assistant City Manager SUBJECT: Information for March 11 Special City Council Meeting on the Supermajority Issue DATE: March 6, 1998 for March 11, 1998 Special City Council Meeting On March 11, you have established a special city council meeting to discuss the proposed amendment to the Plymouth City Charter which would require a supermajority (5/7) vote of the City Council to increase the tax rate. You have invited the Plymouth Charter Commission to participate in the meeting. This meeting will be videotaped for later rebroadcast. We have devised a seating arrangement for both the council and the charter commission which we think will work adequately for both camera and sound. The Council will sit at the dais in the usual seats, and the Charter Commission will sit in front of the dais. Microphones will be available for Charter Commission members who wish to speak. Your packet includes background information for your use. General information about the budget and tax rate and how it is established. A summary of the major issues involved in the supermajority proposal, with pros and cons. These issues were gleaned by staff from outside sources and from points made by the council and the charter commission on the supermajority question. Please note that the italicized print indicate those points which are specific to Plymouth. On a number of occasions, arguments made in our local debate are identical to points found in our literature search. In such cases, only the local argument is included. A memorandum from the City Attorney outlining what actions could be taken by each body at this time and the procedural requirements for doing so. The complete public record to date of discussions on the supermajority issue by both the City Council and the Charter Commission, and related information. 0 Articles on the supermajority question (both pro and con) from an Internet search. We have attempted to present these issues and the pros and cons as neutrally and objectively as possible. No inference should be made if there are either more pros or more cons for any particular issue. Beyond these arguments are additional, even less tangible issues, such as the psychological impact if the voters approve the measure. In any case, we hope that this information consolidates much of the debate that has occurred over the last two years, and provides a beginning reference point for others who become interested in the issue. The Tax Rate What it is and how it works After a long process, the City staff recommends a budget to the Council in late July. After subtracting miscellaneous revenues from the proposed expenditures, the amount of taxes requested is determined. The property tax typically represents about 70% of General Fund Revenues, but only about 30% of City-wide revenues. The city does not legally establish a tax rate. It does establish the dollar amount of the taxes to be raised. The tax rate is the dollar amount of taxes to be raised divided by the tax capacity of the city: Tax Rate = Taxes to be raised/Tax capacity of city The tax rate can only be estimated during the budget process because the State adjusts railroads and utilities later in the year and property owners have the right to homestead their property through the end of the year. The final tax rate is actually established by the County in February of the following year and may vary somewhat from the tax rate estimated for the City Council. The Council has substantial, but limited control of the numerator (the amount of tax dollars to request to raise). A major limitation is state levy limits, which place a cap on the dollar amount of taxes that can be requested to be raised. The Council has no direct control over the denominator (the tax capacity value of the City). Some of the factors that control the tax capacity calculation include: state legislation on tax classification rates, economic conditions, natural disasters, fiscal disparities and tax abatement. Under the supermajority amendment, approving a budget and levy which increases the tax rate will require a 5/7 vote of the city council. If one or more members are absent or seats are vacant, the vote could be tabled until the next regular meeting when councilmembers would be present, or a special council meeting could be called when councilmembers could be present. If a new levy and budget are not established by the end of December of each year, the current year's levy remains in effect. Issue: Should there be a higher standard, such as supermajority vote requirement, for increasing taxes? Pro: It should be difficult to raise taxes. Elected officials tend to be biased in favor of tax increases without a higher vote requirement. The power to tax is the power to spend. A supermajority vote requirement sends a strong message to voters that increasing taxes is a serious decision. Increasing taxes is as important a decision as a rezoning. Requiring a supermajority vote for a tax rate increase may help restore public trust in elected officials and government in general. Con: Issues of taxation do not have the same permanence as do decisions regarding land. Requiring a supermajority vote for a tax rate increase may mean other revenue sources (such as user fees) are implemented, which may have the same effect as increasing the tax rate. A supermajority requirement for taxation purposes was considered when the charter was originally drafted, but the concept of majority rule prevailed. Issue: What is the best means ofprotecting future taxpayers from unneeded taxes? Pro: There are continuing intrinsic pressures at all levels of government to increase taxes. Interest groups exert pressure at all levels. In Minnesota, laws and mandates (such as PELRA) exert pressure on the tax rate. A supermajority requirement would help counterbalance these outside pressures. Devolution—the shifting of service delivery from one level of governmentdown to another level ofgovernment—is a real external threat in the future. Local governments may be pressured by other government levels and by special interest groups to increase taxes to assume responsibility for some services. A supermajority requirement will make certain that decisions on assuming services are carefully considered Plymouth has a good record on controlling the tax rate, but it is important to make it difficult to increase taxes in the future. A supermajority requirement will do this. A supermajority requirement will force tough decisions on spending in the future. Con: Supermajority requirements may make it more difficult to achieve a balance of revenue sources. Plymouth does not control its own destiny, and can be impacted by changing economic conditions and by actions at other levels ofgovernment, such as the legislature, the county, and the court system. Elected officials must have flexibility to deal with changes. A combination of a supermajority requirement and an economic downturn could have a disastrous effect on existing city services. It is important not to be caught "with our levies down. " Bond rating agencies do not look favorably on any actions which impact the ability of a governing body to raise revenue. Enacting a supermajority requirement could be a negative factor impacting Plymouth's AAA bond rating. Devolution may mean that some citizens do not receive needed services, and this can have ramifications on local services such as public safety. Councils should have the flexibility to deal with specific circumstances where service delivery decisions cannot be made solely on numbers alone. Issue: Majority Rule Pro: Tax increases should require more than a simple majority—if there are nearly as many votes against a tax increase as are in favor of it, the concerns of the minority must be considered. There are precedents in the constitution for requiring a supermajority to enact certain measures. Robert's Rules of order do not always follow the principle of majority rule, and do protect the rights of the minority. The extra vote requiredfor a tax rate increase will demand serious thinking, a broader consensus, and a higher standard for spending tax dollars. There is precedent for requiring more than a majority vote, such as expenditures from the CIF. Con: The effectiveness of a supermajority requirement often depends on political affiliations and philosophies. Building a consensus may lead to dealmaking and vote trading. A minority should not be permitted to determine resources for an entire community. The minority should not be able to determine overall economic policy. Plymouth's budget and tax rate historically have been approved by more than a majority vote, even without the requirement. With a supermajority requirement, some votes become more important than other votes. A minority on the council could gridlock the budget and levy approval process. Vacancies and absences on the council may also prove problematic with a supermajority requirement. The principle of majority rule should apply to matters of taxation. b'3 Issue: Implementing a Supermajority Requirement: Constitutional or Legislative? Pro: A constitutional supermajority requirement would be largely immune from attempts to circumvent it through legislative action. A constitutional requirement is more effective at controlling spending and tax increases than legislative requirements. Legislative supermajority requirements provide no permanent protection for taxpayers. A charter amendment requiring a supermajority vote for a tax rate increase is simple, clear and permanent. A future city council could change an ordinance at any time. A charter amendment allows the voters to make a decision on what standard should be required for future tax rate increases. Voters are smart enough to decide the issue themselves. Plymouth can set an example for other local governments in making a strong statement about tax rate increases, and can provide leadership for the entire state. Con: Constitutional changes tend to be permanent, even when circumstances change. Supermajority requirements limit the ability of the governing body to respond to changing economic conditions and budget problems. Legislative supermajority requirements, properly designed, can provide protection against tax increases. A charter amendment which requires a supermajority vote for a tax rate increase is too restrictive—amending the city's equivalent to a constitution is very serious. Other options are available to achieve the goal of making tax rate increases difficult, such as an ordinance permitting the council to impose the supermajority requirement on itself. An ordinance would provide needed flexibilityfor future city councils to meet changing circumstances and conditions. No other Minnesota city has such a requirement for a supermajority vote in a charter. Py 03/06/98 FRI 12:34 FAX 612 452 5550 CAMPBELL 444 PLYMOUTH CAMPBELL KNUTSON Professional Association Auorneys at Law 612) 452-5000 Joel J.11mnil; Thomas J. C:;in ti bc{1 Andrea McRmell PoOiler Roger N. Knutson Fax (612) 452.5550 Marthew K. Brokl$ 1110tnas M. Scott john F Kclly L'llicnt. B. Knctsch Matthawl. Foli Sucsan l.c;i Puce Mstrgucrirc M. McCarronMarch6, 1998 (*-Worge T. Stephenson VIA FACSIMILE TRANSMISSION *'%" lb n.vd in w,,- , UJ Cmmnl: Gary 0- Fuchs Ms. Kathy Lueckert Assistant City Manager City of Plymouth 3400 Plymouth Boulevard Plymouth, MN 55447-1482 Dear Kathy: You asked for a synopsis of options for the City Charter Commission and City Council to review given the pending charter amendment. The current situation is that the City Council by ordinance has proposed a home rule charter amendment, following the Charter Commission review of the proposal as required in M.S. 414.12, subd. 5. Option 1. Take no further action. If neither Commission nor Council acts, the proposed charter amendment will be placed on the ballot for the November election. Option 2. The Charter Commission could draft and propose its own amendment. If the City Council prefers the alternative, it could adopt the amendment by ordinance M.S. 414.12, subd. 7), and move to repeal its previously passed ordinance proposing an amendment. This charter amendment by ordinance would be subject to a possible referendum by petition as provided by law. If the Council chooses not to adopt the Commission proposal by ordinance, both of the competing charter amendments would be placed on the November ballot. Option 3. The Council could repeal its proposed ordinance. If the Council repeals its ordinance, no further action would be necessary. Option 4. The City Council could act to amend its previously adopted ordinance. If the City Council moves to amend its ordinance, the revised version would have to be submitted to the Charter Commission for its review as was the original amendment 1 Suite 317 0 Faganciale Office Cencer 0 Corporate C:cnter Curve. - Ewan, MN 55121 Z002 03/06/88 FRI 12:34 FAX 612 452 5550 CAMPBELL 444 PLYMOUTH 003 Ms, Kathy Lueckert March 6, 1998 Page 2 pursuant to M.S. 414.012, subd. 5. The 60 day review and comment period, which includes the opportunity to suggest a substitute amendment, would again be followed, and the Council could determine whether to submit their amended version or the Charter Commission version to the voters. I hope this brief overview will be helpful. Very truly yours, CAMPBELL KNUTSON Professional Association JJJ:cjh 58287 03/06/98 FRI 15:30 FAX 612 452 5550 CAMPBELL 444 PLYMOUTH Z 002 CAMPBELL KNUTSON Professitm ii A.ssoc.i<itit>rl Attorneys at Law Thomas J. C4.mpt-wl1 (612) 452.5000 locl J. ,jwiinik Rot cr N. Knutson 1"aX (G 1 Z) 4SZ-.5.550 Anrlrc:i Mcc[ dwell Poelller Thomas M. Scutt Matthew K. BT004 Elhoir R. Knctsch John F. Kelly Suc+.m Lea Pace Mattllcw l. l oh March 6, 1998 !` orgucrac M. McCarron VIA EAC SIMII,E..TRANSIV)(ISSION " r,ri:e l' Srcrl,rncon Iso Ikenxrd in rVisams;n t 7f C:,umd: Gary (1 Ft,ic.h; Mr. Dwight Johnson City of Plymouth 3400 Plymouth Boulevard Plymouth, MN 55447-1482 Dear Dwight: Enclosed are two documents which you might want to consider distributing for the joint charter commission/city council meeting. The League prepared document may be sufficient by itself. In the right-hand column of page 1, the LMC memo makes it clear that "local governments do not directly set a tax rate". The section which begins on page 2 titled Property Tax Intricacies explains some of the systematic problems and concludes: Local officials, however, can only control local levy decisions. They have no direct ability to modify the overall structure of the tax system and are at the mercy of the Minnesota legislature." The one point that we discussed which l have been unable to find any materials on is the volatility of the taxable tax capacity element of the formula. Page 1 of the League memo makes an indirect reference as part of the discussion of local tax rates, but it fails to highlight how uncertain or indeterminate the tax capacity figure is at the time the city sets the levy. M.S. §§ 275.08, 275.07, and 275.29 (enclosed) do contain some hints, but nothing definitive. As we discussed, because all of the factors other than the final city levy are in continual flux, the only practical way to administer a tax rate limit is to specify a date certain for a "snapshot" of the city. State law provides for the counties to take this snapshot on March 31 of each year (see M.S. 275.29) . Of course, this number may be substantially obsolete by the time of final city levy. The only practical way of administering the proposed charter amendment may be to secure an estimate from the county of the taxable tax capacity in the city at 60267 Suitc 317 - Eagandale Office Center - 1.380 Corporate Center Curve 9 Lagan, MN55121 03/06/98 FRI 15:30 FAX 612 452 5550 CAMPBELL 444 PLYMOUTH 16003 Mr. Dwight Johnson March 6, 1998 Page 2 a specified date. Maybe Hennepin County has the capability of doing this for the city. If not, or if they are unwilling to provide an estimate to the city, then the administration of the charter amendment will be very difficult and very imprecise. Please contact me if you have any questions. Very truly yours, CAMPBELL KNUTSON Professional Association JJJ: cjh Enclosure cc: Ms. Kathy Luekert Mayor Joy Tierney 60267 r 03/06/98 FRI 15:33 FAX 612 452 5550 CAMPBELL 444 PLYMOUTH 2008 PROPERTY TAXATION 101Lrw•wM....b- This guide is intended to describe the basics of Minnesota's property tax system. This system will collect almost $4.5 billion in 1997 to help fund the services of the state's schools, counties, cities, townships, and special districts. One of the challenges of trying to understand this system is the complex array of terms involved. As new terms are introduced in this guide, they are shown in italics. A glossary at the end of the guide has short definitions of these terms. ASSESSMENT AND CLASSIFICATION The property tax system is a continuous cycle, but it effectively begins with the estimation of property market values by local assessors. Assessors attempt to determine the approximate selling price of each parcel of property based on the current market conditions. Along with the market value determination, a property class is ascribed to each parcel of property based on the use of the property. For example, property that is owner -occupied as a personal residence is classified as a residential homestead. The "use class" is important because the Minnesota system, in effect, assigns a weight to each class of property. Generally, properties that are associated with income production e.g. commercial and industrial properties) have a higher classification weight than other properties. The property classification system defines the tax capacity of each parcel as a percentage of each parcel's market value. For example, a $75,000 home, which is classified as a residential homestead, has a class rate of 1.0 percent and therefore has a tax capacity Table A: Sample property class rates Property Class Taxes Taxes Payable 1997 Payable 1998 Residential Homestead: 72,000 1.0 % 1.0 % 72,000 - $75,000 2.0 1.0 75,000 2.0 1.85 Residential Nonhomestead: Single unit: 475,000 2.3 1.9 75,000 2.3 2.1 2-3 unit buildings 2.3 2.1 Market -rate Apartments: Regular 3.4 2.9 Small Cities 2.3 2.3 Commercial/industrial; 100,000 3.0 2.7 100,000 - $150,000 4.6 2.7 150, 000 4.6 4.0 of $75,000 x .01 or $750. (A sample of the class rates are included in table A.) parcel market val:u::Cj x class rate parcel tax capacity The next step in calculating the tax burden for a parcel involves the determination of each local unit of government's property tax levy. The city, county, school district and any special property taxing authori- ties must establish their levy by December 28 of the year preceding the year in which the levy will be paid by taxpayers. The property tax levy is set after the consideration of all other revenues including state aids such as LGA, HACA, and LPA. city budget -I all non -property tax revenues = city levy For cities within the seven -county Twin Cities metropolitan area and on the Iron Range, the levies are reduced by an amount of property tax revenue derived from the metropolitan and range area fiscal disparities programs. LOCAL TAIL RATES Local governments do not directly set a tax rate. Instead, the tax rate is a function of the levy and the total tax base. To compute the local tax rate, a county must determine the total tax capacity to be used for spreading the levies. The total tax capacity is com- puted by first aggregating the tax capacities of all parcels within the city. Several adjustments to this total must be made because not all tax capacity is available for general tax purposes. The result of this calculation produces taxable tax capacity, Taxable tax capacity is used to determine the local tax rates. city levy _ taxable tax capacity -city tax rate The city tax rate is computed by dividing the city levy (minus the fiscal disparities distribution levy, if applicable) by the taxable tax capacity. Under the current property tax system, the tax rate is expressed as a percentage. For example, the average 1997 city tax Property Taxation 101 Page 1 03/06/98 FRI 15:33 FAX 612 452 5550 CAMPBELL capacity rate is approximately 26 percent. This same calculation is completed for the county based on the county's levy and tax base, the school district and all special taxing authorities. The sum of the tax rates for all taxing authorities that levy against a single property produces the total local tax rate. This total local tax rate is then used to determine the overall tax burden for each parcel of property. PARCEL TAX CALCULATIONS The property tax bill for each parcel of property is determined by multiplying the parcel's tax capacity by the total local tax rate. The tax statement for each individual parcel itemizes the taxes for the county, municipality, school district, and any special taxing authorities. parcel tax capacity x total local tax rate = I tax capacity tax bill To complicate the tax calculations, voter -approved referenda levies are applied to the market value of each parcel, not tax capacity. As a result, each identically - valued parcel, regardless of the property's use, pays the same amount of referenda taxes (with the exception of certain agricultural property, which is taxed at a lower rate). In 1997, two counties, 18 cities, and 162 school districts levied market value -based levies. These communities must have a separate calculation for a market value referenda levy by the total taxable market value of each community. parcel market value x marketyaluetax rate = marketvaluetax bill tax capacitytaxbill a marketvaluetaxblll=totaltaxbill PROPERTY TAX CREDITS Several tax credits for various types of properties are available in certain instances. These amounts are subtracted from the overall taxes for each parcel to determine the net tax bill for the individual owner. Minnesota also provides additional property tax relief directly to individual homeowners, cabin owners, and renters through the circuit breaker and the targeting refund programs. PROPER'T'Y TAX INTRICACIES The technical details of computing property taxes mask many other intricacies of the property tax system. Many communities over the past several years have experienced situations where individual property taxes rise much faster than the increase in the levies that are certified by local units of government. PLYMOUTH 16009 The most common factor that results in an increase in an individual parcel's tax is the change in the parcel's estimated market value. without any change in local levies, a property owner can experience a tax increase due almost exclusively to any valuation increase. The Legislature frequently changes the classifica- tion system. Changes to the classification system can shift property tax burdens from one type of property to another. Table A demonstrates some of the changes the Legislature made to class rates from 1997 to 1998. Commercial, industrial, and apartment properties received significant reductions in their class rates. This shifts tax burden to other classes of property which did not receive class rate reductions, In an effort to mini- mize the effect of these shifts, the Legislature reduced school levies across the state and created the Education Homestead Credit. This credit will reduce the school general tax levy by 32 percent for all homesteads, up to a maximum of $225. Economic factors that may affect broad classes of property can also influence the overall tax changes for individual parcels of property. For example, in the early 1990s the metropolitan area experienced major declines in the valuation for commercial and industrial properties. These valuation declines shifted taxes from property classified as commercial and industrial to all other types of property. 'Valuation declines also may have accentuated the levy changes by local units of government. The 1993 requirement of applying new voter - approved referenda levies to market value rather than to tax capacity accentuates the tax increases for certain classes of property like homestead/residential and agricultural properties, which have low class rates. Legislative changes in state aid formulas can also affect the revenue needed to be raised from the property tax. The amount of money that is currently shared with cities through the LGA and HACA programs has increased more slowly than inflation since 1989. When these revenue sharing programs decline, cities must either cut services or raise their only source of local tax revenue, the property tax. This discussion is only a general overview of the current Minnesota property tax system. Over time, the system has become more complex and difficult for taxpayers to understand. Unfortunately, local officials must frequently explain how the system works and take the blame for the complicated features of the system. Local officials, however, can only control local levy decisions. They have no direct ability to modify the overall structure of the tax system and are at the mercy of the Minnesota Legislature. Page 2 Property Taxation 101 03/06/98 FRI 15:34 FAX 612 452 5550 CAMPBELL GLOSSARY OF TERMS CIRCUIT BREAKER - A state -paid property tax refund program for homeowners who have property taxes out of proportion with their income. A similar program is also available to renters. CLASS RATES - The percent of market value set by state law that establishes the property's tax capacity subject to the property tax. (See Table A for a sample list of class rates) FISCAL DISPARITIES PROGRAMS - Local units of govern- ment in the Twin Cities metropolitan area and on the Iron Range participate in property tax base sharing programs. Under these two programs, a portion of the growth in commercial and industrial property value of each city and township is contrib- uted to a tax base sharing pool. Each city and township then receives a distribution of property value from the pool based on market value and population in each city. HOMESTEAD AND AGRICULTURAL CREDIT AID (HACA) - A property tax relief program that replaced the former homestead credit program and the agricultural credit program. HACA is tied to class rate reduc- tions for certain classes of property. LOCAL r-OVERNMENT AIU (LGA) - A state government revenue sharing program for cities and townships that is intended to provide an alternative to the property tax. LGA is distributed through a formula based on tax base, population, population decline, age of housing, and the percent of market value classified as commercial or industrial. No city can receive less LGA than it did in 1993. LOCAL PERFORMANCE AID (LPA) - A state program for cities and counties that is intended to provide an incentive for local governments to develop perfor- mance measurement systems. LOCAL TAX RATE - The rate used to compute most taxes Localforeachparcelofproperty. Lal tax rate is computed by dividing the certified levy (after reduction for fiscal disparities distribution levy, if applicable, and county disparity reduction aid) by the taxable tax capacity. 444 PLYMOUTH Z010 MARKET VALUE - An assessor's estimate of what prop- erty would be worth if sold on the open market. The market value is set on January 2 of the year before taxes are payable. MARKET VALUE LEVIES - Voter approved levies applied to a parcel's market value rather than tax capacity. PROPERTY CLASS - The classification assigned to each parcel of property based on the use of the property. for example, owner -occupied residential property is classified as homestead. PROPERTY TAX LEVY - The tax imposed by a local unit of government. The tax is established on or around December 28 of the year preceding the year that the levy will be paid by taxpayers. TARGETING REFUND - A state paid property tax refund for homeowners whose property taxes have in- creased by more than 12 percent. A similar pro- gram is available to cabin owners. TAX CAPACITY - The valuation of property based on market value and statutory class rates. The prop- erty tax for each parcel is based on its tax capacity. TAXABLE TAX CAPACITY - The sum of the tax capacities of all parcels in the taxing jurisdiction after adjust- ments for fiscal disparities, tax increment and other property not available for general tax purposes. TOTAL TAX CAPACITY - The amount computed by fust totaling the tax capacities of all parcels of property within a city. TOTAL TAX RATE - the sum of the local tax rates for all taxing authorities that levy against a parcel of property (county, school, city or town, and special taxing districts). The total tax rate times the parcel's tax capacity equals the amount of taxes the property pays (not counting any voter -approved market value levies). TItuTI1 IN TAXATION.- The taxation and notification law, which requires local governments to set estimated levies, inform taxpayers about the impacts, and hold a separate hearing to take taxpayer input. Property 'Taxation 101 Page 3 03/06/98 FRI 15:34 FAX 612 452 5550 CAMPBELL ... PLYMOUTH FISCAL DISPARITIES 101 Local government units within the Twin Cities met- ropolitan area that includes the counties of Anoka, Carver, Dakota, Hennepin, Ramsey, Scott, and Wash- ington participate in a property tax base sharing pro- gram known as Metropolitan Fiscal Disparities. A similar program will begin with taxes payable in 1998 for local government units in the Taconite Area that in- cludes portions of the counties of St. Louis, Itasca, Crow Wing, Aitkin, and Koochiching, and all of Lake and Cook counties. Under these programs, a portion of the growth in commercial, industrial, and public utility property value of each community is contributed to a tax base sharing pool. Each community receives a dis- tribution of property value from the pool based on the market value and population of each city. CONTRIBUTION The contribution to the pool is equal to 40 percent of the growth in commercial, industrial, and public utility value since the base year (1971 for the Twin Cities, 1995 for the Taconite Area). This measure of growth includes both new construction and inflationary in- creases in existing property values. In 1997, for ex- ample, the total amount of tax capacity contributed to the Metropolitan fiscal disparities pool was $275.1 mil- lion, which represents approximately 12 percent of the total tax capacity within the seven -county area. The contribution value is not available for local tax purposes and therefore, the contribution value must be subtracted from the total tax capacity of each community before the local tax rate is computed. DISTRIBUTION The tax capacity contributed to the pool is based on a distribution index. This index compares each city's to- tal market value per capita to the average market value per capita for all cities and towns in the seven counties. Cities that have relatively less market value per capita receive a relatively larger distribution from the pool than cities with greater market value wealth per capita. Page 4 HOW ARE PROPERTY TAXES GENERATED? The tax capacity contributed to the pool ultimately translates into property tax dollars for each local gov- ernment. These property taxes, also known as the dis- tribution levy, arc computed for each local government by multiplying its distribution value by its prior year tax capacity rate. The distribution levy represents the amount of each local government's certified levy raised through the fiscal disparities program, The balance of the certified levy is used to compute the local tax rate. HOW ARE COMMERCIAIANDUSTRIAL AND UTILITY PARCELS TAXED? Commercial and industrial properties are not taxed twice. Instead, a portion of each commercial or indus- trial property's tax capacity is taxed at the area -wide tax capacity Tate and the balance is taxed at the total local tax rate. As a simple example, in a community where exactly 40 percent of all commercial, industrial, and utility property is contributed to the fiscal disparities pool, 40 percent of each parcel's value is taxed at the area -wide tax rate and 60 percent is taxed at the total local tax rate. For 1997, for example, the 'Twin Cities area -wide tax rate was 139.376 percent. POLICY ISSUES Declines in the market values for Twin Cities area com- mercial/industrial properties in the early 1990's not only directly shifted property tax burdens to other types of property, they also reduced the amount of commer- cial and industrial valuation contributed to the fiscal disparities pool. As a result, the totaj distribution levy generated through the fiscal disparities program for all local governments was also reduced, In recent years, commercial/industrial market value rebounds have re- versed this trend. But reductions in the commercial/in- dustrial and public utility property tax class rates by the 1997 legislature will likely result in significant declines in the tax capacity of both the Metropolitan and Taco- nite Area fiscal disparities pools in future years. As the amount of this distribution levy declines, a greater share of the local tax bill is paid by other types of properties, including the portion of each commercial, industrial, and utility property value taxed at the local tax rate. Property Taxation 101 Z011 03/06/98 FRI 15:31 CAMPBE a.4_* 004 4 225 TAM; LEVY, t JtTENsioN 275.295 Subd_ 2. Certificate of auditor. The auditor shall make in each assessment book or list a I certificate in the following form: 1, A.13., auditor of ............ county, and the state of Minnesota, do hereby certify that the following is a correct list of the taxes levied on the real and personal property in the (town or district, as the case may be) of ............ for the year 19.. (being the same year the property was assessed and the tax levied), to become payable in the year 19.. . Witness my hand and official seal this ...... day of .............19.. . County Auditor. Subd. 3. Designation of year of tax. Taxes on real and personal property shall be re- lated to and designated on the property'tax statement by the year in which they become pay- able but the liens shall relate back to the assessment date preceding except as otherwise pro- vided. For cash basis taxpayers, taxes on real and personal property shall relate to the year in 1- which they become payable. For accrual basis taxpayers, taxes on real and personal property rs shall relate to the year in which the lien arose. h Subd. 4. Unit card ledger counties. In any county in this state in which the county audi. Dr for has elected to come under the provisions of section 273.03, subdivision 2, the auditor n shall cause to be prepared a record to be known as "Real estate assessment and tax list for the j ly year ................. In addition to the information provided for in subdivision 1, to be shown in s tax lists, there shall also be included the amount of market value of land, building. and ma- chinery, if any, and the total market value assessed against each parcel of real estate contained in such lists. In such counties the auditor shall make in each list a certificate in the following form: l I . ...............,auditor of ..._.......... county and State of Minnesota, do hereby certify that f SS the following is a correct list of the taxes levied on the real property. based on the total market Y- value indicated therein, in the (town or district, as the case may be) of .................. for the year nt 19.. . X. Witness my hand and official seal this ................... day of ............... 19.. c c. l County Auditor." I e History: (2071. 2072) RL s 875,876; 1963 c• 39 s 1.2; 1963 c 781 s 5: 1965 c 545 s i- 1: 1969 c 323 s 1; 1973 c 458 s 1; 1975 c 339 s 8: 1980 c 607 art 2 s 18; 1946 c 444: r• 1988 c 719 art 5 s 84: 1989 c 277 art 4 s 24: 1989 c 329 art 15 s 20: 1 Sp1989 c 1 art 2 s 11;art 9s47; 1993 c 375 art 2 s I 275.29 ABSTRACTS TO COMMISSIONER OF REVENUE. tI' Not later than March 31, in each year. the eonnty auditor shall mnke and transmit to the J- commissioner of revenue, in such form as may be prescribed by the commissioner of reve- nt nue, complete abstracts of the tax lists of the county, showing the number of acres of land :1 rx assessed; its value, including the structures thereon; the value of town and city lots. including. h structures; the total value of all taxable personal property in the several assessment districts: a the aggregate amount of all taxable property in the county, and the total amount of taxes lev- y ied therein for state, county, town, and all other purposes for that year. ;. tsL id History: (2073) RL s 877; 1974 c 86 s 1; 1975 r 46 s 4; ISp1989 c !art 9 s 48 i '• n 275.295 WETLANDS EXEMPTION; REPLACEMENT OF REVENUE. e. Subdivision 1. Certification. The total amount of revenue lost as a result of the exemp- 7e tion provided in section 272.02, subdivision 1, paragraph (10), clause (iii), must be certified r_ by the county auditor to the commissioner of revenue and submitted to the commissioner as Se part of the abstract of tax lists to be filed with the commissioner under the provisions of sec - If tion 275.29. The amount of revenue lost as a result of the exemption must be computed each c year by applying the current local tax rates of the taxing jurisdictions in which the wetlands x_ are located to the net tax capacity of the wetlands. Payment to the county for lost revenue must not be less than the revenue that would have been received in taxes if the wetlands had a its j 004 03/06/98 FRI 15:31 FAX 612 452 5550 CAMPBELL 444 PLYMOUTH [moo 27S.067 TAXES; LEVY; EXTEK%ON , I& 275.067 SPECIAL TAXING DISTRICTS; ORGANIZATION DATE; CERTIFI- CATION OF LEVY OR SPECIAL ASSESSMENTS. Special taxing districts as defined in section 275.066 organized on or before July I in a calendar year may certify a levy to the county auditor in that same year for property taxes or special assessments to be payable in the following calendar year to the extent that the special taxing district is authorized by statute or special act to levy taxes or special assessments. Spe• cial taxing districts organized after July 1 in a calendar year may not certify a levy of property taxes or special assessments to the county auditor under the powers granted to them by statute or special act until the following calendar year. History: 1994 c 416 art I s 29 275,07 CITY, TOWN, COUNTY, AND SCHOOL DISTRICT TAXES. Subdivision 1. The taxes voted by cities, counties, school districts, and special districts shall be certified by the proper authorities to the county auditor on or before five working days after December 20 in each year. A town must certify the levy adopted by the town board to the county auditor by September 15 each year. If the town board modifies the levy at a special town meeting after September 15, the town board must recertify its levy to the county auditor on or before five working days after December 20. The taxes certified shall not be reduced by the county auditor by the aid reeeivcd under section 273.1398, subdivision 2, but shall be reduced by the county auditor by the aid received under section 273.1398, subdivi- sion 3. If a city, town, county, school district, or special district fails to certify its levy by that date, its levy shall be the amount levied by it for the preceding year. Subd. la. Application of limitations. Any limitation upon the amount that may be lev- isd by a local taxing jurisdiction shall apply to the sum of the levy as certified under subdivi- sion 1 plus the certified homestead and agricultural credit aid amount under section 273.1398, subdivision 2. unless the commissioner of revenue certifies to the county auditor that the limitation applies to the levy under subdivision 1 only. Subd. 2. In school districts lying in more than one county, the clerk shall certify the tax levied to the auditor of the county in which the administrative offices of the school district are located. Subd. 3. [Repealed, 1993 c 375 art 4 s 21 ] Subd. 4. Report to commissioner, On or before October 8 of each year. the county au- ditor shall report to the commissioner of revenue the proposed levy certified by local units of government under section 275.065, subdivision 1. On or before January 15 of each year, the county auditor shall report to the commissioner of revenue the final levy certified by focal units of government under subdivision 1. The levies must be reported in the manner pre- scribed by the commissioner. The reports must show a total levy and the amount of each spe- cial levy_ History: (2058) RL s 869: 1973 c 123 apt 5 s 7: 1977 c 423 art 4 s 5; 1978 c 764 s 101; 1987 c 268 art 6 s 36: art 7 s 40; 1988 c 719 art 5,,r 31,32:1989 c 277 art 2 s 37; 1 Sp1969 c 1 art 3 s 23; art 4 s 1,2: art 9's 39.40; 1990 c 480 art 7 s 17; 1990 r 604 art 3 s 27,28; art 4 s 5; 1993 c 375 art 3 s 25,26; art 4 s 6.7; ISp]993 c I art 2 s 6; 1994 c 416 art 1 s 65; 1994 c 465 art 3 s 73; 1995 c 264 art 11 s 6; 1995 c 471 art 3 s 19 275.075 OMISSION BY INADVERTENCE; CORRECTION. Whenever the amount of taxes as levied and certified by the tax levying body of any county, city, town, or school district has not been, as the result of error, inadvertence, or from the estimates as provided in section 275.08, by the county auditor extended and spread in conformity therewith, such tax levying body may include in its tax levy for the year follow- ing, the whole or any part of the amount so omitted through error. inadvertence, or from the estimates as provided in section 275.08, in addition to its current levy and in addition to and notwithstanding any limitations to the contrary. History:1947 c 71 s 1; 1973 c 123 art 5 s 7; 1Spl981 c I art 8 s 9 275.077 ERRORS BY COUNTY AUDITOR AFFECTING TOWNSHIP LEVY. Subdivision 1. If an error is made by a county auditor in recording the levy of a township lower than the levy certified by the township, the governing body of the county in which the 03/06/98 FRI 15:32 FAX 612 452 5550 CAMPBELL 444 PLYMOUTH 31 B 219 TAXES; LEVY, EXTENSION 275.03 i. CERTIFI- error was made shall appropriate and disburse to the affected township sufficient funds to make up for the difference created by the error within 30 days of notification of the error. re duly 1 in a ` Subd. 2. The difference between the correct levy and the erroneous levy shall be added erty taxes or to the township levy for the subsequent levy year; provided that if the amount of the differ - at the special ence exceeds 0.12089 percent of taxable market value. the excess shall be added to the.town- sments. Spe- ship levy for the second and later subsequent levy years, not to exceed an additional levy of y of property 0.12089 percent of taxable market value in any year, until the full amount of the difference The funds collected from the corrected levies shall be used to reimburse theembystatutehasbeenlevied. county for the payment required by subdivision 1. History: 1979 c 16 s 1.2: 1989 c 277 art 4.y 23 006 275.08 AUDITOR TO FIX RATE, ecial districts five working Subdivision 1. Generally. The rate percent of all taxes, except the state tax and taxes the le town board race of which may be fixed by law, shall be calculated and fixed by the county auditor accord - the levy ata ing to the limitations in this chapter hereinafter prescribed; provided. that if any county, city. to the county town, or school district shall return a greater amount than the prescribed rates will raise,'the I shall not auditor shall extend only such amount of tax as the limited rate will produce. rr 2, butbut Subd. 1a. For taxes payable in 1989, the county auditor shall compute the gross tax ca - 398,subdivi- 398, aeit for each parcel according to the class rates specified in section 273.13. The gross taxPyPgP s levy by that capacity will be the appropriate class rate multiplied by the parcel's market value. For taxes payable in 1990 and subsequent years, the county auditor shall compute the net tax capacity t may be lev- for each parcel according to the class rates specified in section 273.13. The net tax capacity nder subdivi. will be the appropriate class rate multiplied by the parcel's market value, nder section Subd. lb. Computation of tax rates. The amounts certified to be levied against net tax nunty auditor capacity under section 275.07 by an individual local government unit shall be divided by the total net fax capacity of all taxable properties within the local government unit's taxing juris- ertity the tax diction. The resulting ratio, the local government's local tax rate, multiplied by each proper - to] district are ty's net tax capacity shall be each property's net tax capacity tax for that local government unit before reduction by any credits. Any amount certified to the county uuditor to be levied aguinst market value shall be he county au- divided by the total referendum market value of all taxable properties within the taxing dis- loeal units of trict. The resulting ratio, the taxing district's new referendum tax rate, multiplied by each each year, the property's referendum market value shall be each pruperty'S new referendum tax before re- ified by local duction by any credits. For the purposes of this subdivision, "referendum market value" manner pre- means the market value as defined in section 124A.02, subdivision 3b. t of each spe- Subd. lc. After the local tax rate of a lucal government has been determined pursuant to subdivision lb, the auditor shall adjust the local government's local tax rate thin tach 978 c 764 s unique taxing jurisdiction as defined in section 273.1398, subdivision 1, in which the local government exercises taxing authority. The adjustment shall equal the unique taxing juris- c604art 3 diction's disparity reduction aids allocated to the local government pursuant to section 1994 a 416 273.1398, subdivision 3, divided by the total tax capacity of all taxable property within the unique taxing jurisdiction. The adjustment shall reduce the local tax rate of the local govern- ment within the unique taxing jurisdiction for which the adjustment was calculated. Subd. Id. If, after computing each local government's adjusted local tax rate within a body of any unique taxing jurisdiction pursuant to subdivision lc, the auditor finds that the total adjusted enee, or from local tax rate of all local governments combined is less than 90 percent of grosstax capacity and spread in for taxes payable in 1989 and 90 percent of net tax capacity for taxes payable in 1990 and year follow- thereafter, the auditor shall increase each local government's adjusted local tax rate propor- c, or from the tionately so the total adjusted local tax rate of all local governments combined equals 90 per- ddition to and :i cent. The total amount of the increase in tax resulting from the increased local tux rates must not exceed the amount of disparity aid allocated to the unique taxing district under section 273.1398. The auditor shall certify to the department of revenue the difference between the disparity aid originally allocated under section 273.1398, subdivision 3, and the amount nec- P LEVY. essary to reduce the total adjusted local tax rate of all local governments combined to 90 per - cent. Each localofatownship government's disparity reduction aid payment under'section 273.1398, sub - y in which the division 6, must be reduced accordingly. 006 03/06/98 FRI 15:32 FAX 612 452 5550 CAMPBELL 444 PLYMOUTH 4 007 275.08 TAXES; LEVY, EXTENSION 220 Subd. 2. Estimates. If, by January 1.5 of any year, the county auditor has not received from another county auditor the local tax rate or gross tax capacity applicable to any taxing district lying in two or more counties, the county auditor who has not received the necessary x1 information may levy taxes for the overlapping district by estimating the local tax rate or the gross tax capacity. . Subd. 3. Assistance of county auditor. A county auditor who has not furnished the lo- cal tax rate or gross tax capacity of property in the county by January 15 shall, on request, furnish the county auditor of a county in the overlapping district an estimate of the tax capaci- ties or the local tax rate. The auditor may request the assistance of the county assessor in de- termining the estimate. Subd. 4. Subsequent adjustment. After the correct local tax rate or net tax capacity has been certified, the amount of taxes over or under levied shall be computed and notice sent to each affected taxing district. If the estimated tax levy exceeds the correct tax levy based on actual net tax capacity and local tax rate, the county treasurer shall remit any amount of ex- cess collected to the affected taxing district. In the following levy year, the estimating county auditor shall adjust the levy of the affected taxing district to compensate for the amount of variance. In the event that the estimated tax levy is less than the correct tax levy based on actual; net tax capacity and local tax rate, the auditor shall adjust the levy of the affected taxing dis- trict as provided in section 275.075. History: (2059) RL .r 870: 1 Sp1981 c I art 8 s 10; 1986 c 444; 1988 c 719 art 5 s 33--35,84; 1989 c I s 2; 1989 c 329 art 13 s 20. 15p1989 c I art 2 s 11; art 9,v 41,421- 1991 c 291 art 1 s 27; 1995 c 264 art 115 7; 1996 c 471 art 3 s 20 275.081 ,[Repealed. 1988 a 719 art 5 s 81] 275.082 [Repealed, 1988 c 719 an 5 s 81 ] 275.09 Subdivision 1 _ [Repealed, 1984 c 593 s 46] Subd. 2. [Repealed, 1984 c 593 s 46] Subd. 3. [Repealed, 1983 c 342 art 3 s 9] Subd. 3. [Repealed, 1983 c 342 art 3 s 9: 1984 c 593 s 461 Subd. 4. [Repealed, 1984 c 593 s 46] 275.091 [Repealed, 1984 c 593 s 46] t 275.092 LOCAL ACTS LIMITING COUNTY LEVY OR APPROPRIATION. Any special act for a single county relating to a limitation on the authority of a county board to levy taxes or make an appropriation for a particular purpose. however stated in stills, dollars, or a per capita amount, which is inconsistent with Laws 1973, chapter 583, sections 1 to 35 is superseded. History: 1973 c 583 s 36 275.10 [Repealed, 1979 c 153 s 2] 275.11 Subdivision 1. MS 1990 [Repealed, I Sp 1989 c I art 5 s 51 ] Subd. 2. MS 1990 [Repealed, 1Sp1989 c 1 art 5 s 51] Subd. 3, MS 1957 [Repealed, 1961 c 500 s 21 Subd. 3. MS 1990 [Repealed, 1Sp1989 c 1 art 5 s 51] Subd. 4. MS 1990 [Repealed. 1Sp1989 c I art 5 s 51] 275.12 [Repealed, Ex1971 c 31. art 20 s 25] 275.121 (Local] 275.122 MS 1969 [Expired] 275.123 [Repealed, Ex 1971 c 31 art 20 s 251 275.124 REPORT OF CERTIFIED LEVY. Prior to April 1 of each year, each county auditor shall report to the commissioner of 124 children, families, and learning on forms furnished by the commissioner, the amount of the SC-Ot lsr.,tf aw, Chronology of Supermajority Vote Issue Fall 1995 Possibility of requiring a supermajority vote of the city council for a tax rate increase is in the campaign platforms of some individuals running for city council. May 1, 1996 Councilmember Preus brings up the possibility of an ordinance requiring supermajority vote for tax increase. Placed on May 15, 1996 agenda for further discussion and possible action. May 15, 1996 Regular City Council meeting. City Council adopts ordinance proposing a charter amendment which requires a supermajority vote of the city council for a tax rate increase. Under state statutes, the Charter Commission has sixty days (or until July 15) to accept or reject the proposed amendment, or to propose different language. The Charter Commission also has the option of filing with the city clerk an extension for an additional ninety days of review (or until October 15). May 23, 1996 Charter Commission meeting. Charter Commission votes to meet again on July 9; invites City Council to attend meeting to discuss proposed amendment. June 19, 1996. Regular City Council meeting. City Council discusses supermajority issue and the invitation of the Charter Commission to its July meeting. Councilmember Preus agrees to attend meeting. Council passes resolution encouraging Charter Commission to act quickly on the supermajority proposal so that the amendment can be on the November 1996 ballot. The council declines to meet with the Charter Commission unless the meeting is televised. July 9, 1996. Charter Commission meeting. Charter Commission hears from Councilmember Preus on the supermajority proposal. Charter Commission votes to file with the city clerk an extension for an additional ninety day review period. Commission votes to meet on July 30 with city attorney. July 10, 1996. Regular City Council meeting. City Council discusses issues related to the Charter Commission and the supermajority proposal. July 30, 1996. Charter Commission meeting. Charter Commission meets with city attorney to discuss the supermajority issue. Commission votes to meet on August 20 to hear from interested speakers, and to hold a public, televised meeting on September 9. August 20,1996. Charter Commission meeting. Charter Commission hears from speakers from the League of Minnesota Cities, Minnesota Taxpayers Association, and the former city manager of Plymouth. 1 August 21, 1996. Regular City Council meeting. City Council discusses issues related to the Charter Commission and the supermajority proposal. September 9, 1996. Charter Commission public hearing. Charter Commission holds televised public meeting on the supermajority proposal. Commission tables any action on a recommendation to the city council until Charter Commission meeting on September 30, 1996. September 10, 1996. Special City Council meeting. City Council discusses Charter Commission meeting of previous evening. September 20, 1996. Special City Council meeting. A special city council meeting is called by three councilmembers to receive report from the Charter Commission on the supermajority proposal. This date was the last possible date to meet deadlines to place a question on the November 1996 ballot. The Charter Commission does not make a report. September 30, 1996. Charter Commission meeting. Charter Commission meets and votes to reject the proposed supermajority amendment. October 2, 1996. Regular City Council meeting. City Council receives Charter Commission report. Council votes to place the proposed supermajority amendment on the November 1998 ballot. October 21, 1997. Charter Commission meeting. Charter Commission meets to discuss proposed supermajority amendment. Commission votes to request the City Council to repeal actions which place the issue on the ballot in November 1998, and invites City Council to attend the December 2, 1997 Charter Commission meeting. November 12, 1997. Special City Council meeting. City Council discusses Charter Commission request, and takes no action. December 2, 1997. Charter Commission meeting. Charter Commission meets and votes to request that the City Council place a discussion of the Commission's October 1997 resolution on a regular agenda, and to hold a public hearing on the supermajority issue by April 1, 1998. January 7, 1998. City Council decides to hold special meeting to discuss the supermajority issue on March 11, 1998. The Charter Commission is encouraged to attend. a Supermajority Vote Issue May Councilmember Christian Preus proposed a requirement to mandate a vote of 5/7 (a supermajority) of the city council to increase the city's tax rate. Initially, it was thought that this requirement could be instituted by ordinance. However, the City Attorney opined that such an ordinance might be inconsistent with the Plymouth City Charter. The City Council considered three options for a supermajority vote: Option 1 placed language in the charter requiring a supermajority vote to increase the tax rate over that of the prior year Option 2 placed language in the charter requiring a supermajority vote to increase the tax rate over the prior year, except if certain circumstances (involving the city's finances) are met. If the conditions are met, a simple majority could increase the tax rate. Option 3 placed language in the charter which allows the city council to impose the supermajority requirement by passing an ordinance to that effect. The City Council voted to send only Option 1 to the Charter Commission for their consideration. The council's intent was to place the proposed amendment on the ballot for the November 1996 general election. May - September 1996. Under state statutes, a city council can initiate amendments to a city charter. The charter commission has sixty days to review the proposed amendment, but can file for a ninety day extension for further review. The Plymouth Charter Commission requested a ninety day extension in July 1996. If the Commission took the full 150 days to examine the proposed amendment, placing the amendment before the voters in November was not possible. In considering the proposed amendment, the Charter Commission reviewed its own work on the supermajority issue from 1992, when the charter was drafted. The Charter Commission also sought the opinions of individuals, including Councilmember Preus, about the supermajority issue. The Charter Commission held a public hearing on September 9, 1996. The Commission made its final report to the City Council on September 30, 1996. The Charter Commission recommended rejection of the proposed amendment. The resolution passed by the Charter Commission is as follows: The Plymouth Charter Commission hereby gives its reasons for rejecting the proposed charter amendment requiring a supermajority vote for a tax rate increase: 1. There has been no public support for the concept of a supermajority requirement for the increase of a tax rate. 2. A supermajority rule does not represent good government as it relates to issues of taxation. We endorse the principle of majority rule when it comes to fiscal responsibility. 3. As a matter of constitutional law, we do not believe that future councils should be bound by a supermajority voting requirement on fiscal matters. Such issues should be resolved by traditional democratic procedures, at the heart of which is the majority rule. 4. Expert testimony presented to the City Charter Commission has not supported the idea of a supermajority requirement. The contrary has been true. S. In the two year process of drafting the City Charter, this Commission considered and rejected the supermajority concept as it related to taxation. 6. The Charter Commission is irrevocably opposed to the concept of the "tyranny of the minority. " Issues relating to taxation ought to be controlled by the majority. 7. The Charter Commission is not opposed to future reconsideration of the supermajority requirement if valid evidence in support of the concept is presented. 8. The supermajority requirement does not exist in the form proposed in any other Minnesota city charter. This report was given to the City Council on October 3, 1996. October 1996. The City Council received the Charter Commission's report, and expressed disappointment that the amendment would not be on the ballot in November. The Council passed a motion placing the proposed amendment on the ballot for November 1998, the next general election. Some interest was expressed by both the City Council and the Charter Commission in perhaps compromising on Option 3, which would place language in the charter allowing the council to impose the supermajority requirement by ordinance. The Charter Commission may propose a different supermajority amendment prior to November 1998. Regular Council Meeting May 1, 1996 Page 11 Item 9-E Ordinance to Require a 5/7 Vote of the Council to Increase the Tax Rate Councilmember Preus stated that only a simple majority vote is currently needed in order to increase the City tax rate. He favors a provision to require a 5/7 vote of the Council. Initially, it was proposed that the Council adopt an ordinance to accomplish this; however, the City Attorney determined that this may be inconsistent with the City Charter. Councilmember Preus advised the Council that he has asked Manager Johnson to recommend options for enacting this through the Charter Commission at the May 15 Council meeting. Motion was made by Councilmember Anderson, seconded by Councilmember Lymangood, to adjourn the meeting at 8:30 p.m. Motion carried, seven ayes. Laurie F. Ahrens City Clerk 3 r f s//slq Agenda Number: 9a TO: Mayor and City Council FROM: Dwight D. Johnson, City Manager SUBJECT: Amendment to City Charter for supermajority vote to raise the tax rate DATE: May 8, 1996 1. ACTION REQUESTED: Consider approval of one of the attached ordinances proposing to amend the City Charter to require a supermajority vote of the City Council to raise the City's tax rate. 2. BACKGROUND: At the May 1 Council meeting, Council member Christian Preus requested development of a City Charter amendment to require a 5/7 vote of the City Council to raise the City's tax rate in any fiscal year. The City Attorney has previously opined that the current City Charter may not allow the Council sufficient authority to pass an ordinance requiring a supermajority at this time. City Clerk Laurie Ahrens has identified a section of the statutes that provides for the City Council to initiate a charter amendment in ordinance form. A copy is attached. If the Council initiates an amendment in ordinance form, the Charter Commission has 60 days to review it. However, they can extend that time by an additional 90 days. The Commission can propose an alternative to the initiative if it wishes. The City Council can then choose between its own initiative and that of the Charter Commission and, under its own power, can decide which version is presented to the voters. The voters have the final approval over any charter amendment in this procedure. 3. ALTERNATIVES: Two alternative ordinances have been prepared by City Attorney Roger Knutson. The first ordinance proposes a simple, straightforward amendment to the City Charter which would place language directly into the charter requiring a two-thirds majority vote for any increase in the City's tax rate. The second ordinance would amend the Charter to enable the Council to pass its own ordinance, but with conditions in the charter about how the ordinance applies and how it may be repealed. The ordinance requiring a supermajority could apply to all situations except where the City loses at least 20 % of its state aid or loses more than 10 % of its net tax capacity for any reason. The latter provision would accommodate both state legislative changes and substantial economic devaluations. Restrictions on repealing the ordinance would include two required public hearings with notice. r 5/q<,> Of course, there are many possible permutations of the second ordinance. The situations that the eventual ordinance would apply to could be increased or decreased, and the restrictions on repeal could be increased or decreased in various ways. Finally, there is the option of taking no action. 4. DISCUSSION: The straightforward charter amendment represented by the first ordinance has the advantages of simplicity and clarity, both for ourselves and the tax payers. It also would appear to have more permanence, which may be reassuring to the taxpayers. However, it is also the least flexible option if the City's budget and economic status should markedly change. Examples of such change might include (1) no more growth beyond the MUSA line, (2) State legislative changes in state aids, tax policy, fiscal disparities, and other tax base sharing (Orfield type legislation), (3) major economic change in property values due to economic distress, such as the tax abatements that occurred in the commercial/industrial portion of the tax base a few years ago, (4) a major physical disaster such as a tornado or flood and (5) opportunities might present themselves which would raise the City's tax rate, but not the overall tax rate. An example would be if we took over the Met Council transit levy locally, as legislation this year now authorizes us to do.. The second charter amendment draft loses some of the advantages of simplicity, clarity, and permanence. However, it does provide for exceptions for many of the potential major changes in the City's condition identified above. In contemplating a charter amendment, some of the questions to consider might include: 1. How much specific language should be placed in the charter itself, which is our City constitution? 2. How necessary is a charter amendment? Is it likely that the City would propose increases in the tax rate in the foreseeable future without any restrictions? 3. Will Moody's be influenced to downgrade our AAA bond rating? Moody's spoke out strongly against the Legislature's tax freeze proposal earlier this year and generally dislikes revenue restrictions. 4. Will additional restrictions on raising the tax rate cause future Councils and administrations to not cut tax rates when they otherwise could and should, for fear of being caught with their tax levies down in a subsequent year? 5. How likely are the potential major changes in the City's status? 6. How much has the taxpayers trust in us as local official deteriorated, thus requiring external" controls on us? 7. Will our adoption of a voluntary limitation show leadership to other local jurisdictions who have been raising tax rates? 5. BUDGET D PACT: There is little impact on the budget for the next year or two, absent one of the major changes in our situation. Substantial growth revenues should continue for another year or two, making in increase in the tax rate easily avoidable. Long range impacts are more difficult to forecast. jla ff i'yOr 6. RECOMIVVIENDATION: I strongly share the Council's goal to not increase the City's tax rate. In fact, over the last three years, the City's tax rate has declined by over 17% since 1993 (from 18.04 to 14.94), and we now have the lowest tax rate of any Minnesota City over 10,000 population. I also agree with the concept of making a strong public statement about our intentions to continue to keep the tax rate down in the future. Such a statement would help build trust with our citizens, many of whom do not know our excellent recent record on reducing tax rates. It would also show leadership to other jurisdictions that it is possible to provide high quality services without constantly raising taxes. It also seems likely that we are on the verge of major actions reforming the property tax system in the 1997 Legislature. Individuals of both parties are now proposing legislation that would eliminate HACA aid, currently $1.8 million for Plymouth. Our growth revenues will also decline substantially within the next several years if we choose not to move the MUSA line anytime soon. We have about a two year supply of residential land at this time. It was only three years ago (1993) that we lost $1 million in tax abatements in a single year. There may be reasons why we may want to assume the Met Council transit levy (over $1 million) in the next several years. Because so many elements of the property tax system in Minnesota are beyond our control, and because a number of major changes in the system and our circumstances seem likely in the nekt several years, I favor adopting a charter amendment that would enable the Council to pass its own ordinance requiring a supermajority vote. The charter should provide a very public and deliberate process for any repeal or amendment of the supermajority ordinance. I do not believe that the charter needs to provide any specific exceptions for major changes in circumstances if the Council can amend its own ordinance in the future after a public prodess. I would therefore suggest consideration of version three attached. v CAMPBELL. KNUTSON. SCOTT & FUCHS. P.A May 3.96 9=52 No.003 P.02 CITY OF PLYMOUTHs q HENNEPIN COUNTY, MINNESOTA ORDINANCE NO. 96 - AN ORDINANCE AMENDING THE PLYMOUTH CITY CHARTER CONCERNING TAXATION WIIERF,AS, Minn. Stat. § 410.12, Subd. 5 authorizes the City Council to propose- charter roposecharteramendmentstothevotersbyordinance. THE CITY OF PLYMOUTH ORDAINS: SECTION 1. Chapter 7 of the City Charter is amended by adding Section 7.15 to read: 7.15 Increase in Tax Rate. A two-thirds majority of all members of the Council is required to adopt a tax levy resolution that increases the City's tax rate over the prior year. Tax rate means the quotient derived by dividing the City's tax levy by the City's net tax capacity. 5ECTION 2. Effective Date. This ordinance shall. become effective only when approved by the voters as provided in Minn. Stat. § 410.12, Subd. 4. ADOPTED by the City Council this ATTEST: Laurie F. Ahrens, City Clerk 37599.01. OVUM D day of , Joycelyn Tierney, Mayor CAMPBELL. KNUTSON. SCOTT & FUCHS. P.A May 3 .96 9:53 No.003 P.'03 5AJ ff YIYI CITY OF PLYMOUTH HENNEPIN COUNTY, MINNESOTA ORDINANCE NO. 96 - AN ORDINANCE AMENDING THE PLYMOUTH CITY CHARTER CONCERNING TAXATION VaMREAS, Minn. Stat. § 410.12, Subd. 5 authorizes the City Council to propose charter amendments to the voters by ordinance. THE CITY OF PLYMOUTH ORDAINS: SECTION 1. Chapter 7 of the City Charter is amended by adding Section 7.15toread: 7.15 Increase in Tax Rate. The Council may by ordinance require a two-thirds majority of all members of the Council to adopt a tax levy resolution that increases the City's tax rate over the prior year. Tax rate means the quotient derived by dividing the City's tax levy by the City's net tax capacity. The ordinance, if adopted, shall provide that a simple majority of all members of the Council may adopt a tax levy resolution that increases the City's tax rateunderanyofthefollowingcircumstances: a) if the City's state aid (i.e., local government aid and homestead and agricultural aid) has been reduced by twenty percent (20%) or more from the prior year; b) if the City's net tax capacity has been reduced by more than tca percent10 %) from the prior year. The ordinance, once adopted, may not be repealed or amended without a public hearing following two (2) publications in the official newspaper stating the time, place, and purpose of the hearing. The two (2) publications shall be . a week apart and the hearing shall be at least three (3) days after the last publication. 37599.03 05/03/95 LHMNBELL. KNU15UN. 5LUII 6 FULHS. F.H Mdg 0.'JO 'J;Zo,) NO.UUS V.04 re ood sEC][jQN 2. llffective Date. This ordinance shall become effective only when approved by the voters as provided in Minn. Stat. § 410.12, Subd. 4. ADOPTED by the City Council this day of Joycelyn Tierney, Mayor ATTEST: I.nurie F. Ahrens, City Clerk 3n99.0 OSlOS/96 05/08/96 11:24 %'612 452 5550 CAMPBELL KNUTSON 444 PLYMOUTH 002/002- CITY OF PLYMOUTH / 51A, 14ENNEPIN COUNTY, MINNESOTA ORDINANCE NO. 96 - AN ORDINANCE AMENDING THE PLYMOUTH CITY CHARTER CONCERNING TAXA'T'ION PREAMBLE VvMREAS, Minn. Stat. § 410.12, Subd. 5 authorizes the City Council to propose charter amendments to the voters by ordinance. THE CITY OF PL YMOUTH ORDAINS: SEC'T'ION 1. Chapter 7 of the City Charter is amended by adding Section 7.15 to read: 7.15 Increase in Tax Rate. The Council may by ordinance require a two-thirds majority of all members of the Council to adopt a tax levy resolution that increases the City's tax rate over the prior year. Tax rate means the' quotient derived by dividing the City's tax levy by the City's net tax capacity. The ordinance, if adopted, may not be repealed or amended without a public hearing following two (2) publications in the official newspaper stating the time, place, and purpose of the hearing. The two (2) publications shall be a week apart and the hearing shall be at least three (3) days after the last publication. LECTION 2. Effective Date. This ordinance shall become effective only whenapprovedbythevotersasprovidedinMinn. Stat. § 410.12, Subd. 4. 1996. ADOPTED by the City Council. this ATTEST: Laurie F. Ahrens, City Clerk 37599.06 ' OS/06/g6 day of 7oycelyn Tierney, Mayor F• 1 a- 410.12 CLASSIFICATION; CHARTERS 410.12 AMENDMENTS. 95' 462 Subdivision 1. Proposals. The charter commission may propose amendments to such charter and shall do so upon the petition of voters equal in number to five percentofthetotalvotescastatthelastpreviousstategeneralelectioninthecity. If the cityhasasystemofpermanentregistrationofvoters, only registered voters are eligible tosignthepetition. All petitions circulated with respect to a charter amendment shall beuniformincharacterandshallhaveattachedtheretothetextoftheproposedamend- ment in full; except that in the case of a proposed amendment containing more than1,000 words, a true and correct copy of the same may be filed with the city clerk, andthepetitionshallthencontainasummaryofnotlessthan50normorethan300wordssettingforthinsubstancethenatureoftheproposedamendment. Such summary shall contain a statement of the objects and purposes of the amendment proposed and an outline of any proposed new scheme or frame work of government and shall be suffi- cient to inform the signers of the petition as to what change in government is soughttobeaccomplishedbytheamendment. The summary, together with a copy of the pro- posed amendment, shall first be submitted to the charter commission for its approvalastoformandsubstance. The commission shall within ten days after such submissiontoit, return the same to the proposers of the amendment with such modifications instatementasitmaydeemnecessaryinorderthatthesummarymayfairlycomplywiththerequirementsabovesetforth. Subd. la. Alternative methods of charter amendment. A home rule charter may beamendedonlybyfollowingoneofthealternativemethodsofamendmentprovidedinsubdivisionsIto7. Subd. 2. Petitions. The signatures to such petition need not all be appended to onepaper, but to each separate petition there shall be attached an affidavit of the circulator thereof as provided by this section. A petition must contain each petitioner's signatureininkorindeliblepencilandmustindicateafterthesignaturetheplaceofresidencebystreetandnumber, or other description sufficient to identify the place. There shall appear on each petition the names and addresses of five electors of the city, and on eachpaperthenamesandaddressesofthesamefiveelectors, who, as a committee of the petitioners, shall be regarded as responsible for the circulation and filing of the petition. The affidavit attached to each petition shall be as follows: State of ..................... ) ss. Countyof ................. ) being duty sworn, deposes and says that the affiant and the affi- ant only, personally circulated the foregoing paper, that all the signatures appended thereto were made in the affiant's presence, and that the affiant believes them to be the genuine signatures of the persons whose names they purport to be. Signed............................ Signature of Circulator) Subscribed and sworn to before me this ....... day of ...... 19 .... Notary Public (or other officer) authorized to administer oaths The foregoing affidavit shall be strictly construed and any affiant convicted ofswearingfalselyasregardsanyparticularthereofshallbepunishableinaccordancewithexistinglaw. Subd. 3. May be assembled as one petition. All petition papers for a proposed amendment shall be assembled and filed with the charter commission as one instru- ment. Within ten days after such petition is transmitted to the city council, the city clerkshalldeterminewhethereachpaperofthepetitionisproperlyattestedandwhetherthePetitionissignedbyasufficientnumberofvoters. The city clerk shall declare any peti- tion paper entirely invalid which is not attested by the circulator thereof as required 13 462 lendments to o five percent ty- If the city are eligible to ment shall be used amend- ig more than ity clerk. and an 300 words smmary shall oscd and an hall be suffi- ent is sought Jy of the pro - its approval i submission lifications in comply with artier may be provided in nded to one ne circulator is signature of residence There shall and on each aittee of the Shepetition. and the affi- 1 appended m Io jX the 3nvicted of dance with a proposed one instru- ie city clerk whether the re any peti- as required CLASSIFICATION; CHARTERS 410.12 463 , in this section. Upon completing an examination of the petition, the city clerk shall cer- tify the result of the examination to the council. If the city clerk shall certify that the petition is insufficient the city clerk shall set forth in a certificate the particulars in i which it is defective and shall at once notify the committee of the petitioners of the find- ings. A petition may be amended at any time within ten days after the making of a cer- tificate of insufficiency by the city clerk, by filing a supplementary petition upon additional papers signed and filed as provided in case of an original petition. The city clerk shall within five days after such amendment is filed, make examination of the amended petition, and if the certificate shall show the petition still to be insufficient, the city clerk shall file it in the city clerk's office and notify the committee of the peti- tioners of the findings and no further action shall be had on such insufficient petition. ! The finding of the insufficiency of a petition shall not prejudice the filing of a new peti- tion for the same purpose. Subd. 4. Election. Amendments shall be submitted to the qualified voters at a gen- oral or special election and published as in the case of the original charter. The form of the ballot shall be fixed by the governing body. The statement of the question on the ballot shall be sufficient to identify the amendment clearly and to distinguish the ques- tion from every other question on the ballot at the same time. If 51 percent of the votes cast on any amendment are in favor of its adoption, copies of the amendment and cer- tificates shall be filed, as in the case of the original charter and the amendment shall ; Itakeeffectin30daysfromthedateoftheelectionoratsuchothertimeasisfixedin the amendment. - Subd. 5. Amendments proposed by council. The council of any city having a home rule charter may propose charter amendments to the voters by ordinance. Any ordi- nance proposing such an amendment shall be submitted to the charter commission. Within 60 days thereafter, the charter commission shall review the proposed amend- ment but before the expiration of such period the commission may extend the time for review for an additional 90 days by filing with the city clerk its resolution determining that an additional time for review is needed. After reviewing the proposed amendment, the charter commission shall approve or reject the proposed amendment or suggest a substitute amendment. The commission shall promptly notify the council of the action taken. On notification of the charter commission's action, the council may submit to i ° I the people, in the same manner as provided in subdivision 4, the amendment originally T proposed by it or the substitute amendment proposed by the charter commission. The amendment shall become effective onlywhen approved b the voters as provided in I' PP Y subdivision 4. If so approved it shall be filed in the same manner as other amendments. Nothing in this subdivision precludes the charter commission from proposing charter ' 1 amendments in the manner provided by subdivision 1. I ' Subd. 6. Amendments, cities of the fourth class. The council of a city of the fourth class having a home rule charter may propose charter amendments by ordinance with- out submission to the charter commission. Such ordinance, if enacted, shall be adopted by at least a four-fifths vote of all its members after a public hearing upon two weeks' published notice containing the text of the proposed amendment and shall be approved by the mayor and published as in the case of other ordinances. The council shall submit I ' the proposed amendment to the people in the manner provided in subdivision 4, but Inotsoonerthanthreemonthsafterthepassageoftheordinance. The amendment becomes effective only when approved by the voters as provided in subdivision 4. If so approved, it shall be filed in the same manner as other amendments. Subd. 7. Amendment by ordinance. Upon recommendation of the charter commis- sion the city council may enact a charter amendment by ordinance. Such an ordinance, if enacted shall be adopted by the council by an affirmative vote of all its members after a public hearing upon two weeks' published notice containing the text of the proposed amendment and shall be approved by the mayor and published as in the case of other ordinances. An ordinance amending a city charter shall not become effective until 90 days after passage and publication or at* such later date as is fixed in the ordinance. Within 60 days after passage and publication of such an ordinance, a petition request- I ; sill ilgol Z 410.12 CLASSIFICATION; CIIARTERS S/5/ 464 ing a referendum on the ordinance may be filed with the city clerk. Such petition shall be signed by qualified voters equal in number to two percent of the total number of votes cast in the city at the last state general election or 2,000, whichever is less. If the city has a system of permanent registration of voters, only registered voters are eligible to sign the petition. If the requisite petition is filed within the prescribed period, the ordinance shall not become effective until it is approved by the voters as in the case of charter amendments submitted by the charter commission, the council, or by peti- tion of the voters, except that the council may submit the ordinance at any general or special election held at least 60 days after submission of the petition, or it may recon - 1 : Sider its action in adopting the ordinance. As far as practicable the requirements ofsub- divisions I to 3 apply to petitions submitted under this section, to an ordinance amending a charter, and to the filing of such ordinance when approved by the voters. S• History: (1286) RL s 756; 1907 c 199 s 1; 1911 c 343 s 1. 1939 c 292 s 1; 1943 c 227j sl. 1949 c 122 s 1; 1959 c 305 s 3,4; 1961 c 608 s 5,6; 1969 c 1027 s 3; 1973 c 503 s 1-4; 1986 c 444 410.121 SALE OF INTOXICATING LIQUOR OR WINE; FAVORABLE VOTE. If the charter which is to be amended or replaced contains provisions which pro- hibit the sale of intoxicating liquor or wine in certain areas, such provisions shall not be amended or removed unless 55 percent of the votes cast on the proposition shall be in favor thereof. History: 1969 c 1027 s 2 - 410.13 [Repealed, 1959 c 305 s 6] 410.14 ALTERNATIVE PROPOSALS. In submitting a charter or an amendment to the voters any alternative section or article may be presented and voted on separately, without prejudice to other articles or sections of the charter or any amendments thereto. History: (1288) RL s 757 Iff 410.15 SUCCESSION; SUBSISTING RIGHTS. The new city so organized shall be in all respects the legal successor of the former corporation, and no charter so adopted, nor any amendment thereof, shall prejudice any subsisting right, lien or demand against the city superseded, or of%ct any pending action or proceeding to enforce the same. All rights, penalties, and forfeitures accrued of accruing to such former corporation, all property vested therein or held in trust therefor, all taxes and assessments levied in its behalf, and all its privileges and immuni- ties not inconsistent with the new charter, shall pass to its successor. All ordinances, resolutions, and bylaws in force at the adoption of such new charter, and not in conflict with its provisions, shall continue in force until duly altered or repealed. History: (1289) RL s 758, 1973 c 123 art 5 s 7 410.16 FORMS OF GOVERNMENT INCORPORATED IN CHARTER. The charter commission may incorporate as part of the proposed charter for any city the commission, mayor -council, council-manager form of city government or any other form not inconsistent with constitution or statute, and may provide that all elec- tive city officers, including mayor and members of the council, shall be elected at large or otherwise. History: (1290) 1909 c 170 s 1; 1959 c 305 s 5; 1961 c 608 s 7 410.17 [Repealed, 1973 c 503 s 6] 410.18 DISTRIBUTION OF ADMINISTRATIVE POWERS. Such charter commission may also provide that the administrative powers, author, Ir Regular Council )`.Meeting May 15, 1996 Page 9 Motion was made by Councilmember Anderson; seconded by Coudcilmember Black, to adopt RESOLUTION 96-286 A/ SISTANCE T CITY MANAGER TO APPLY TO THE DEPADE AND ECONOMIC DEVELOPMENT AND EEMENTS FOR FUNDING OF THE VALUE RX PROJELF OF THE CITY OF PLYMOUTH; RESOLUTION 96-287 OF ADOPTIONIAL ANTIDISPLACEMENT, RELOCATIOAND DISPLACEMENT MINIMIZATION PL RESOLUTION 96-288 PRELIMINAY APPROVAL OF PLYMOUTH ECONOMIC DEVELOPMENT F`1ND GUIDELINES. Motion carried, six ayes. Item 7-11 Vacation in Pheasant Tr s Addition Public Works Director or presented the staff report on the request for vacation of part of53 Avenue street right-of-way in Pheasant Trails Addition. Deputy Mayo ymangood opened the public hearing at 7:38 p.m. No one appeared, a the hearing was closed. P/ MOTI was made by Councilmember Wold, seconded by Councilmember re, to adopt RESOLUTION 96-289 AUTHORIZING THE V CATION OF PART OF 53RD AVENUE STREET RIGHT-OF-WAY. otion carried, six ayes. Item 8 -Al (9-A) Ordinance Initiating a City Charter Amendment Motion was made by Councilmember Preus, seconded by Councilmember Wold, to adopt ORDINANCE 96-9 AMENDING THE PLYMOUTH CITY CHARTER CONCERNING TAXATION. Councilmember Preus explained that this was a campaign issue supported by three councilmembers in the last election. The ordinance proposes a City Charter amendment to require a 5/7 vote of the City Council to raise the City's tax rate in any fiscal year. If adopted, the ordinance will be forwarded to the Charter Commission for review. The Charter Commission can propose an alternative to the initiative if it wishes. The City Council can then choose between its own initiative and that of the Charter Commission to select which version is presented to the voters. Councilmember Preus stated that this initiative would make it more difficult to increase the tax rate in the future. He b 12 Regular Council Meeting May 15, 1996 Page 10 stated that the City Council, City Manager and staff have done a good job of reducing the tax rate over the last several years. The City currently has the lowest tax rate in Minnesota of cities with over 10,000 population. This charter amendment would demonstrate that an increase of the City's tax rate deserves more attention than a simple majority vote. Manager Johnson reviewed possible alternative ordinances. One alternative would be to amend the Charter to enable the Council to pass its own ordinance, but with conditions in the charter about how the ordinance applies and how it may be repealed. For example, the ordinance requiring a supermajority could apply in all situations except where the City loses at least 20 percent of its state aid or loses more than 10 percent of its net tax capacity. Another alternative would be to expand those situations to also accommodate both state legislative changes and substantial economic devaluations. Councilmember Granath supported the motion. He stated that it will be more difficult for future Councils to maintain the City's low tax rate when faced with declining revenues. Citizens and future City Councils and staff will be encouraged to do hard planning to keep the tax rate low. Motion carried, six ayes. Item 8-A2 (6-H) Concept Plan for Holly Creek 5th Addition (96005). Community Development Director Hurlburt reviewed the application o Scherber Partnership Properties/Loucks and Associates, Inc., for Pl ed Unit Development Concept Plan for Holly Creek 5th Addition locate orth of 39th Avenue and west of Dunkirk Lane. She stated that a second ' m relates to the wetland plan based on the proposed concept plan. Director Hurlburt stated that the applicant has requ ted consideration of the concept plan first, and separately, from the preli nary plat for Holly Creek 5th Addition because of the wetland requiremen . She said that reduced wetland buffers are allowed in some situations, b only if the developer requests alternative buffers. The developer ha equested alternative buffers in a small part of the proposed development. he said that at the concept plan stage, the City Council should consider t generai layout of streets, the request for alternative buffers, and gen compliance with the City's Comprehensive Plan. Final grading, det ' ed street design, and erosion control issues would be considered at later re 'ew stages. She described a site as a 19.5 acre parcel with three wetland basins. Two of the basinsXe of medium quality and one is a low quality basin. About .36 acreso etlands is proposed to be filled, with the mitigation on the site at a 2:1 io. The first duty under the Wetlands Act is to avoid wetlands; CITY OF PLYMOUTH HENNEPIN COUNTY, IOTA RESOLUTION NO. 96-9 AN ORDINANCE AMENDING THE, PLYMOUTH CITY CHARTER CONCERNING TAXATION PREAMBLE WHEREAS, Minn. Sta. §410.12, Subd. 5 authorizes the City Council to propose charter amendments to the voters by ordinance. THE CITY OF PLYMOUTH ORDAINS: SECTION 1. Chapter 7 of the City Charter is amended by adding Section 7.15 to read: 7.15 Increase in Tax Rate. A two-thirds majority of all members of the Council is required to adopt a tax levy resolution that increases the City's tax rate over the prior year. Tax rate means the quotient derived by dividing the City's tax levy by the City's net tax capacity. SECTION 2. Effective Date. This ordinance shall become effective only when approved by the voters as provided in Minn.= Stat. §410.12, Subd. 4. ADOPTED by the City Council this 15th Day of May, 1996. ATTEST: Laurie F. Ahrens, City Clerk ce n T' rney, Mayor IS la Plymouth Charter Commission May 23, 1996 Minutes Present: Virgil Schneider, Jon Speck, John Duntley, Tim Peterson, Dave Crain, Dave Pauba, Joy Tierney, Bob Sipkins, Kapila Bobra, Ty Bujold, Ellie Singer, Assistant City Manager Kathy Lueckert Excused: Sandy Patterson, Bill Pribble Absent: Pauline Milner Virgil Schneider called the meeting to order at 7:05 PM. d) W 5131/1 Virgil Schneider explained the purpose of the meeting. He stated that several issues were referred to the Charter Commission in recent weeks. He determined that there was a need for a meeting in May, even though this date was somewhat past the deadline set by the Commission in December 1995. Mr. Schneider stated that the Commission must consider two issues for possible charter amendments: requiring a supermajority vote for a tax rate increase, and regulating council attendance. Sunermaiority Vote for Tax Increase Assistant Manager Lueckert explained the statutory provisions for amending the Charter. She'stated that the City Council passed an ordinance specifying the amendment language for the November ballot. Ms. Lueckeft stated that it is very likely that this proposed amendment will be on the ballot in November. She referred the Commission to the staff report on this subject for the May 15 City Council meeting, which outlined the options available to the Council. Joy Tierney stated that the City Council was given three options, but chose the stronger language. She stated that the Charter Commission had considered supermajority vote requirements when the charter was drafted. Dave Crain expressed concern that a supermajority vote on a tax rate increase would give control of the budget to a minority, and that deadlocks could result. Virgil Schneider stated that he doesn't remember a time when the budget was adopted without a supermajority vote; Dave Crain concurred. Ms. Lueckert shared a spreadsheet showing the ten year history of budget votes, which supported Mr. Schneider's and Mr. Crain's recollections. Joy Tierney stated that she is concerned about too many supermajority vote requirements. There may be unintended consequences for other cities who may follow Plymouth's lead but not have the benefit of the revenues which come from growth. Ty Bujold stated that government should be run by the majority, and questioned the wisdom of singling out issues for a supermajority requirement. I9 Bob Sipkins asked if the requirement for a supermajority vote on a tax rate increase was acampaignissue. Virgil Schneider stated that several candidates had highlighted this issueduringtheFall1995campaign. Mr. Schneider stated that setting the tax rate is asignificantissue, not unlike rezonings. In his opinion, a council must have a compellingreasontoraisetaxes. He stated that he thinks most voters would vote for such anamendment. Tim Peterson stated that the budget vote history shows no pattern of problems. Hewonderediftheissuereallyneeded "fixing." John Duntley stated that he wondered about the merits of discussing this issue more in amorepublicfashion, and he felt that more information was needed for the Commission andforthepublic. Ty Bujold pointed out that the state law section gives the Commission aninitialsixtydayreviewperiod, and then permits the Commission to consider the issue for another ninety days. Ty Bujold stated that he feels that the additional time will be needed, and that time and energy is needed to make certain the electorate is informed about thisissue. John Duntley stated that he also feels that the Commission needs to gather data, and tohearallviewpointsonthesupermajorityvoteissue. Mr. Duntley stated that after theCharterCommissioniscomfortablewithallaspectsoftheissue, public meetings should beheld. Jon Speck stated that the Charter Commission had turned down the idea of a supermajority vote on the budget when the charter was drafted. He stated that he felt thatthecommissionhadgoodreasonsfordoingso. Virgil Schneider stressed the importance of keeping an open mind about this issue. Mr. Schneider suggested that the Commission invite the City Council to the next CharterCommissionmeeting. At'this meeting, councilmembers could articulate their position onthesupermajorityvotequestion, and commission members could ask questions. He statedthatcommissionmembersshouldcometothismeetingwiththeirquestionsprepared. Ellie Singer moved, seconded by Kapila Bobra, that the Charter Commission meetonTuesday, July 9, 1996 at 7 PM to consider the supermajority vote issue, and thattheCityCouncilbeinvitedtoattendthismeeting. The motion carried. The Charter Commission directed Kathy Lueckert to gather the following information: research supermajority vote requirements in other charters, find out ballot printingdeadlines, seek an opinion from Springsted about the impacts of a supermajority vote onthecity's bond rating, and consider inviting city managers from other cities to give theirPerspectiveonsupermajorityvotes. Council Attendance Joy Tierney gave a brief overview of the issue of councilmember attendance. Sheexplainedthepreviousordinancerequirementsandhighlightedthechangeswhich were 0 Minutes Regular Council Meeting June 5, 1996 The regular meeting of the Plymouth City Council was called to order bayor Tierney at 7:00 p.m., in the Council Chambers, 3400 Plymouth Blvd., on Ju ' 1996. COUNCIL PRESENT: Mayor Tierney; Councilmembers B ck, Anderson, Wold, Lymangood, Preus, and Granath. ABSENT: None. STAFF PRESENT: City Manager Jo on, Assistant City Manager Lueckert, Public Works Director Moore, Commun' evelopment Director Hurlburt, Finance Director Hahn, Park Director Blank, P is Safety Director Gerdes, City Attorney Knutson, and City Clerk Ahrens. Item 3 Plvntsfitli Forum I ne appeared for the Forum. Item 5 Approve Agenda Councilmember Lymangood requested that the minutes of the Charter Commission meeting of May 23 be added to the agenda as Item 9-C. Motion was made by Councilmember Lymangood, seconded by Councilmember Granath, to approve the agenda with the addition of Item 9-C. Motion carried, seven ayes. Item 6 Consent Agenda Councilmember Lymangood noted that a clarification has been madA ouncilstaffreportforItem6-E and a correction made to the May 20 C' Special Meeting minutes. These items were noted and rem ' ed on the consent agenda. Items 6-F and 6-K were removed fro a Consent Agenda. Motion was made by Councilmember Ande n, seconded by Councilmember Preus, to approve the consent agenda mended. Motion carried, seven ayes. Item 6-A Approve City C> by Mi es Motion was madncilmember Anderson, seconded by Councilmember Preus, toapprovnutes of the May 15 Regular Council Meeting, May 20 Bo of Review, and the May 20 Special Council Meeting as correc Motion carried, seven ayes. 91 Regular Council Meeting June 19, 1996 Page 10 suggested that Plymouth could share its experience with the sump pum ordinance or other technical expertise on this issue with those uniti Motion was made by Councilmember Lyman , seconded by Councilmember Wold, to adopt RES ION 96-338 AUTHORIZING THE FINANCE DIRECTO SUBMIT A LOAN APPLICATION TO THE METROPOL COUNCIL ENVIRONMENTAL SERVICES, and directs o communicate with the cities of Medina and Medicine ke lee City's willingness to work with them on addressing sewage flow m their communities. Motion carried, six ayes. Item 8-C Plymouth Charter Commission Minutes Councilmember Lymangood referenced the Plymouth Charter Commission minutes of May 23, 1996. He noted that a motion was adopted `that the Charter Commission meet on Tuesday, July 9, 1996 at 7 p.m. to consider the supermajority vote issue, and that the City Council be invited to attend this meeting." He expressed concerns with this action. He believes that there could be a blurring of responsibilities in a joint meeting of the Charter Commission and City Council, and he is hesitant to engage in such a meeting. He viewed the Charter Commission as similar to a constitutional congress, with powers not to implement change, but to make recommendations on amendments to the City Charter. He is concerned that the City Council, an elected body required to abide by the City Charter, would meet with the Charter Commission to debate the issues. From a practical perspective, the City Council has already adopted wording for a proposed Charter amendment and he believes the issue is very clear. He expressed concern that the Charter Commission has an opportunity to delay the process of getting the amendment to the voters this November. Councilmember Lymangood stated he will not participate in the meeting unless it is a televised public hearing, and he would still have concerns about blurring of responsibilities. Councilmember Preus had similar observations. He would be happy to attend the Charter Commission meeting to give an explanation of his views on the issue, but doesn't believe that the City Council should be jointly meeting with the Charter Commission. He believes this issue is very clear and is concerned that the Charter Commission members indicated they may need. more time to address it. He hoped that the Charter Commission does not delay the issue further. The Charter Commission should either agree with the language proposed by the Council, or recommend some other option. Mayor Tierney asked the City Attorney if there is difficulty under a Council - Manager form of government of having a joint City Council and Charter Commission meeting. 207 Regular Council Meeting June 19, 1996 Page 11 Attorney Knutson said there is no legal problem with such a meeting, but councilmembers may have philosophical issues. Mayor Tierney explained that the Charter Commission discussed the issue of supermajority votes several years ago and decided that they did not want this included in the Charter. The Charter Commission felt that, rather than take the issue immediately to a public meeting, it would be good to hear from Councilmembers on why they favor this amendment. The Charter Commission noted that there was not much discussion among the Council on the issue, other than to indicate support for the amendment. They would like to have a clear understanding of why the City Council wants the amendment; therefore, they would like to hold a meeting with the Council before a public hearing is scheduled. Councilmember Wold stated it is his understanding that the job of the Commission is to oversee the Charter. The Charter Commission should be paying close attention to the Council meetings in order to do so. He assumed that the Charter Commission received the minutes of the City Council meeting where the amendment language was adopted, and that they had access to theCouncilmemberdebateslastfallwhentheissuewasfirstraised. He feels that the issue is perfectly clear, and he feels it is disconcerting that the will of the Council wasn't clear when a member of the Council was present at the Charter Commission meeting. Councilmember Wold stated that before voting on the proposed amendment language, Councilmembers made it clear that raising taxes is something that deserves more than a simple majority vote. He feels that a meeting with the Charter Commission would serve no purpose because the City Council's position is on public record and they would only restate thepositionthathasbeenadopted. Councilmember Lymangood suggested that perhaps the Charter Commission should just conduct a public hearing. He stated that three members of the CityCouncilmadethesupermajority'vote for increasing the tax rate a campaign issue. He believes that the City Council has exercised leadership, and he requested that the Charter Commission allow the voters to act on it in 1996. Councilmember Preus noted that the minutes of the Charter Commission meeting reflect different views on this issue. The Charter Commission can vote to agree or not agree with the City Council's proposed amendment language, but there is no reason to delay action. Mayor Tierney stated that most of the Charter Commission members don't believe the supermajority vote issue is as simple as it looks. TheCommissionersrecognizethatthiswasacampaignissue, but now they want toknowiftheamendmentisinthebestinterestoftheCity. She stated that the 3 Regular Council Meeting June 19, 1996 Page 12 Charter Commission attorney was denied payment for three months by the previous City Council. The Charter Commission wants the City Council to meet with them. Mayor Tierney stated she was not present at the City Council meeting on May 15 when the proposed amendment language was adopted. She suggested that he joint Charter Commission and City Council meeting could be videocast. Mayor Tierney noted there is a current vacancy on the Charter Commission and questioned whether any councilmembers had submitted their application of interest. Assistant Manager Lueckert stated that it would not be possible to televise a joint meeting on July 9 because a Planning Commission meeting is scheduled. Councilmember Lymangood stated that he has consciously not submitted an application to serve on the Charter Commission. He has no desire to serve as a Charter Commission member as long as he is in elected office. He believes that the Charter Commission is intended to be an independent body and that philosophical issues could be mixed by serving in both roles. Councilmember Wold stated that he does not believe it is appropriate to serve as a Councilmember and also on the Charter Commission that establishes the tales" through the City Charter. Mayor Tierney stated that the Charter Commission doesn't know whether the. desire to require a supermajority vote for a tax increase is just a political idea supported by council candidates or whether it has good reason. She said there is no legal restriction that a councilmember cannot also serve on the Charter Commission. She was a member of the Charter Commission before becoming a Councilmember. Councilmember Wold stated that the City Council believes the supermajority vote requirement would be good public policy. Motion was made by Councilmember Lymangood, seconded by Councilmember Granath, that the Plymouth City Council agrees that a 5/7 supermajority vote requirement in order to raise the tax rate is good public policy for the citizens of Plymouth, that the City Council encourages the Charter Commission to act forthwith in addressing the issue so that the citizens have an opportunity to vote on the issue in 1996, and to suggest that the Charter Commission can conduct a public hearing if they wish additional input on the issue. Councilmember Preus supported the motion. He stated that the issue was raised during the ca,tipaign because it is good government policy. Six gq Regular Council Meeting June 19, 1996 Page 13 Councilmembers voted in favor of the Charter amendment language, and the issue should go to the voters for a decision this November. Councilmember Black said that she supported the supermajority requirement as part of her campaign and believes voters should be allowed to decide if a tax rate increase is more important than other city business. Mayor Tierney stated that one issue is the concern of whether there should ever be a supermajority vote requirement because it can turn decisions over to a minority. She will not support the motion because she has not been shown evidence that requiring a supermajority vote for a tax rate increase is good government. Motion carried, five ayes; Tierney nay. Councilmember Wold called for division. Motion carried on a roll call vote: Wold, Lymangood, Preus, Granath, Black ayes; Tierney nay. Item 8-1) Weston Corporation, The Courts at Nanterre (96023) Community Development Director Hurlburt presented the staff report on e request of Weston Corporation for residential planned unit developme preliminary plan/plat, conditional use permit and variances for The ourts at Nanterre located west of Vicksburg Lane and north of the Holl ale Golf Course. The Planning Commission recommended approval, en denial, on a vote of 3 to 3. The item is sent to the Council without a commendation from the Planning Commission. She stated that The Courts at Nanterre is a pro sed 37 -unit townhome project located in the Nanterre planned unit velopment, for which concept plan approval was given by the City in 19 The single family part of the project has been given final approval. irector Hurlburt stated that the issue of the type of fencing along the Holl ale Golf Course has been resolved since the Planning Commission meeting the satisfaction of all parties. Another concern was the setback fro the Soo Line Railroad. Staff believes that there is sufficient buffer for th nits_ XCOMMurnuftyeve ment Director Hurlburt stated that an issue of staff r ated to the road system in the development. The developer a combination of public streets and private drives. Schmidt Lake tock Lane, and 49th Place would be public streets. There would te driveways to serve clusters of two to three townhomes each, ional private driveway on the east side of Comstock Lane. She as' Regular Council Meeting June 26, 1996 Page 13 Councilmember Granath said that he added this item to the agenda for a statu report from the City Manager. He applauded the intention of Mayor Schr er and the Medicine Lake City Council to work with Plymouth on issues r ted to South Shore Drive. He encouraged them to consider the issues a eir July 1 Council meeting. If the Medicine Lake City Council is prepare o take action as requested by the City of Plymouth, he doesn't believ hat it is essential that a meeting be held. He said it is in the interest f both communities to resolve these issues. Councilmember Anderson stated that he will notend the Medicine Lake City Council meeting. The Plymouth Council has e ectively resolved issues through established subcommittees. He to exception to several sentences of Mayor Schrader's letter. Councilmemb Anderson stated that the Plymouth City Council has set a deadline of the nd of July. He would like to see action by that time, or he would expect uncilmember Granath to place the closure of South Shore Drive on the nda for consideration. He will seriously consider th/ifthi further occurs by that time. Councilmeated that the July 1 meeting is where the City of Medicine Lscuss their options. Plymouth councilmembers are not needed forn. She stated that the Subcommittee can meet with the Mediciouncil, once they decide how to proceed. Coun ' member Wold stated that the Subcommittee has his full support. He be ' ves the Subcommittee can work with Medicine Lake Council to reach a ompromise by the end of July. Item 9-13 Charter Commission Request Councilmember Black acknowledged that there are various points of view on the issue relating to requiring a supermajority vote for a tax rate increase. She suggested that one Councilmember be appointed to attend the Charter Commission meeting to present the City Council's position and to enter into a discussion with the Charter Commission on the issue. Councilmember Preus has indicated he would be willing to attend the Charter Commission meeting to do this. The City Council expressed support for Councilmember Preus attending the Charter Commission meeting and representing the position of the City Council. Mayor Tierney stated she would like to see more councilmembers interested in the various charter issues. She said that the Charter Commission has previously discussed these issues. 94 Regular Council Meeting June 26, 1996 Page 14 Councilmember Black stated that she believes the Charter Commission has a mission and a specific role to play, and the interference of the Council is unnecessary. However, she believes it would be useful to have one councilmember present the Council's position at the Charter Commission meeting. Councilmember Lymangood agreed that this was a worthy compromise. He said that the City Council has also indicated they would meet with the Charter Commission at a public hearing on the issue. Item 9-C Tobacco Ordinance Councilmember Lymangood reported that an article r> iordinance City's Tobacco Ordinance recently appeared in USA Today. ed the Public Safety Director. He acknowledged the work oanager, Public Safety Director, and City Attorney on developiand receiving nationwide attention on this issue. Councilmember Wold reported that yesterdayfre attended a meeting on the City's tobacco ordinance. He stated tha ne panel member was impressed with the resolve of the Council in a ting the ordinance, and the forum was very positive. Councilmember Anderson left the eeting at 9:00 p.m. Public Safet erector Gerdes explained that the City hosted a prevention forumfo sing on the scenario that "It's too easy for kids to buy tobacco in HqeRdpin County." The Plymouth ordinance was highlighted and the meeting v fas well received. N ion was made by Councilmember Black, seconded by Councilmember Lymangood to adjourn the meeting at 9:05 p.m. Motion carried, five ayes. Laurie Ahrens City Clerk a; Plymouth Charter Commission July 9, 1996 Minutes Present: Virgil Schneider, Dave Pauba, Ty Bujold, John Duntley, Dave Crain, Bob Sipkins, Tim Peterson, Jon Speck, Joy Tierney, Kapila Bobra, Ellie Singer, Councilmember Christian Preus, Assistant City Manager Kathy Lueckert Excused: Bill Pribble, Pauline Milner, Sandy Patterson Call to Order Virgil Schneider called the meeting to order at 7:02 PM. Virgil Schneider introduced Councilmember Christian Preus, and the Charter Commission introduced themselves. Approval of Minutes The minutes of the May 23, 1996 Charter Commission meeting were approved as presented. Old Business Supermajority Vote for Tax Rate Increase Virgil Schneider asked if any commission member needed a report from staff; none indicated that they did. Virgil Schneider asked that commission members ask questions of Councilmember Preus. Dave Pauba asked Councilmember Preus why he thought requiring a supermajority vote was a good idea. Councilmember Preus stated that he is looking toward the future, and that is why he is proposing the supermajority vote. He said that right now the city has no fiscal problems, that it has good budgets and the tax rate has declined in recent years. However, he is wary of what actions the federal and state governments may take which may force local governments to provide services that have not previously been their purview. Councilmember Preus stated that he fears that these services could be a tremendous burden, and that the city should consider carefully whether or not it wants to increase taxes to provide them. He stated that City Manager Dwight Johnson had several good ideas on how to approach the supermajority vote, such as the Charter enabling the City Council to adopt an ordinance dealing with a supermajority vote on a tax rate increase. Councilmember Preus stated that he felt this might lead to tinkering with the ordinance from one year to the next, and that the Charter requirement should be for a supermajority vote or none at all. He said that he is not afraid of a "tyranny of a minority." He has not seen that come to be during his tenure on the Planning Commission or the City Council. zt Virgil Schneider stated that the current requirements for a supermajority vote are for rezonings and reguidings. Kapila Bobra asked Councilmember Preus why he thought Plymouth needed a supermajority vote for a tax rate increase when other cities and counties do this by a simple majority vote. Christian Preus stated that he is looking to the future, and that other local governments may not be wary of what the federal and state levels might do. He says it is simply a different approach. Joy Tierney stated that the Charter Commission also is concerned about taxes, but the city's record on holding the line on taxes has been good. She said that the supermajority vote is an issue of giving or not giving control to a minority. She asked why should action be taken when there does not seem to be a problem in Plymouth. Councilmember Preus stated that he feels that in the future, an extra vote will ensure caution when spending money. The fiscal decisions will be harder in the future. Virgil Schneider said that supermajority votes are required for rezonings and reguidings because these changes tend to be permanent. He said that the tax rate can change from year to year and thus is not a permanent change. He stated that elections also provide an opportunity for a leadership change if voters are not happy with taxes. In his opinion, raising taxes and rezonings/reguidings are not in the same category. Councilmember Preus stated that technically Virgil Schneider was right. However, he stated that experience shows that holding the line on taxes is very difficult at the state and federal level, and that Plymouth may have the same difficulties in the future. Dave Crain stated that Virgil Schneider's point was an important distinction. He stated that Plymouth has enjoyed strong growth revenues and has been "lean and mean" in providing services. Dave Crain said that this may not be possible in the future. His main concern is that of minority control. He is concerned about the possibility of never passing a budget. He is also concerned about the inflexibility of the amendment as currently drafted, in that five absolute votes are needed. What happens if there is a vacancy on the council at the time the tax rate must be approved? Virgil Schneider concurred with Dave Crain's concerns about flexibility and dealing with council vacancies. Christian Preus said there have not been problems in the past with taxes, and that he feels the voters would intervene if there were a problem. He stated that most council vacancies are temporary. Councilmember Preus stated that if the City Council took the ordinance approach to a supermajority that there would be too much room for case-by- case maneuvering and dealmaking. Virgil Schneider stated that a supermajority vote might result in more dealmaking than simple majority votes, and that it might not be limited to budget discussions. Ellie Singer said that the ward system may lend itself to deals. Jon Speck said that one ward, plus an at -large councilmember and the mayor could control the budget, and lead to one ward being more powerful than another. Virgil Schneider stated that minority control may force deals. Councilmember Preus stated that he does not see that happening in Plymouth. He wondered if deals might be made more in rezoning situations than in setting the tax rate. 21 Ty Bujold thanked Councilmember Preus for coming to the meeting, and said that he was glad to hear his comments. Ty Bujold stated that the Charter Commission's role is not to dictate to the City Council, but to offer other suggestions. He said that the issue at hand is to place a requirement in the Charter which would tightly control the ability of a future city council to raise taxes. Does the Charter Commission want to endorse this, or should it be a legislative decision dependent on the circumstances at the time? Ty Bujold said that all three possible ordinances considered by the Council dealt with controlling taxes, and that he can't think of an alternative that the Charter Commission could propose that the Council would accept. Tim Peterson expressed an interest in finding some sort of compromise, perhaps setting benchmarks of changes in the city's fiscal picture which would or would not activate the supermajority vote requirement. Councilmember Preus said that future circumstances cannot be predicted. Dave Crain asked what would happen with the supermajority vote requirement if the Legislature changes the entire tax system, as happened during the change from mill rates to tax capacity. He is concerned about the inflexibility of the proposed amendment. Virgil Schneider asked Councilmember Preus just what the problem is, and what the issue is that necessitates the supermajority vote proposal. Councilmember Preus said that it is best to take action prior to actual problems. He feels that pressure to raise the tax rate will be a future problem, and that it is best to consider the supermajority issue when there is no immediate pressure and problems. John Duntley said that the electorate is very sensitive to taxes, and that the City Council will hear about it. He observed that when it is necessary to raise taxes, councils tend to vote as a group so all take the pressure. Jon Speck stated that if the issue is one of control over taxes, then perhaps other alternatives should be looked at, such as requiring a supermajority vote to adopt the annual budget. He stated that he doesn't understand why there is such a sense of urgency to this, and that more study and research is needed. Tim Peterson said that most voters will think the supermajority requirement is good, and will vote for it without full knowledge of the pros and cons. Bob Sipkins stated that Christian Preus and the City Council are to be commended for a future orientation. He stated, however, that the supermajority requirement is an easy idea for populists to embrace, but that there may be other solutions and contingencies to achieve the same goal. He stated that the issue is whether or not the control should be in the Charter. Virgil Schneider stated that the Charter Commission can ask for an extension of 90 days, can propose modified language, or can decline to place the amendment on the ballot. The Council could then place their own version on the ballot. Kapila Bobra stated that she feels an extension is needed, so that the Charter Commission can discuss ideas among themselves. She said that the public will think the supermajority requirement is a good idea, but may not be aware of its practical applications. Ellie Singer asked Councilmember Preus if he saw no reasons to delay the question. 30 Councilmember Preus stated that the ballot deadline is a concern. He said that an additional 90 days might postpone getting it on the ballot. Ellie Singer stated that she wants the minutes to reflect that she takes exception to Councilmember Wold's comments in the city council minutes of June 19. She stated that the Charter Commission's role is indeed to oversee the charter, and that it is important to carefully consider changes to the Charter. Christian Preus stated that he understands that the Charter Commission does not have much time to consider the language. However, he stated that the Charter Commission may be making the issue more complicated than it is, and that it is a questions of being for or against the proposed amendment. Virgil Schneider stated that a presidential election year might not be the best time to place charter amendments on the ballot, because of the length of the ballot. He suggested a gubernatorial year instead. Ty Bujold stated that he doesn't want an unnecessary delay in getting this issue to the voter, but that he also feels that the electorate should be informed. Ty Bujold moved that in accordance with Minnesota Statutes 410.12, Subdivision 5, the Charter Commission resolves that a 90 day extension is necessary to fully consider all aspects of the proposed amendment on a supermajority vote requirement for a tax rate increase, and that a resolution be filed to that effect with the City Clerk. Dave Pauba seconded the motion. Virgil Schneider called for discussion on the motion. Tim Peterson asked what actions the Charter Commission would take during the next 90 days. Jon Speck asked for more research on the track record of the City of Fridley, which requires a supermajority vote to adopt the budget. He also wants more explanation of the proposed language. Jon Speck also stated that he would like a public meeting on the proposed amendment. Dave Crain said that perhaps the Charter Commission should consider a supermajority vote not only on the tax rate but also on the budget adoption. Bob Sipkins said that the strongest action would be to go on record as rejecting the language proposed by the Council. Kathy Lueckert stated that the ballot language must be finalized by early September, following the primary election. If the Charter Commission wished to meet that deadline, a report to the City Council would be due by the September 4 meeting. Bob Sipkins said that the City Council seems anxious to get this before the electorate, and that they will see the 90 day extension as an attempt to thwart their efforts. Thus the strongest action by the Charter Commission may be to reject the proposed language. He said that he was uncertain what an additional 90 days would do. John Duntley said that he simply wants more information, and that this may provide him with a reason to support or to deny the proposal. He said that the issue is a no brainer" for voters. However, the Charter Commission did consider the supermajority requirement while drafting the charter, and that there is more below the surface of the issue. 31 Ty Bujold said that the proposed amendment does not demand immediate action, and that it doesn't need to be in place immediately. Joy Tierney said that the issue can use more study, and that an attorney should be brought in for more suggestions. She stated that she was disappointed that the City Council did not discuss the issue more, and that the Council did not accept the City Manager's recommendation. Ellie Singer observed that six councilmembers are for the amendment. She said that the Charter Commission serves as an overseer of the charter, and that while it doesn't make decisions quickly, it does that for a purpose. The Charter Commission is a separate body, and should not rubber stamp every suggestion by the City Council but consider each on its merits. Dave Crain said that the city could be faced with a conundrum. He wondered what might happen if levy limits were imposed again, and that it would be hard to not stay at the current tax rate to avoid fiscal difficulties. Christian Preus observed that the Charter Commission had raised good points. He stated that if he hadn't come, he would think that the proposed resolution asking for an extension was a "slap in the face" to the council. He said that there may be the perception that the 90 day extension was requested just to kill the issue. He asked that the Charter Commission make a good faith effort to reach a decision in time for the ballot deadline. Ty Bujold stated that he is not concerned about what the Council thinks of him or the Charter Commission. He feels that the Charter Commission's responsibility is to take care of the charter. He stated that more information is needed, and that he cannot understand the urgency. Councilmember Preus stated that the lack of verbiage in the minutes does not mean that the Council did not think carefully about the proposed amendment. He stated that the Charter Commission has taken an honorable position, and that the Commission is not responsible to the Council. Virgil Schneider said that the Charter Commission has already spent nearly three hours discussing the supermajority vote issue, and that appears to be more time than the City Council has spent in public discussion of the issue. He stated that the Charter is the city's constitution, and that it exists in perpetuity and that changes should be carefully considered. Councilmember Preus stated that he thinks the Council has considered the issue. Tim Peterson stated that he agrees with Ty Bujold. He wants a working relationship with the City Council, but that the council minutes were very strong, and did not have a conciliatory or diplomatic tone. He said that the tone of the minutes was very much "we/them." He wants a better relationship with the council, but no councilmembers had called him or any other commission member. However, he thinks that Ty Bujold's motion would perpetuate this problem. Ty Bujold called for the question. Motion passed, 8 ayes, 2 nays. Recall of Elected Officials Kathy Lueckert reported that she had researched the Charter Commission minutes, and had found the discussion about recall of elected officials. Because of the 32 decision in a court case (Jacobsen v. Nagel), recall of elected officials is available only in case of malfeasance or misfeasance in office. It was moved and seconded stated that unless another opinion could be found, the Charter Commission would not further discuss the issue of recall of elected officials. The motion passed. Campaign Reporting Kathy Lueckert presented the proposed charter amendment language which would require campaign finance reporting for groups as well as individuals. Virgil Schneider asked about the $1000 limit, and was this state law. He said there is a $300 limit for individuals, and asked that the City Attorney verify the limits. Jon Speck said he thinks this is a good idea, but should go to the voters along with other proposed charter amendments. It was moved and seconded to table this issue until the next meeting. Motion passed. Joy Tierney asked that Roger Knutson offer suggestions on how language in the charter might be changed to deal with temporary vacancies. Kathy Lueckert stated that the Charter Commission still had a vacancy, and that no applications had been received. She suggested that the Commission wait until the fall to readvertise the vacancy. Ty Bujold asked that the minutes express appreciation to Kathy Lueckert for the excellent information provided prior to meetings. Ty Bujold also expressed his thanks and appreciation to Councilmember Christian Preus for attending the meeting. Virgil Schneider set the next meeting of the Charter Commission for Tuesday, July 30, 1996 at 7 PM in the Public Safety Training Room. The topic of discussion will be the supermajority vote requirement. Kathy Lueckert was directed to invite City Attorney Roger Knutson to that meeting. The meeting adjourned at 9:05 PM. Kathy Lueckert, Assistant City Manager 33 PCITY F PUMOUTI Jul) Laurie Ahrens City Clerk City of Plymouth 3400 Plymouth Boulevard Plymouth, Minnesota 55447 Dear Ms. Ahrens, The Plymouth Charter Commission voted at its meeting last evening to review for an additional ninety days the issue of a possible charter amendment on requiring a supermajority vote for a tax rate increase. This letter serves as the filing document required by Minnesota Statutes 410.12, Subdivision 5. The ninety days will expire on October 15, 1996. The Commission's resolution is attached. Sincerely, VC i 1 kn ic Virgil Schneider, Chairman Plymouth Charter Commission cc: Plymouth City Council Plymouth Charter Commission 31 PLYMOUTH :1 Pc,ruri idP1accToLive3:,0.) "'L TAOUTH BOULEVARD - PLYMOUTH. MINNESOTA 55447-1.482 - TELEPHONE (612) 509-5000 Plymouth Charter Commission July 9, 1996 f - Z. CjM q11;V 4-7 BE IT RESOLVED by the Charter Commission of the City of Plymouth, Minnesota, that in accordance with Minnesota Statutes 410.12, Subdivision 5, the Plymouth Charter Commission determines that a ninety day extension is necessary to fully consider all aspects of the proposed amendment on a supermajority vote requirement for a tax rate increase, and that a resolution be filed to that effect with the City Clerk. MOTION: Bujold SECOND: Pauba VOTE: 8 ayes, 2 nayes 3.f Regular Council Meeting July 10, 1996 Page 10 Councilmember Lymangood stated that he was not the Councilmember ho added this item to the agenda. Councilmember Granath had asan update. Councilmember Lymangood was attempting to get theyion to Councilmember Granath for his questions or comment. Mayor Tierney stated that Councilmember Wold had an ovortunity to speak. Councilmember Wold had viewed the videotape and ted that Councilmember Granath had no opportunity to get he floor because a member cannot interrupt the speaker to attain the floor u er Roberts Rules. Until Councilmember Lymangood's point of order, ere was no opportunity for Councilmember Granath to get the floor be use of the comments of the Chairperson. Mayor Tierney stated that Councilm ber Granath asked Manager Johnson for an update on the issue. Motion was made by Counci ember Preus, seconded by Councilmember Black, to close debate and all the question on the amendment and main question. Mayor Tierney qu9gfloned whether the motion was appropriate. Councilmembff Wold raised a point of information that the motion is proper under Robqfs Rules of Order.. Motio/to call the question carried, six ayes. ion to amend the main motion carried, six ayes. Main motion as amended carried, six ayes. Item 9-A Report on Action of Charter Commission Councilmember Preus reported on the July 9 Charter Commission meeting which he had attended. The Charter Commission adopted a resolution to take an additional 90 days to consider the proposed charter amendment which was proposed by the City Council relating to requiring a supermajority vote for an increase in the tax rate. In his view, there was little new information discussed by the Charter Commission that the Council had not already considered. He explained that the Charter Commission's reason for taking an additional 90 days is to get information and study the issue further.' He is unsure whether this means that the Charter Commission will take the full 90 days or only a portion thereof. If the full 90 days is taken, the issue cannot get on the ballot this November. 34. Regular Council Meeting July 10, 1996 Page 11 Mayor Tierney stated that there is some complexity in what occurs if the Council and Charter Commission disagree on the proposed Charter language. The City Attorney is planning to attend the next Charter Commission meeting to discuss the process. She invited anyone interested to attend the Charter Commission meeting. Councilmember Preus explained that the procedure used by the City Council is specified by statute whereby the Council adopts the proposed language, and the language is sent to the Charter Commission for review. The Charter Commission has the options of agreeing or not agreeing with the language, or adopting alternate language. This comes back to the City Council, and the City Council decides which language goes on the ballot and to the voters. There is not conflicting language going to the voters. Attorney Knutson stated that the process was correctly described. He added that under another section of the statutes, the Charter Commission can propose their own Charter amendment independent of what the City Council does. Councilmember Anderson asked if the City Attorney could ensure that the City Council get the issue in time to place it on the November ballot. He is concerned about the Charter Commission keeping the issue from the voters this fall. Attorney Knutson stated that he has no control over the time schedule, but will relay the Council's desire to the Charter Commission. Councilmember Wold thanked Councilmember Preus for representing the Council's position at this meeting. Mayor Tierney stated there was not an official vote to have Councilmember Preus represent the City Council at the Charter Commission meeting. She said that Councilmember Preus represented only himself at the -meeting. Councilmember Preus raised a point of order that the speaker should not be interrupted. Councilmember Wold stated that his opinions had been represented byCouncilmemberPreusattheCharterCommissionmeeting. Councilmembers Black and Anderson also thanked Councilmember Preus for attending the meeting and representing their views on the topic. 33 Regular Council Meeting July 10, 1996 Page 12 Mayor Tierney stated that this item was discussed at a council meeting, but no action was taken by the Council to designate anyone as a designee of the Council. Councilmember Preus stated that prior to being elected, he had spoken with Councilmember Wold about the supermajority vote issue, and he recently discussed the issue rrith Councilmember Black. He noted this information in order to avoid any appearance of serial discussions between Councilmembers about the issue. Councilmember Lymangood stated that Page 13 of the June 26 minutes indicate that Councilmember Black suggested that Councilmember Preus represent the City Council at the Charter Commission and there were no objections from the Council. Mayor Tierney stated there was no official vote of the Council. She stated that it is inappropriate for the City Council to feel that the Charter Commission is working against the Council. She believes that the City Council should be respectful of the Charter Commission. She stated that the City Council now has seven members, rather than five, at the initiative of the Charter Commission. Motion was made by Councilmember Wold, seconded by Councilmember Anderson, to close discussion on Item 9-A and move to Item 9-B. Mayor Tierney did not recognize the motion. Item 9-B Council Subcommittee Meeting with Medicine Lake Council Councilmember Preus noted that the City Council Subco7ni tte n South Shore Drive safety issues is scheduled to meet tomorrow with the Medicine Lake City Council. He asked if that subco meeting has been noticed as an official meeting. Manager Johnson stated that staff postedice of the meeting as soon as it was learned that four members of the ' y Council may be present at the meeting. However, sufficient adv a notice was not made to meet the open meeting law notice requireme for an official meeting. City Attorney Knutso ecommended that official notice is advisable when a subcommittee of Council meets and four members are present, but he stated that th 'ssue is debatable. nember Wold stated that he intended to make a motion relating to attendance at the subcommittee meeting. 31 Plymouth Charter Commission July 30, 1996 Minutes Present: Virgil Schneider, Dave Crain, Pauline Milner, Kapila Bobra, Ty Bujold, Joy Tierney, Sandy Patterson, Jon Speck, Dave Pauba, Ellie Singer, Bill Pribble, Bob Sipkins, Tim Peterson, City Attorney Roger Knutson, Assistant City Manager Kathy Lueckert Excused: John Duntley Call to Order Virgil Schneider called the meeting to order at 6:30 PM. Approval of Minutes The minutes of the July 9, 1996 meeting were approved as presented. Discussion with City Attorney Virgil Schneider introduced City Attorney Roger Knutson. Roger Knutson said that the issue of the supermajority vote requirement for a tax increase is really a constitutional question, not a legal one. He cannot say whether it is a good idea or a bad idea. Roger Knutson stated that Councilmember David Anderson had requested that he communicate to the Charter Commission Mr. Anderson's desire that the Charter Commission finish its work in time to place the issue on the November 1996 ballot. On the issue of campaign reporting, Roger Knutson stated that the dollar amount limit in the proposed amendment is a number he developed, and there is no magic to it. Virgil Schneider asked if there are any limits on contributions by individuals for referendum questions; Roger Knutson said that there are no limits at the local level. Kathy Lueckert asked Roger Knutson to explain the process for getting the issue on the ballot. Roger Knutson stated that the City Council cannot put the issue on the ballot without a Charter Commission decision on the proposed language. In response to Virgil Schneider's question about what would happen if the Charter Commission proposed its own language, Roger Knutson said that the City Council would consider the language of both proposals, and then choose the proposal it wished to place on the ballot. Ty Bujold stated that it would be possible to have two questions on the supermajority issue on the ballot, one proposed by the City Council and one proposed by the Charter Commission. Jon Speck asked what might happen if both questions were approved by the voters. Roger Knutson said there is no guidance in state law as to what happens if both questions are approved. Kapila Bobra stated that such an occurrence would look silly to voters. Dave Crain stated that he is still most concerned about the potential for stalemate over budget adoption. Joy Tierney asked what the deadline is for ballot language. Kathy Lueckert stated that the practical deadline is the week of the primary election. Dave Crain stated that the legal guideline for ballots is 45 days prior to the election. Joy Tierney stated that there 31 does not seem to be much interest on the Council to hold a special election just for this issue. Jon Speck asked if there have been any court cases challenging supermajority votes. He noted that Fridley has such a requirement for budget adoption. He wondered why the supermajority requirement deals only with an increase, and not a decrease. Roger Knutson stated there is no Minnesota case law on supermajority votes. Ty Bujold asked to return to the issue of campaign reporting for special issue elections. He noted that the proposed language limits individual contributions to $1,000. However, there is no limit placed on the amount which might be spent on petition drives, prior to the issue being placed on the ballot. Ty Bujold said that such expenditures concern him, and he feels there should be accountability for petition drives as well. Virgil Schneider asked the Roger Knutson draft some language to cover Ty Bujold's concern. Virgil Schneider asked if Roger Knutson has any experience in non -budget related supermajority votes which have caused problems. Roger Knutson mentioned the issue in Eagan over a proposed development for low income housing. The proposal could not get the required supermajority vote. The Eagan City Council was sued; the case was settled out of court and the project is now under construction. Dave Crain stated that perhaps the language might be changed to require a vote of two thirds of those present. Roger Knutson left the meeting at 7:05 p.m. Campaign Reporting Virgil Schneider asked if the Commission wanted to have further discussion on the campaign reporting issue. Dave Crain stated that he is concerned about limiting the amount that an individual can contribute to a special issue campaign. However, he feels strongly that campaign reporting is important. Tim Peterson stated that while he is not concerned about the amount contributed, he is concerned that it be reported. Joy Tierney stated that the $1,000 limit will impact very few individuals, but that some special issue elections could have direct benefits to some residents. Tim Peterson stated that he is also concerned about in-kind contributions, and suggested that some language be added to deal with that issue. Virgil Schneider stated that he thinks it is a good idea to require campaign reporting on special issue elections. He also wants language to require reporting prior to the election, at intervals similar to those required for individual candidates. Ellie Singer asked if the Commission wanted to place this question on the ballot. Virgil Schneider stated that it is not important enough to place it on the ballot by itself, but that it could be placed with other questions. Virgil Schneider directed Kathy Lueckert to ask Roger Knutson to redraft the language proposed for campaign reporting to address the following issues: remove the dollar limit for contributions, include guidelines for reporting for petition drives, incorporate language that would cover "in kind" contributions, and require reporting at intervals prior to and after the election. Na Supermajority Vote Ty Bujold said that he had done some research on the issue of supermajority votes, but that there is limited literature. He distributed copies of articles he had found on the topic. He stated that this is an important philosophical issue to be debated. He feels that he must educate himself first so that he can help inform voters. He stated that this issue requires careful thought. Kapila Bobra agreed that it is crucial for Commission members to educate themselves. Ty Bujold suggested that the Commission have expert speakers, both pro and con, come to the next meeting. Commission members agreed that this was a good idea. Various commission members will seek out speakers on both sides of the issue. Kathy Lueckert will contact the League of Minnesota Cities and the Minnesota Taxpayer's Association. Ellie Singer stated that she does not want to create a divisive atmosphere. She said that she has not yet formed an opinion. She takes her role as a charter commission member very seriously. She wants more information before she decides on the supermajority question. Joy Tierney stated that the Commission should avoid "dueling amendments." Sandy Patterson agreed that this would not be good for the city. Bob Sipkins stated that he feels it is important to educate the Charter Commission so that the commission can give good information to voters. He stated that he is keeping an open mind, and could be persuaded either way with the presentation of compelling information. He wants to hear all sides of the issue. Tim Peterson stated his desire to try to work within the time parameters to get the issue resolved. He does not want to postpone the issue unnecessarily. The Charter Commission will hold a meeting on August 20 to hear speakers on either side of the supermajority issue. The meeting will be at 7 PM in the Public Safety Training Room. The Charter Commission will hold a public meeting on the proposed supermajority vote issue on September 9, 1996 at 7 PM in the Council Chambers. The meeting will be televised. The Charter Commission will meet immediately following the public hearing, and will try to forward its decision to the City Council at the Council's September 18 meeting. Adjournment The meeting adjourned at 8:17 PM. NI Plymouth Charter Commission August 20, 1996 Minutes Present: Virgil Schneider, Bill Pribble, Jon Speck, Joy Tierney, Bob Sipkins, Tim Peterson, Ellie Singer, Ty Bujold, Pauline Milner, Dave Pauba, Sandy Patterson, Kapila Bobra, Assistant City Manager Kathy Lueckert Guests: Lynn Reed (Minnesota Taxpayer's Association), Kent Sulem (League of Minnesota Cities), Jim Willis (Inver Grove Heights City Manager) Excused: John Duntley Absent: Dave Crain Call to Order Virgil Schneider called the meeting to order at 7:05 PM. Approval of Minutes The minutes of the July 30, 1996 meeting were approved as presented. Discussion of Supermajorily Vote Requirement Virgil Schneider noted that this evening's meeting included speakers from the League of Minnesota Cities, the Minnesota Taxpayer's Association, and the Inver Grove Heights City Manager. He introduced Kent Sulem, an attorney with the League of Minnesota Cities (LMC). Kent Sulem, League of Minnesota Cities. Mr. Sulem stated that the city requested that he and the League examine the issue of supermajority vote requirements for a tax increase. He said the Plymouth would be the first charter city to have such a restrictive amendment. Eight other charter cities have a supermajority vote requirement to make budget adjustments, once the budget has been adopted. Duluth has an informal policy to not increase the tax rate because of increases in the tax base. Mr. Sulem noted that in 1994 four states proposed amendments for supermajority requirements for tax increases at the state level. Three of the four were defeated. The experience shows that voters are not as supportive of the idea once they are given information and understand all the implications. Mr. Sulem stated that a supermajority requirement could tie the hands of cities. State and federal funding is uncertain, and there is a strong possibility that local aid to cities will be reduced or eliminated in Minnesota during upcoming legislative sessions. A supermajority requirement might restrict the city's ability to respond thoughtfully and promptly to revenue shortfalls. Mr. Sulem noted that while Plymouth is still growing, the IN expansion of tax capacity may not be enough to offset the need to reduce services to meet a shortfall. Mr. Sulem stated that the League's view on this issue is not to restrict the city's flexibility to deal with fiscal uncertainties, and that the League would not recommend this amendment. Jon Speck asked if Plymouth were not a charter city, would the supermajority vote even be an option, i.e. if Plymouth were a statutory city, would the supermajority vote requirement be possible? Mr. Sulem stated that the only means of establishing such a requirement for a statutory city would be by ordinance, which could be changed at any time. Mr. Sulem stated that it is his understanding that Plymouth's charter does not permit the City Council to pass such an ordinance, which is why the amendment is suggested for voter approval in the first place. Ty Bujold stated that many levels of government are considering measures to make it more difficult to raise taxes. He sees a trickle down effect in the future, and local governments might be saddled with services for which there is no money to fund. He asked Mr. Sulem what services might be impacted in such a situation. Mr. Sulem said that decisions on services are made on a city by city basis, and that staffing levels must be considered. Tim Peterson stated that it is important to preserve flexibility to deal with different fiscal scenarios, and that certain fiscal events might trigger different tax rate approval requirements. Kathy Lueckert stated that this was one of the options for a charter ordinance given to the City Council for consideration. Mr. Sulem stated that it would be possible to determine tax rate approval guidelines based on different fiscal conditions, and that the Commission should consider this. He noted that Plymouth has done an exceptional job of keeping the tax rate low over the years. Ty Bujold stated that he was unclear why the City Council needed extra guidelines for taxation issues. It is his view that the involvement and voice of the constituency should be enough of a controlling factor without a supermajority vote requirement. Mr. Sulem noted that the proposed amendment sounds good to voters, and that it sells well." If a city council is doing its job well, the electorate should trust the council to make the right decisions without a supermajority vote requirement. Jon Speck said that some of the information retrieved from the Internet indicated that the Minnesota legislature was considering two/thirds vote requirements on certain taxation issues. He asked if Mr. Sulem knew the status. Mr. Sulem stated that that particular bill did not see any action in 1996, but he did not know what might be introduced in 1997. Lynn Reed, Minnesota Taxpayer's Association. Virgil Schneider introduced Lynn Reed, Research Director for the Minnesota Taxpayer's Association (MTA). Mr. Reed said the MTA has existed since 1926, and focuses on education and advocacy. Mr. Reed distributed an article on Tax and Expenditure Limits on Local Governments from the Advisory Commission on Intergovernmental Relations (ACIR), and the MTA newsletter. N3 Mr. Reed said he would discuss three issues: why are tax and expenditure limitations (TELs) popular, what are the merits of Plymouth's proposed amendment, and are there better ways to accomplish the same goal? In addressing the "why" question, Mr. Reed said that interest in controlling taxes is not a new phenomenon. As early as the nineteenth century Americans were concerned with perceived high taxes, and the 1970's tax revolt also is indicative of this sentiment. The concern about taxation reflects a lack of confidence in elected officials. Voters do not feel that they are getting their money's worth, and that elected officials are not paying attention. Mr. Reed stated that there is a perception that there are insiders and special interest groups who have access to government officials, but ordinary citizens do not. He asked how well attended council meetings are by ordinary citizens. He said the lack of confidence is worse in Minnesota because of the complex property tax system. The current system makes it difficult to fix responsibility for spending, and most citizens do not understand it. In terms of the Plymouth proposal, Mr. Reed asked what the goal is of this proposal. Is it to make increasing taxes more difficult? He noted that the tax base has a tremendous impact, in that actual taxes paid can go up because of value increases, while the tax rate itself is decreasing. If the goal is to make it more difficult to spend taxpayer dollars, the current proposal might not meet that goal because Plymouth's growing tax base. Mr. Reed said that there might be a better way to limit property taxes. He suggested changing the current property tax classification system within the city to even out the burden between homeowners and businesses. While he doesn't know if changing the classification system is possible, it is an intriguing idea. Mr. Reed also suggested a focus on the absolute dollars generated, rather than on the tax rate, and place a supermajority limit on the dollars. Mr. Reed said the bottom line is that voters are frustrated, and that they want access to government and accountability in government. Mr. Sulem noted that voters are indeed frustrated with all levels of government, but he is uncertain whether or not an action at the local level will do much to alleviate it. He said that it is important to educate voters on the details of city spending. He doubts that there is little that can be done about the tax classification system structure at this point. Joy Tierney asked if the city shouldn't preserve its flexibility to deal with changing fiscal conditions, such as a loss of homestead aid or a drastic change in the tax system. Mr. Reed said that flexibility can be preserved in how the guidelines are written. The bottom line is accountability: who controls the taxes and who spends the tax dollars. Ty Bujold asked why make taxes the only supermajority limit? He said that people might feel strongly that granting a liquor license is important enough to warrant a supermajority requirement. He wonders if the supermajority requirement is a "slippery slope," and if the present proposal is just an attempt to make people feel good. Mr. Reed said that taxes are important to everyone. However, he stated that the balance of access seems to have tilted away from citizens, and that the average citizen needs extra leverage to be heard in government. Mr. Reed said that the supermajority vote requirement might not be the best option, but that a referendum might be a better 11 choice. He noted that elected officials at all levels must evaluate the levelness of the playing field, and must have personal morality beyond the next election. Kapila Bobra asked if the MTA would lobby for changes in Minnesota's fiscal system. Mr. Reed stated that it is important to even out revenue sources, and that there are advantages and disadvantages to each type of tax. He stated that MTA has not taken a position on supermajority requirements. Jon Speck asked Mr. Reed about his letter's reference to the state of Arizona's supermajority requirement. Mr. Reed had mentioned that this requirement had produced unintended consequences. Mr. Reed responded that in Arizona acquiring the extra votes needed for a supermajority to pass the state's budget had proven very expensive. The overall spending increased by nearly 50% in order to achieve the supermajority requirement. Mr. Bujold asked why MTA had not taken a position on the supermajority vote requirement. Mr. Reed stated that MTA was still analyzing the issue, that cities should be free to do what cities do best, and that sources of funding should not be commingled. Jim Willis, Inver Grove Heights City Manager. Mr. Willis stated that supermajority requirements are not the way governments should work. He said that local officials are elected and appointed to manage the affairs of the city, and must generate the revenues needed to pay the city's bills. He said that in general, cities see very little "games playing." Most elected officials are concerned with the tax rate, not the tax dollars generated by that rate. Mr. Willis recalled that during his tenure as city manager of Plymouth, nearly all the budgets and tax rates were adopted unanimously. He noted that supermajority requirements mean that some individual votes become more important than other individual votes. Mr. Willis said that Plymouth is very well off in comparison to other communities, but that this relative prosperity will not last forever. He stated that he does not see the need for a supermajority vote, and does not feel it is good public process or policy. It is difficult to predict what the consequences of such a requirement might be for future city councils. Ty Bujold asked if Mr. Willis thought that voters would embrace the idea. Mr. Willis said that most citizens do not take the time to educate themselves about the real problems, and that amendments such as these do not make the problems disappear. Mr. Sulem mentioned a metro -area city in which voters had approved a charter amendment which placed severe restrictions on the use of special assessments for street reconstruction. This city is now a "loss leader" for the League's insurance trust because of all the problems with streets. The city has been unsuccessful in repealing the amendment. Discussion of Campaign Reporting Amendment. Virgil Schneider called the Commission's attention to the language drafted for a possible campaign reporting amendment. The Commission agreed that the language was acceptable, but took no formal action on the proposal. 50 Discussion of September 9, 1996 Public Hearing. The Charter Commission discussed the general format of the September 9 public hearing on the supermajority vote requirement. Kathy Lueckert will make a brief statement of how the amendment was brought to the Charter Commission. Virgil Schneider will then discuss the Commission's actions and deliberations since May 1996. The Commission will then hear comments from the public on the proposal. Virgil Schneider said that the Charter Commission will meet following the public hearing to consider what, if any action will be taken by the Commission. Virgil Schneider asked that Kathy Lueckert sent thank you notes to this evening's speakers, and invite them to participate in the public hearing on September 9. Several Commission members asked that the minutes reflect the appreciation of the Charter Commission for the presentations made by the three speakers. The meeting adjourned at 9 PM. HG Regular Council Meeting August 21, 1996 Page 11 Item 9-A Charter Commission Minutes of July 30 Councilmember Lymangood read an excerpt of the Plymouth Charter Commission minutes of July 30: "Joy Tierney asked what the deadline is for ballot language. Kathy Lueckert stated that the practical deadline is the week of the primary election. Dave Crain stated that the legal guideline for ballots is 45 days prior to the election. Joy Tierney stated that there does not seem to be much interest on the Council to hold a special election just for this issue. " Councilmember Lymangood stated that he does not recall the City Council discussing whether this issue was of sufficient importance to schedule for consideration at a special election. Mayor Tierney stated that no official position was taken by the City Council, but she had made this assumption from Councilmember Lymangood's previous comment that if the question does not get on the November ballot, it would take two more years to.be considered. She stated that this was brief, general discussion and that she did not relay an official position of the City Council to the Charter Commission. Motion was made by Councilmember Lymangood, seconded by Councilmember Granath, to direct staff to prepare a report for consideration at the next budget study meeting on funds necessary to allow for one special election in the 1997 proposed budget. Motion carried, seven ayes. Councilmember Lymangood stated that the Charter Commission has scheduled a public hearing on September 9 to address the issue of a supermajority vote requirement for a tax levy increase. Assistant Manager Lueckert announced that the meeting will begin at 7 p.m. on September 9, and citizens are invited to attend. The meeting will be cablecast. Councilmember Anderson asked if the Charter Commission intends to vote on the recommendation to the City Council following the public hearing that evening. Assistant Manager Lueckert stated that she believes the intent of the Charter Commission is to make a decision on their recommendation following the public meeting that evening, if possible. The City Council could schedule a special meeting on September 10 or 11. In the event that the Charter Commission makes a recommendation; the City Council could act on the issue. The ballot language must be submitted to the County for ballot printing on September 11. N 3 Regular Council Meeting August 21, 1996 Page 12 , touncilmember Anderson supported scheduling a special council meeting to consider the recommendation of the Charter Commission. Manager Johnson stated that the City Council could schedule a special meeting on September 10, but the meeting could not begin until 8 p.m. due to the State Primary Election. Motion was made by Councilmember Wold, seconded by Councilmember Lymangood, to establish a Special Council Meeting for September 10 at 8 p.m. to receive the recommendation of the Plymouth Charter Commission on the issue of a supermajority vote requirement for a tax levy increase, and to consider the proposed charter amendment language. Mayor Tierney stated that the Charter Commission is holding a public hearing on September 9, but they may not necessarily adopt a report to submit to the Council following the public hearing. Assistant Manager Lueckert clarified that it is her understanding that the Charter Commission intends to adopt a recommendation to the Council following the public hearing on September 9; however, the Charter Commission legally has until October 15 to adopt a recommendation. Mayor Tierney reported that speakers from the Minnesota Taxpayers Association and the League of Minnesota Cities, as well as the former City Manager attended the last Charter Commission meeting to speak on the supermajority vote issue. There was not significant support for the proposal. A point of order was made by Councilmember Preus. He stated that the discussion does not relate to the motion under consideration which is whether to schedule a special meeting. Councilmember Wold stated that he is ay. -are that the Charter Commission has the legal right not to act on September 9 following the public hearing. However, the City Council must schedule a Special Meeting in the event that a recommendation is received. Councilmember Black expressed disappointment that she will be unable to attend the Special Meeting. Motion carried, seven ayes. Councilmember Lymangood asked if the Charter Commission meeting on September 9 is a public hearing or public meeting. Regular Council Meeting August 21, 1996 Page 13 Manager Johnson explained that the entire meeting is open for the public to attend. As part of the meeting, a public hearing will be conducted on the supermajority vote issue. The Charter Commission could consider their recommendation following the public hearing portion of the agenda. Councilmember Anderson asked if the City Council can formally request that the recommendation on the proposed supermajority Charter amendment be voted on by the Charter Commission on September 9 following the public hearing. City Attorney Knutson stated that the City Council can go on record as requesting that the Charter Commission make their recommendation on September 9, but can't require any action to be taken. Motion was made by Councilmember Anderson, seconded by Councilmember Granath, to respectfully request that the Charter Commission make a recommendation on the proposed supermajority Charter amendment on September 9. Councilmember Granath stated that the City Council respects the independence and commitment of the Charter Commission. He believes that they should consider the item and make a recommendation while the public is present on September 9. Councilmember Wold spoke against the motion as he does not believe it is appropriate for the City Council to make official requests of the Charter Commission. He believes that the Council can trust the Charter Commission to deliver a recommendation and does not want to be party to an appearance of the Council pushing the Charter Commission for a recommendation. He expects that the Charter Commission will make a recommendation on September 9. Councilmember Granath stated that the independence of the Charter Commission is necessary to the governing of the City. He wants to encourage the Commission to make a recommendation to the Council, irrespective of the decision. Councilmember Preus stated that he will support the motion. The Charter Commission knows that it is an independent body, and he fully respects their independence. However, he will support the motion as a reminder to the Charter Commission that this is what the City Council would like in order to get the supermajority amendment on the ballot in November. If the Charter Commission does not adopt a recommendation on September 9, the issue cannot be placed on the November ballot. N9 Regular Council Meeting August 21, 1996 Page 14 Mayor Tierney stated that one question has arisen on whether the Charter Commission could have moved up the public hearing. She said that when the City Council indicated it did not wish to meet with the Charter Commission on the supermajority amendment issue, it slowed the schedule. The Charter Commission wanted full notice of the public hearing, and this was done through the newspapers and September Plymouth News. She forewarned the Council that the Charter Commission previously considered the supermajority vote issue and that most information they received is against such a Charter amendment. The Charter Commission has some valid concerns in putting this language into a charter amendment, and the Charter Commission deserves respect. Councilmember Preus stated there is no question that members of the City Council respect the Charter Commission. He said that the Charter Commission's scheduling of the public hearing on September 9 has nothing to do with the decision of the City Council not to meet as a whole with the Charter Commission. That decision was made in June or July. The Charter Commission waited to schedule the public hearing because they wanted to get additional information on the proposal. He said that the Charter Commission disagreed with the Council's decision not to meet with the Commission, but they respected that decision. Mayor Tierney stated that Councilmember Preus may be correct, but it did seem like a delay to the Charter Commission. Motion carried: Anderson, Lymangood, Preus, Granath, and Black ayes; Wold nay; Tierney abstained. Mayor Tierney said that she abstained because of the dual role that she is playing at this point. Item 9-B AMM Meeting on Transportation Mayor Tierney.reported that one of the main areas of interest to t Association of Metropolitan Municipalities is trZrouportatio ey are currently discussing ways of reducing speeding neighborhoods, including consideration of 25 mph speed limit a asked if the Council supports this effort. Councilmember Wold sta at he supports such an effort. He suggested that the issue of 25 speed limits be forwarded to the Community PolicingSubcommittarodewithapoliceofficeronNationalNightOutandstated that t are other ideas to discuss as well. SO slj-c P10j ql]AoIq PLYMOUTH: 4 dU <EOUL vAI D .:PLY3:::04:PYN.....:....................:........,.:....... _ :...... DATE: September 6, 1996 TO: Mayor and City Council FROM: - Kathy Lueckert, Assistant City Manager SUBJECT: Available Options for Possible Charter Commission Report On September 9, 1996 the Charter Commission will hold a public hearing to receive public comment on the proposed charter amendment to require a supermajority vote to increase the tax rate. The Charter Commission may be prepared to make its report to the City Council on September 10. However, legally the Charter Commission has until October 15 to make its final report on the proposed amendment to the City Council. Four scenarios are possible for the September 10 meeting. 1. No report from Charter Commission. If the Charter Commission does'not make a report to you on September 10, the Council cannot take action to place the proposed amendment on the November ballot. After receiving the report or after October 15, the Council could consider scheduling a special election for this issue during 1997. 2. Charter Commission report rejects proposed amendment. If the Charter Commission does make a report to the Council on September 10, it could reject the language proposed by the Council. After receiving the report, the City Council can take action to place its original proposed amendment language on the ballot in November or at the next regularly scheduled city election, in November 1998. 3. Charter Commission report recommends alternative language. If the Charter Commission makes a report on September 10, it may recommend alternative language for the proposed amendment. The City Council can choose between the original language and the alternative language in determining the amendment to place before voters in November. 4. Charter Commission report recommends alternative language; City Council and Charter Commission seek language compromise. If the Charter Commission makes its 31 11 ort report and suggests alternative language, the City Council could choose to wok with theCharterCommissiontoreachagreementonlanguageacceptabletobothbodies. This would then place the issue before the voters in a special election in 1997 or at the nextregularlyscheduledcityelection, in November 1998. Attached is a copy of the proposed language, as well as the relevant section fromMinnesotaStatutes. g4o pe . N CITY OF PLYMOUTH of// HENNEPIN COUNTY, MINNESOTA RESOLUTION NO. 96-9 AN ORDINANCE AMENDING THE PLYMOUTH CITY CHARTER CONCERNING TAXATION l: WHEREAS, Minn. Sta. §410.12, Subd. 5 authorizes the City Council to propose charter amendments to the voters by ordinance. THE CITY OF PLYMOUTH ORDAINS: SECTION 1. Chapter 7 of the City Charter is amended by adding Section 7.15 to read: 7.15 Increase in Tax Rate. A two-thirds majority of all members of the Council is required to adopt a tax levy resolution that increases the City's tax rate over the prior year. Tax rate means the quotient derived by dividing the City's tax levy by the City's net tax capacity. SECTION 2. Effective Date. This ordinance shall become effective only when approved by the voters as provided in Minn. Stat. §410.12, Subd. 4. ADOPTED by the City Council this 15th Day of May, 1996. ATTEST: Laurie F. Ahrens, City Clerk 4ceP T' rne, Mayor s3 4162 463 CLASSIFICAMN; CHARTERS 410.12 In this section.Uponcer- the city lrtiferk sthatexaminationontothecouncil. [f theycity clerk shall ccetition, dmenIs to resluhall lt of thetifythey vePercent :2 petition is insufficient the city clerk shall set forth in a certificate the particulars in If the city ;;. ', it is defective and shall at once no the committee of the petitioners of the find- which eligible to ,. ings. A petition may be amended at any time within ten days after the making of a cer- nt shall be tificate of insufficiency by the city clerk, by filing a supplementary petition upon d amend_ additional pape 8nsigned and filed as provided in case of an original petition. The city mora than clerk shall within five days after such amendment is filed, make examination of the clerk, ,and amended petition, and if the certificate shall show the petition still to be insufficient, 300 words t.:: the city clerk shall file it in the city clerks office and notify the committee of the peti- I na 'shall x tioners of the findings and no further action shall be had on such insufficient petition. I d and an`' r `• The finding of the insufficiency ora petition shall not prejudice the filing of a new peti- 11 be suf" tion for the same purpose. is sought Subd. 4. Election. Amendments shall be submitted to the qualified voters at a gen- fthc 1 pro- cral or special election and published as in the case of the original charter. The formar:y Iapprovalbmissionoftheballotshallbefixedbythegoverningbody. The statement of the question on thet . ations in t` ballot shall be sufficient to identify the amendment clearly and to distinguish the ques- ply tion from every other question on the ballot at the same time. If 51 percent of the votes e cast on any amendment are in favor of its adoption, copies of the amendment and cer- tificates; shall be filed, as in the case of the original charter and the amendment shall rmay be _ w: take effect in 30 days from the date of the election or at such other time as is fixed in wided in the amendment. Subd. 5. Amendments proposed by council. The council of any city having a homez 1 to one rule charter may propose charter amendments to the voters by ordinance. Any ordi- irculator . nance proposing such an amendment shall be submit to the charter commission. j kignatureWithin60daysthereafter, the charter commission shall csidence .L ment ut be ore a expiration o sur pen t c commission ma extend the time f r ere shalli rcvie nalays ing with city cthecierk its resolution determining on each K that an additional time for review is needed. A ter reviewing the proposed amendment, I e of the !i` a charter commissions approve or reject t e Dropos: amen mcn or suggest a xtiiion.r III subsutute amen3—m eiTEcommissionshallpromptlynotifythecouncilotheaction' en. On notification of the charter commissions action, the council may submit tot the people, in the same manner as provided in subdivision 4, the amendment originally by itproposed or the substitute amendment proposed by the charter commission. The amendment shall become effective only when approved by the voters as provided in the a&subdivision 4. If so approved it shall be filed in the same manner as other amendments. Nothing in this subdivision precludes the charter commission from proposing charterpended D be the amendments in the manner provided by subdivision 1. Subd. 6. Amendments, cities of the fourth class. The council of a city of the fourth class having a home rule charter may propose charter amendments by ordinance with- out submission to the charter commission. Such ordinance, if enacted, shall be adopted by at least'a four-fifths vote of all its members after a public hearing upon two weeks' published nnf inn containing the text of the proposed amendment and shall be approved by the mayor and published as in the case of other ordinances. The council snail submit 1 the proposed amendment to the people in the manner provided in subdivision 4, but Inotsoonerthanthreemonthsafterthepassageoftheordinance. The amendment becomes effective only when approved by the voters as in subdivision 4. Ifctcdofprovided cc with so approved, it shall be filed in the same manner as other amendments. Subd. 7. Amendment by ordinance. Upon recommendation of the charter commis- Sion the city council may enact a charter amendment by ordinance. Such an ordinance, oposed if enacted, shall be adopted by itsacini" the council by an affirmative vote of all members after a Public hearing upon two weeks' published notice containing the text of the proposedclerk amendment and'shall be azcrthe pprovcd by the mayor and publuhcd as in the cast of other ordinances. An ordinance amending a city charter shall not become effective until 90Ypeti- days after passage and publication or at such later date as is fixed in the ordinance. turd Within 60 days after Ipassageandpublicationofsuchanordinance, a petition request- Minutes Special Council Meeting September 10, 1996 A special meeting of the Plymouth City Council was called to order by Mayor Tierney at 8:10 p.m. in the Public Safety Training Room, 3400 Plymouth Blvd., on September 10, 1996. COUNCIL PRESENT: Mayor Tierney; Councilmembers Anderson, Wold, Lymangood, Preus, and Granath. ABSENT: Councilmember Black. STAFF PRESENT; City Manager Johnson, Assistant City Manager Lueckert, Community Development Director Hurlburt, Public Works Director Moore, and City Clerk Ahrens. Mayor Tierney reviewed the meeting agenda: 1) Consider a Discretionary Environmental Assessment Worksheet for Plymouth Ponds Building Four (tabled from September 4, 1996), and 2) Consider Charter Commission recommendation on proposed Charter Amendment regarding super -majority vote requirement for tax levy increase. Motion was made,by Councilmember Lymangood, seconded by Councilmember Preus, to reverse the order of the agenda items. Motion carried, six ayes. Motion was made by Councilmember Wold to add to the agenda discussion on the first meeting of the Computer Subcommittee. Manager Johnson stated that under the Open Meeting Law requirements, no new items may be discussed at this special meeting. Councilmember Wold withdrew his motion. Proposed Charter Amendment regarding Supermajority Vote Requirement for Tag Levy Increase Assistant City Manager Lueckert reported that on September 9, 1996, the Charter Commission held a public hearing on the proposed supermajority vote requirement for a tax rate increase. The Charter Commission voted six to five to defer action on the proposed charter amendment until their next meeting on Monday, September 30, at 7 p.m. The Charter Commission will make its report by the deadline, October 15, 1996. Motion was made by Councilmember Lymangood, seconded by Councilmember Wold, that all staff directives be in the form of motions. Motion carried, six ayes. 6-f Special Council Meeting September 10, 1996 Page 2 Motion was made by Councilmember Lymangood, seconded by Councilmember Granath, to direct the City Manager to ensure that meticulous notes are being taken of this meeting and that the proposed supermajority vote requirement for a tax rate increase, along with the proposed 1997 budget, be added to the next regular council meeting. Councilmember Lymangood explained that he wants a summary of this meeting given by the City Manager, and an opportunity to discuss on camera the proposed Charter amendment and issues regarding the 1997 proposed budget that were discussed at the Charter Commission public hearing. Councilmember Granath stated that he watched the entire public hearing and supports the motion. Councilmember Wold also spoke in favor of the motion. Motion was made by Councilmember Wold, seconded by Councilmember Anderson, to amend the motion to direct staff to supply the City Council with the minutes of the Charter Commission public hearing, and to indicate on the staff summary memo which Commissioners voted for and against the tabling action. Vote on the amendment, six ayes Mayor Tierney asked Councilmember Lymangood to clarify his motion. Councilmember Lymangood stated that he would like more detailed commentary included in the minutes of this meeting because the proposed Charter amendment is an important issue and this meeting is not televised. Mayor Tierney asked why the proposed 1997 budget would be added to the upcoming regular council agenda, rather than discussing issues later at the Truth in Taxation hearing. Councilmember Lymangood stated he would like to discuss the proposed 1997 budget at the next regular meeting because issues were raised at the Charter Commission public hearing regarding the proposed 1997 budget. For example, Councilmember Wold made a statement that when taxes are paid, they are gone permanently and that behooves the Council to keep the tax rate as low as possible. A Charter Commissioner said the plan for 1997 is to lower the tax rate, but the proposed budget would allow for a minor tax increase. Councilmember Lymangood stated he was moved to consider making additional suggestions to staff relating to the proposed 1997 budget prior to the Truth in Taxation hearings that will be held in December. Main motion as once amended carried, six ayes. sG Special Council Meeting September 10, 1996 Page 3 Motion was made by Councilmember Lymangood, seconded by Councilmember Anderson, to direct staff to provide a report at the next regular council meeting regarding specific options available to the Council, including timelines, for calling of a special election on the proposed Charter amendment regarding a supermajority vote requirement for a tax levy increase, in light of the tabling action by the Charter Commission. Councilmember Lymangood stated that he wants to ensure that by the next regular council meeting, the Council is prepared to consider an election timeline, should the Council choose to pursue that alternative given that the proposed Charter amendment cannot be on the November 1996 election ballot. He stated that perhaps the Council could still call a special election for 1996. Manager Johnson said that is possible. Mayor Tierney stated that a special election could be held anytime and prior to the next City election which would be in November 1998. Councilmember Lymangood stated that the City Council has allowed for the 1997 preliminary budget to include a special election. The Council has been informed that there will be a significant budget surplus in 1996, so perhaps the special election cost could be removed from the 1997 budget and levy, and funded in 1996. Councilmember Granath supported the motion. He stated that he generally supports the proposed supermajority amendment and he was disappointed by the Charter Commission's tabling vote. He would like to see the issue progress at the next regular council meeting. Mayor Tierney stated that no one had given the Charter Commission any indication that this was a "hurry up" item. She stated that the City Council has a 10:00 p.m. adjournment time, and they should not expect the Charter Commission to meet past that time. Councilmember Granath stated that he would like the voters to be able to vote on the proposed Charter amendment. Mayor Tierney said that the Charter Commission needs time to discuss the issue. Motion carried, six ayes. Councilmember Wold stated that six of seven Council members voted in favor of the proposed Charter amendment regarding a supermajority vote requirement for a tax levy increase. He believes that all Councilmembers were disappointed in the 30? Special Council Meeting September 10, 1996 Page 4 Charter Commission's tabling of the item. He stated that the Charter Commission showed a remarkable "paralysis of analysis", and he was distraught over their meeting. Councilmember Wold said that no one on the Charter Commission could make a decision. The Charter Commission was empowered to make a decision at the meeting on September 9, and they failed to do so. Councilmember Wold also responded to Mayor Tierney's comment that the Council had not indicated there was a hurry on the proposed Charter amendment issue. He stated that twice the City Council passed a motion requesting that the Charter Commission make a decision because the Council felt it was important to let the voters decide on the issue. He said that the November General Election is the last opportunity to reach the greatest number of voters that will be seen for four years — into the next century. He stated that the Charter Commission was irresponsible. The City Council was ready to act, and the Charter Commission should have taken a position either for or against the issue. Councilmember Wold stated that at the Charter Commission meeting, he was accused of this being a political issue. He was appalled that the Mayor did not defend him, and he was ashamed of the Mayor. Councilmember Wold stated he looks forward to discussing the entire issue at the next Council meeting, and he requested a copy of the videotape from the Charter Commission public hearing. Mayor Tierney commented on the Charter Commission public hearing. Councilmember Wold raised a point of order that Mayor Tierney had already made comments regarding the public hearing, and other Council members who had not yet spoken to the issue wished to speak. Mayor Tierney continued with her comments. Councilmember Wold challenged the ruling of the Chair. Mayor Tierney recognized Councilmember Preus. Councilmember Preus stated that the proposed Charter amendment is very clearly not an issue of "why the rush", but of "why the delay'. He stated that the City Council reviewed and considered three proposals relating to the proposed Charter amendment on May 15. The Charter Commission public hearing was held on September 9. This was the first time the Charter Commission reviewed anything other than the single proposal recommended by the City Council. He asked why the Charter Commission waited four months to consider anything other than the Council's proposal. Councilmember Preus stated that some of the comments by the Charter Commission indicated that they knew they had an opportunity to consider the issue and some members had decided their view on the issue. He said jot Special Council Meeting September 10, 1996 Page 5 it is very disappointing that it will be the next century before a very large number of voters would have the opportunity to vote on the issue. The Charter Commission's duty was to review the City Council's recommendation and respond. The Commission has prevented the City Council from exercising the option of sending the issue to the voters at the general election. He said that the argument that the Charter Commission needs more time is impossible to legitimately argue. Councilmember Anderson supported the comments made by Councilmembers Lymangood, Preus, Wold, and Granath. He made a motion at the last council meeting to request that the Charter Commission take action on the City Council's proposal because tonight is the deadline to put a question on the November ballot. He said that the arrogance involved in this issue bothers him, as a limited number of people are trying to keep the proposed Charter amendment from all of the citizens in the City. The City Council wants the issue in front of the taxpayers, and it needs to be openly discussed on television. Motion was made by Councilmember Lymangood, seconded by Councilmember Anderson, to direct staff to present at the next regular meeting three options for ongoing showing of the Charter Commission public hearing of September 9, including timing and frequency of playbacks and how it would interfere with other scheduling, with one option being to run the three-hour meeting in a continuous playback loop. Councilmember Lymangood stated he was moved.by the meeting. It was significant and contemporaneous. He believes that the fairest way to present the events of the meeting is with unbiased commentary by viewing of the hearing. Mayor Tierney questioned whether the showing of the hearing should pre-empt other programming. Councilmember Lymangood said that at least one option — the ongoing showing - would definitely pre-empt other programming. This can be evaluated when the options are presented. Mayor Tierney asked what it will cost to have ongoing showing of the hearing. Councilmember Wold stated that the cost involved will be part of the staff report, as every staff recommendation comes to the Council with a cost estimate. Motion was made by Councilmember Preus, seconded by Councilmember Wold, to call the question. Motion carried, six ayes. Motion carried, six ayes. s9 Special Council Meeting September 10, 1996 Page 6 Motion was made by Councilmember Lymangood, seconded by Councilmember Granath, that Councilmember Lymangood's comments at the Charter Commission meeting be included as part of these minutes. Mayor Tierney referenced one of Councilmember Lymangood's comments at the hearing relating to her conflict of interest. She said that no conflict of interest exists from her service on the City Council and the Charter Commission. Councilmember Preus raised a point of order that the motion under consideration relates only to whether the comments should become part of these minutes. The motion does not relate to the substance of the comments. Motion carried, six ayes. Mayor Tierney stated that some Charter Commissioners took offense and felt that the City Council had figured this issue out and were telling them what to do. The Charter Commission reviewed the information; took public testimony, and were ready to debate five items relating to the proposed amendment. She said that the Charter Commission did take action and hold a meeting when the City Council sent the proposal to them. The Charter Commission was advised that it is possible to send two language options to the voters. The Commission was told that this would be disastrous. She said that the League of Minnesota Cities and City staff did not recommend the proposed Charter amendment. The Charter Commission conducts its deliberations in a responsible fashion. She said that Councilmembers have been concerned about people being left out. However, on May 15 the proposed amendment was placed on the Council agenda for consideration when she was out of town. Councilmember Lymangood raised a point of order. He said that it is not allowable under Roberts Rules of Order for a member to attempt to assail the intent of another member, and that the Mayor's comments are out of order. Motion was made by Councilmember Lymangood, seconded by Councilmember Preus, to close discussion for this evening and move to the next agenda item. Motion carried, five ayes; Tierney nay. Consider Discretionary Environmental Assessment Worksheet for Plymouth Ponds Building Four Councilmember Lymangood stated that a meeting was held at 6 p.m. on this issue. At the meeting, staff submitted a written update on issues discussed at the September 4 regular Council meeting. The homeowners then expressed their concerns relating to the development, while the developer went to a separate room. The parties were then brought together and there was a good exchange of 60 Plymouth Charter Commission September 9, 1996 Minutes Present: Chairman Virgil Schneider, John Duntley, Bob Sipkins, Ellie Singer, Ty Bujold, Kapila Bobra, Pauline Milner, Bill Pribble, Joy Tierney, Dave Pauba, Tim Peterson, Assistant City Manager Kathy Lueckert Excused: Dave Crain, Sandy Patterson, Jon Speck Call to Order Virgil Schneider called the meeting to order at 7:03 p.m. He stated that the purpose of the meeting was to hold a public hearing on the proposed charter amendment which would require a supermajority vote of the City Council (5 of 7 members voting in favor) to increase the tax rate. Virgil Schneider stated that after some introductory comments, he would open the public hearing. Any one in the audience wishing to speak should fill out a blue card and give it to Mr. Schneider. Approval of Minutes The minutes of the August 20, 1996 Charter Commission meeting were approved as presented. Introductory Comments Virgil Schneider introduced Kathy Lueckert, Assistant City Manager. Comments of Assistant City Manager Kathy Lueckert Assistant Lueckert stated that the issue under consideration is whether or not the charter should be amended to require a supermajority vote of the City Council (5 of 7 members in favor) to increase the tax rate. She stated that the idea for a supermajority vote requirement surfaced during the fall 1995 City Council election campaign. The initial proposal to enact the supermajority requirement was for the City Council to pass an ordinance specifying the vote requirement. However, the City Attorney stated that the Plymouth City Charter did not give the City Council sufficient authority to enact such an ordinance. The charter must be amended to impose a supermajority requirement. Assistant Lueckert stated that on May 1, 1996 Councilmember Christian Preus asked that the City Attorney prepare charter amendments which would enable a supermajority requirement. The City Attorney proposed three possible amendments. The first option amends the city charter by placing language directly in the charter requiring a supermajority vote for any tax rate increase. The second option would amend the charter so that the supermajority vote could be enacted by ordinance. However, if certain 61 Plymouth Charter Commission September 9, 1996 adverse fiscal actions occurred, such as a loss of state aid or a dramatic decrease in the city's tax base, the ordinance could be repealed after a public process. The third option enables a supermajority vote ordinance in the charter, but provides a mechanism to repeal the ordinance at any time, after a public process. On May 15, the City Council adopted the first option, requiring a supermajority vote for any tax rate increase in the charter. Assistant Lueckert said that state law governs the process for considering the charter amendment. When the City Council adopts an ordinance amending the charter, the proposal is sent to the Charter Commission for their consideration. The Charter Commission is given 60 days to accept or reject the proposal, or to suggest new language to the City Council. When the Charter Commission makes its recommendation to the council, the council decides which version—the City Council's version or the Charter Commission's version, if one is suggested—is placed before the voters. However, state law also gives the Charter Commission an additional 90 days to review the issue, simply by notifying the city clerk. Assistant Lueckert stated that the Charter Commission's 60 day clock began on May 15. On July 10, the commission notified the city clerk that it needed an additional 90 days to review the proposal. The Charter Commission must report back to the City Council by October 15. Comments of Chairman Virgil Schneider Virgil Schneider explained that the Charter Commission holds an annual meeting each December to review the past year and to consider any possible charter amendments in the coming year. At December 1995 meeting, the Charter Commission established a deadline of April 1, 1996, as the deadline to consider new charter issues. He said that this deadline was established to provide adequate time for the commission to carefully consider an issue prior to placing in on the November ballot. Virgil Schneider stated that the April 1 deadline had passed when City Council forwarded its supermajority vote proposal to the Charter Commission on May 15. A special meeting of Charter Commission was called to consider the proposal, despite the passing of the deadline. Virgil Schneider said that at a May 23, 1996 meeting the Charter Commission discussed the proposal for a supermajority vote for a tax rate increase. He said that on one side of the issue, raising taxes is an important action, not unlike rezoning land, which does require a supermajority vote. The supermajority proposal is likely to be popular with voters. On the other side of the issue, a supermajority vote requirement could lead to minority control of an elected body. In addition, the City of Plymouth has had an excellent record on controlling taxes, and nearly all budgets have been adopted by a unanimous vote. Mr. Schneider stated that Plymouth does not have a problem with the tax rate. He noted that at the May 23 meeting, the Charter Commission felt strongly 61 Plymouth Charter Commission September 9, 1996 about educating themselves and the public about all aspects of the supermajority question. Also at this meeting, the Charter Commission extended an invitation to the City Council to attend the next Charter Commission meeting on July 9 and explain the reasons for wanting the supermajority vote requirement in the charter. Virgil Schneider said that at the July 9, 1996 meeting, Councilmember Christian Preus attended, and stated that his reason for proposing the amendment is because of his concern for the future. He agreed that Plymouth does not now have a problem with taxes or the tax rate, but he believes in taking action before problems occur. Mr. Schneider said that Councilmember Preus stated that he believes that other levels of government— the federal and state levels—will push more services down to the local level, but not provide any funding to cities to provide these services. He thinks that council should think very hard before raising taxes to provide these services, and that the extra vote requirement will encourage serious thinking. Mr. Schneider stated that the Charter Commission expressed concerns about limiting the flexibility of future City Councils, and about how to deal with vacancies or absences on the council on the night of budget adoption. The Charter Commission also stated its apprehension about the "tyranny of the minority." Mr. Schneider stated that at the July 30 meeting the Charter Commission heard from City Attorney Roger Knutson. Knutson stated that it is possible that the ballot could have two possible charter amendments on the same issue, one from the City Council and one from the Charter Commission. State law provides no guidance should both amendments pass. The Charter Commission decided to hold a public hearing on the issue on September 9, and to televise the hearing. The Charter Commission asked that at its next meeting, speakers from both sides of the issue present information. The Commission felt that it did not have adequate information to make a decision. Mr. Schneider said that at the August 20 meeting the Charter Commission heard from three speakers. Kent Sulem, from the League of Minnesota Cities stated that Plymouth would be first charter city in Minnesota to have such a restrictive amendment pertaining to tax rates. The Charter Commission heard that the League believes that it is unwise to limit flexibility of City Councils in times of fiscal uncertainty, and does not recommend the amendment. Lynn Reed, from the Minnesota Taxpayer's Association stated that it is difficult in Minnesota for voters to assign responsibility for taxing decisions, and that that is the primary reason for public interest in tax and expenditure limitations. Mr. Reed believes that it is more important to change the current tax system rather than merely impose new limitations. Mr. Reed stated that the supermajority vote requirement may not be the best option. Jim Willis, Inver Grove Heights City Manager, stated that a supermajority vote requirement makes some votes more important than other votes. If there are real problems in a city, amendments such as these will not fix the real problems. 43 Plymouth Charter Commission September 9, 1996 Mr. Schneider stated again that the tonight's purpose is to hear from the public on the issue of requiring a supermajority (5/7) vote of the City Council to increase the tax rate. The Charter Commission will then consider its recommendation to the City Council. Public Hearing on Supermajority Vote Requirement to Increase the Tax Rate Chairman Schneider opened the public hearing. Lynn Reed, Minnesota Taxpayer's Association, 3114 Morgan Avenue North, Minneapolis spoke on the issue. Mr. Reed said that he was perhaps a little more in favor of the supermajority requirement than he was at the August meeting. He stated that voters feel they are not getting "their money's worth" from government. The balance has shifted so far to the side of spending that average voters feel they have no voice. Mr. Reed said that in The Federalist Papers the authors stressed the importance of balancing factions, but that today this concept of balance has been lost. Mr. Reed said that spending decisions often are automatic, such as salary and benefit increases for government employees dictated by bargaining agreements. Mr. Reed stated that tax and expenditure limitations tend to "level the playing field." Mr. Reed said that if the goal of the supermajority requirement is to make it more difficult to raise the tax rate, that the requirement would be successful. If the goal is to make it more difficult to raise property taxes, then the success will depend on the size and health of the tax base. If the goal is to make it more difficult for the city to spend more, the requirement probably will not be successful because of fees, licenses, enterprise funds, etc. can be used by a city to offset spending reductions. Mr. Reed stated that a better goal might be to change the entire tax classification system. He also suggested a referendum for any spending increases, which would serve as a balance to City Council actions. Tim Wold, 1305 Olive Lane North, Plymouth. Mr. Wold stated that he is the Ward 2 councilmember for the City of Plymouth. He said that the idea for a supermajority requirement was part of his campaign platform in 1995. He said that he was glad the Charter Commission decided to televise this meeting. He asked that the Charter Commission act on the proposed amendment so that it could be placed before the voters in November. Mr. Wold stated that he would consider alternative language, but that the City Council's proposal is straightforward and simple. He wants the same standards that apply to rezoning actions to apply to tax rate increases. Mr. Wold said that he does not feel that the fear of the tyranny of the minority is an issue, and that there are rules to protect the rights of the minority, such as Robert's Rules of Order. Mr. Wold feels that each vote on setting the tax rate is really a litmus test. He urged the Charter Commission to take action tonight. Ty Bujold asked Mr. Wold why he felt the supermajority vote was necessary for taxation. If the City Council has a majority of its members who agree on a tax rate, why 0 Plymouth Charter Commission September 9, 1996 is an extra vote needed? Mr. Bujold asked why a simple majority was not sufficient for taxation decisions. Mr. Wold stated that he feels that the same number of votes necessary for a rezoning should be required for taxation decisions. He stated that taxes impact every citizen, that the level of taxes was the one thing he heard about most often on the campaign trail. Other issues do not matter as much to voters. He stated that the city should take only the amount needed to accomplish the city's work. Mr. Schneider stated that the supermajority requirement for rezonings is in state law, and reflects the permanence of a decision on land. He said that taxation decisions only last one year, until the next budget is proposed. Mr. Wold said that once taxes are paid, citizens do not get them back, and do not receive a refund. In that sense, taxes are just as permanent as rezonings. Kapila Bobra asked Mr. Wold why the supermajority requirement is needed at this time. She stated that other cities do not have the requirement, and why should Plymouth be the first. Mr. Wold stated that the City Council wanted to be proactive, and to take care of issues before a problem arises. He said that this City Council has shown such leadership on a number of issues, such as wetlands, erosion control, and the like. Bob Sipkins asked Mr. Wold that if taxes are so critical, why not make the vote requirement a unanimous vote, or why not require a referendum? Mr. Wold stated that he believes this is a good first step. Joy Tierney stated that Robert's Rules of Order have been important to Mr. Wold during his time on the council. She believes that the real issue is not just taxes, but also one of democratic process: when should the minority be given power? She said that protection of minorities may be important in the process in meetings. She said that the council has stated that it has researched the supermajority requirement. She asked Mr. Wold to answer the question of should the minority be given power, and when should it be given power? Mr. Wold stated that he thinks that issue has been well spelled out. Raising taxes should be as important a rezoning actions. He stated that it is very clear that this is an important issue. Joy Tierney said that the council has studied the supermajority question, and the Charter Commission had examined and studied this issue when developing the charter. Plymouth Charter Commission September 9, 1996 She asked why the direct charter amendment requiring the supermajority was proposed, and why the third option was not. Mr. Wold stated that the issue must be considered in today's tax climate. Chuck Lymangood, 11780 401h Place North, Plymouth. Mr. Lymangood said that he was here to speak on the supermajority vote requirement. He thanked the Charter Commission for holding hearings on this and other issues in the past. Mr. Lymangood said that he appreciated the invitation of the Charter Commission to meet on this issue, but he did not feel it was appropriate. He views the Charter Commission as the equivalent of a constitutional convention. He believes that it is difficult for the legislative branch—the City Council—to meet with the constitutional convention. He is willing to speak at the public hearing, and is prepared to do so tonight. He said that this shows his respect for the Charter Commission. Mr. Lymangood stated that Mayor Joy Tierney has a conflict of interest. It is difficult to serve two bodies. Bill Pribble stated that it was not Mr. Lymangood's place to challenge the appropriateness of Joy Tierney serving on the Charter Commission and on the City Council. Mr. Lymangood said that Virgil Schneider was the second largest contributor to Joy Tierney's recent campaign. Mr. Lymangood asked why Joy Tierney would abstain from a vote on the City Council pertaining to the Charter Commission, but would not abstain at the Charter Commission meetings. Mr. Schneider asked to what City Council vote Mr. Lymangood referred. Mr. Lymangood said that it was the vote by the City Council to call a special meeting for September 10 to receive the Charter Commission's report, and to encourage the Charter Commission to make a decision this evening. Mr. Schneider asked what his campaign contribution decisions had to do with the supermajority vote proposal. Mr. Lymangood said that he was concerned about conflicts of interest. Mr. Schneider stated that the public hearing was on the supermajority vote requirement. He observed that he also contributed to Mr. Lymangood's campaign. He said that it was not appropriate to ask Joy Tierney to step down, as she is appointed by the Chief Judge of Hennepin County. 8 64 Plymouth Charter Commission September 9, 1996 Mr. Lymangood stated that the reasons why the Charter Commission should vote for the proposal. (Italicized portions are verbatim from his visual aid.) Higher taxes are bad, lower taxes are good. Mr. Lymangood stated that any requirement which makes it harder to increase taxes is good. Bigger government is bad, smaller government is good. This requirement would make government smaller and more efficient. The power to tax is the power to spend. Mr. Lymangood said that the writings of economist Milton Friedman, while written nearly thirty years ago, are pertinent today and address many of today's issues. Mr. Lymangood read an excerpt from Milton Friedman's writings, and stated that government will spend whatever amount of revenue is raised. The supermajority requirement is apolitical issue, not a legal or economic issue. Mr. Lymangood stated that he means political in the sense of its Latin roots, meaning "of the people." He said that the body politic—the people—are engaged by this issue. The beauty of this proposal lies in its simplicity. Mr. Lymangood said that this is a very simple idea, make five votes required instead of four to raise taxes. There are no better alternatives, only drawing at straws. Mr. Lymangood stated that this is the best proposal, there are no better options. This requires action by the Charter Commission. Mr. Lymangood said that the Charter Commission must act on the supermajority proposal. Let the people decide. Mr. Lymangood said that the voters should decide this issue, whether the Charter Commission is in favor of the proposal or not. The people have already given their tacit approval. Mr. Lymangood pointed out that the supermajority requirement was part of the pledge of fiscal conservatism by the Pro Plymouth Team during the 1995 election. Because those candidates were elected, the people have already indicated their approval of the idea. Mr. Lymangood said that there are extraneous excuses for not taking action on the proposal. The majority does not rule absolutely. Mr. Lymangood stated that the ancient Greeks created the democratic process. The American contribution to democracy was that the majority does not rule absolutely. Mr. Lymangood highlighted the requirements for spending funds from the city's community improvement fund (CIF), which was created by the Charter Commission. Mr. Lymangood pointed out that some CIF expenditures require a supermajority vote. There is nothing more to think about. Mr. Lymangood said that there are no more issues to be considered. He stated that Plymouth's growth has already slowed compared to several years ago, so that fear is groundless. No outside experts will help—just more straws. Mr. Lymangood reminded the Charter Commission about the issue of what law to follow when the charter is silent on an issue. The Charter Commission had been advised by an outside expert that state law would provide guidance. He stated that the question was first raised when a vacancy existed on the council. Advice from other outside experts was incorrect, and it was found that a charter city could not rely on state law unless the charter Gfi Plymouth Charter Commission September 9, 1996 specifically directed that. At his prompting and that of Councilmember Nick Granath the charter was amended to correct the deficiency. Mr. Lymangood stated that relying on more outside experts in the supermajority instance is not wise. The people are smart enough to decide, trust the people. Mr. Lymangood stated that there are significant logistical problems with holding referendums on spending and taxation decision, and he does not believe that Mr. Reed's suggestion is useful. In answer to the question of why Plymouth should be the first to enact such a requirement, Mr. Lymangood said that Plymouth has the lowest tax rate of any city over 10,000 and that should be protected. In answer to the question of why should not the vote be a requirement for unanimity, Mr. Lymangood said that the city already has a supermajority requirement for some issues, so the precedent is already set. Mr. Lymangood outlined how he believes the Charter Commission should proceed. Have Joy Step Down, for her sake and your own integrity. Mr. Lymangood said that Joy Tierney's membership on both the City Council and the Charter Commission is a threat to the integrity of the Charter Commission. Decide or Defer. Mr. Lymangood said that the commission should not prolong its decision any longer, or the people will not have an opportunity to decide in November. The Council and the people are waiting. Mr. Lymangood stated that the Charter Commission has the knowledge, insight, wisdom and power, even the obligation, to decide. Mr. Peterson asked Mr. Lymangood why if this was so important, the Charter Commission did not receive the proposal until May. Mr. Lymangood said that the timing was deficient, but that government actions sometimes move slowly. After the initial opinion that the charter did not permit the council to enact an ordinance requiring a supermajority vote, City Clerk Laurie Ahrens and City Attorney Roger Knutson identified the provision in state law which allows councils to propose charter amendments by ordinance. Ellie Singer questioned whether or not simple language is the best language. She observed that rezoning and CIF expenditures have criteria, and why was not the option containing criteria selected as a proposal. Mr. Lymangood said that he was merely pointing out the level of decision making needed to provide a satisfactory comfort level. He also stated that he was merely pointing out that the majority does not rule absolutely in every case, and that Robert's Rules protects the rights of the minority. 1 61 Plymouth Charter Commission September 9, 1996 Ellie Singer asked how it is known that this language is the best language. She said that the council indicated that it would consider alternatives, but Mr. Lymangood has stated that this language was the best language. Mr. Lymangood invited Ms. Singer and the rest of the Charter Commission to improve upon the proposed language. Ms. Singer asked Mr. Lymangood why a supermajority requirement would not be as good for a tax decrease, since that may mean service reductions or increases in fees, as pointed out by Mr. Reed. Mr. Lymangood said that most people focus on the tax rate. Kapila Bobra said that she was not convinced about the proposal. She asked why not have a supermajority requirement for all financial decisions of the city. She said that getting agreement among five members is very difficult. Mr. Lymangood stated that getting agreement has not been difficult in the past, and that the current council has not experienced deadlocks. Mr. Lymangood stated that he does not see a problem if five votes are not possible and the tax rate remains at the same level as the current year. The government can always be changed at the next election if voters do not like decisions. Ty Bujold said the federal, state and county levels of government are devolving services. The local level of government will be required to provide services. Mr. Lymangood said that the world is indeed changing. It is important to make it difficult to raise taxes. Decisions on which government level will provide services will have to be made. Mr. Bujold said managing government at the local level will be more difficult when no money is given to provide services. Mr. Bujold said that he feels these decisions should be vigorously debated, and then the majority should make the decision. Elected officials should have the intestinal fortitude to make tough decisions. Mr. Lymangood stated that the majority does not rule absolutely. Joy Tierney responded to Mr. Lymangood's comments about her serving on both the City Council and the Charter Commission. She stated that she was appointed to the Charter Commission prior to her election to City Council. She said that there is no conflict with her serving on both bodies, and that the Crystal Charter Commission has three councilmembers currently serving. She does not see a problem. In reference to her vote on calling a special council meeting for September 10, Joy Tierney said that she abstained from voting because she did not feel the meeting was necessary. She stated that 1 61 Plymouth Charter Commission September 9, 1996 this is a political issue. She stated that she missed the City Council meeting when the supermajority proposal was debated. She said that the Charter Commission does not focus on politics, but on the philosophical and process aspects of the charter. Ms. Tierney said it is important to separate the rhetoric from the larger, constitutional issues. She said that Proposition 13 in California is a good example of the ramifications of spending and tax limitations, and that such proposals must be considered carefully so that the integrity of the community is not undermined. Joy Tierney stated that the Charter Commission took action on the council vacancy issue and its implications as soon as it was brought to the commission's attention. The Charter Commission was not frivolous or whimsical in its consideration of issues. The Charter Commission cannot be dissolved, and that it must meet once a year. It is a living document. She asked Mr. Lymangood why a vote must be taken tonight. She said that the Charter Commission heard the council loud and clear abut the political side of things. Mr. Lymangood said that he never used the words "frivolous or whimsical" in describing the Charter Commission's work. He stated that the Charter Commission did its work well, but that it was wrongly advised about the application of state law. He said that this is a matter of record, and had to be corrected. Mr. Schneider stated that experts had given advice to the Charter Commission wrongly, but that the problem has been corrected. Mr. Lymangood said that the wrong advice is responsible for the thinness of the charter. He stated that the point is that the issue was raised by himself and councilmember Granath, and not by outside experts, and that the opinions of himself and Mr. Granath prevailed. He observed that sometimes experts on an issue are right in your midst. Mr. Lymangood said that Ms. Tierney did not understand his reference to political. He said that he was using it in the broad sense—"of the people." The Charter Commission's obligation rests in letting the people decide in November. John Duntley stated that he felt like he was watching a tennis match. He asked Mr. Lymangood about what Milton Friedman had to say on supermajority requirements. Mr. Lymangood said that Milton Friedman believes that higher taxes are not a good thing. Mr. Lymangood believes that to look for answers in outside experts is not the answer, but it is important to go to the people and to ask them. Mr. Peterson stated that all Charter Commission meetings are public meetings. Mr. Peterson highlighted Mr. Reed's statement about clarifying the intended goal: if the goal is to make spending more difficult, then the supermajority requirement will be less successful. 7.o Plymouth Charter Commission September 9, 1996 Mr. Lymangood stated that Mr. Reed also recommended a referendum, which is not feasible. Bill Pribble asked if Mr. Lymangood saw any negative aspects to the supermajority proposal. Mr. Lymangood said that he knew of no negative aspects. Mr. Pribble asked if a requirement for a unanimous vote would empower a minority. He asked if some service or program might have such a high value as a social good that taxes should be increased to provide it. Mr. Lymangood stated that he knew of no pending or foreseeable situation facubg the City Council which would make raising taxes a good action. Christian Preus, 16205 5`'' Avenue North, Plymouth. Mr. Preus stated that he is an at -large member of the Plymouth City Council. He stated that he had intended only to listen this evening. He addressed Tim Peterson's questions of why the issue had not been brought to the Charter Commission earlier. Mr. Preus stated that when he first raised the issue, he was not aware of the Charter Commission's April 1 deadline. Mr. Preus had surfaced the issue earlier, but the city attorney had reservations about a simple ordinance to enact the supermajority requirement. City Attorney Knutson had said that while the City Council could adopt an ordinance, it was unclear in the charter whether or not that ordinance could be enforced. Mr. Preus said that it can be implied from the charter that the council cannot place additional restrictions on itself for purposes of budgeting and taxation. Mr. Preus said that he interprets the charter to be more permissive, but he did not want this to be come a legal issue and so accepted Mr. Knutson's interpretation. Mr. Preus stated that the announcement that the supermajority vote would be considered was made one meeting in advance (May 1) of the May 15 council meeting when the proposal was approved and forwarded to the Charter Commission. Mr. Preus said that he did not know that Mayor Tierney would be absent at the May 15 meeting. He said that councilmember Nick Granath made the best case for the first option, describing it as the best choice. Mr. Preus said that he never thought this issue would receive so much attention, and that he had somewhat misjudged the interest in it. He said that he looks at the issue as a simple matter. It is not an attempt to end increased government spending, but is one small, positive step to attempt to control it. He said that the Charter Commission discussion has shown all sides of the issue. Mr. Preus urged the Charter Commission to make its decision tonight. He said that the commission has given the matter much thought, but that the decision is not difficult. He said that this has been a different process to get the issue to the Charter Plymouth Charter Commission September 9, 1996 Commission. Some commission members may agree with the proposal, and some may disagree, but it is important for the commission to decide. Mr. Bujold asked why raising the tax rate could not merely be a subject of vigorous debate, and then let the majority rule. He observed that all councilmembers are thinking, articulate individuals who can debate an issue thoroughly. He wondered why the reliance on a supermajority rule was necessary. Mr. Preus stated that the Federalist Papers were mentioned earlier in the evening, and that he too is an admirer of those papers. He said that the founding fathers were concerned with factions, not with parties. Mr. Preus stated that the balance has tilted too far in favor of spending. He hopes that the federal and state levels of government will continue to decrease in size. He feels that the supermajority rule will be more of a check on spending. He sees tough decisions in the future on what services should be provided, and that taxing actions always trend upwards. Ellie Singer stated that each issue brought to the Charter Commission receives the attention it deserves. The Charter Commission takes its role seriously, and is mindful of taking a long term view and educating themselves. She noted that in 1997 the tax rate decrease will actually result in a slight tax dollar increase. She asked how the supermajority rule would apply in this situation. Mr. Preus stated that the rule would have no impact. Ms. Singer stated that if the supermajority rule would have had no impact in 1997 even if it was now in the charter, Plymouth residents would still pay more taxes and so spending is not reduced. Mr. Preus stated that he is impressed with the breadth of the examination given the issue by the Charter Commission. He had not expected that, and had anticipated a narrower viewpoint. Virgil Schneider said that the Charter Commission believes strongly in educating itself about issues and its role in educating the public, and that is the primary reason for public hearings such as this. Mr. Schneider said that process is important. Bob Sipkins clarified that until attorney advice to the contrary was received, the council thought it could adopt an ordinance requiring a supermajority vote. Mr. Sipkins stated that the Charter Commission could recommend an amendment which would enable such an ordinance, similar to the third option presented to the City Council. Virgil Schneider said that that option was not given to the Charter Commission, only the more restrictive language was presented. 3 z Plymouth Charter Commission September 9, 1996 Bob Sipkins asked about the rationale for the more restrictive language, as it seems to limit the flexibility of future councils. He asked for Mr. Preus' comments. Mr. Preus stated that an ordinance can be changed from year to year, and the more restrictive language will prevent councils from tinkering with the requirement. Ty Bujold asked if Mr. Preus could foresee a time when a six sevenths vote might be required. Mr. Preus stated that the question is one of what is a reasonable level or standard for approval. He feels that a six sevenths requirement is too high a level. Mr. Bujold asked that if the proposed amendment required six sevenths instead of five sevenths, did Mr. Preus think it would be approved by voters. Mr. Preus stated that he was not certain it would pass. Mr. Bujold stated that he feels the Charter Commission needs more debate on the issue. The difference between standards of simple majority, five sevenths, six sevenths, or unanimity is important to consider when adding a requirement to the city's constitution. He feels this question may need more "aging." Ellie Singer stated that the proposed language is simple. She asked if Mr. Preus would be open to alternative language. Mr. Preus responded that he would be open to alternative language. Joy Tierney stated that questions have arisen about whether or not the mayor can objectively debate issues of government. She is concerned about the process surrounding the supermajority proposal. She stated that Mr. Preus came to the July Charter Commission on his own volition, and that the council had not appointed him their representative. Ms. Tierney asked how much debate the council had about the proposal. She asked what Mr. Preus thought about the possibility of having two different proposals on the ballot, one from the council and one from the Charter Commission. She asked what the obligation was of the Charter Commission to make a decision tonight. Mr. Preus stated that it was his impression that the City Council wanted him to attend the July Charter Commission meeting. He heard of the suggestion of two proposals on the ballot this summer. He stated that two proposals is not a sensible way of dealing with an issue. Mr. Preus said that he would not use the word obligation for the Charter Commission, but he thinks that the commission has enough information and should make a decision. 33 Plymouth Charter Commission September 9, 1996 Ms. Tierney asked if Mr. Preus had voted to call the special council meeting on September 10. Mr. Preus responded that he had voted to call the special meeting. He noted that issues can come to the Charter Commission in many ways. The council has used one of these methods, and the Charter Commission must now respond back to the council. Ms. Tierney said that the Charter Commission has concerns about the proposal, and that the choice and decision are not obvious. She stated that she doesn't feel that the council adequately debated the supermajority proposal. There is a possibility to have two proposed amendments, and that possibility was not discussed by the council. She says that the City Council missed this important issue. She is interested in working with the council to devise a proposal which is in the long term interests of the city. Mr. Preus responded that that state law has always made it possible to have two proposed amendments, and that the council can do nothing about that. Two proposals are not the route he wishes to take, and he does not want two conflicting proposals before the voters. Tim Wold 1305 Olive Lane North, Plymouth. Mr. Wold stated that he appreciated Mr. Pribble's question about making it harder to raise taxes to deal with a social good. He stated that the supermajority rule would make it harder to make the case for an important program, and that he would have to work diligently to prove the need. He asked again that the Charter Commission make a decision tonight. Virgil Schneider closed the public hearing. Discussion of Supermajority Proposal Virgil Schneider said that he was disappointed with the public turnout, and that the speakers included three elected officials and one invited speaker. He said that there is not an apparent public outcry about the supermajority rule. He asked what actions the Charter Commission wished to take. Joy Tierney said it was important to be clear about what is being debated. The Charter Commission was only given one proposal to consider. The commission can propose alternative language to the council or can simply reject the proposal. Virgil Schneider explained the three options considered by the council. He stated that the first proposal, the one given to the Charter Commission, places language directly in the charter which requires a supermajority vote. The second proposal enables the council to adopt an ordinance requiring a supermajority vote, and specifies the criteria by which the ordinance could be repealed, such as loss of state aid beyond a certain percentage. The third proposal enables the council to adopt an ordinance requiring a supermajority vote, which can be repealed after a specified public process. 3N Plymouth Charter Commission September 9, 1996 Joy Tierney asked if Plymouth were still a statutory city, could the City Council pass an ordinance requiring a supermajority vote. Assistant Lueckert stated that this would take research to answer. Ty Bujold moved, seconded by Bill Pribble, that the Charter Commission make no decision tonight but table further consideration of the supermajority proposal until the next Charter Commission meeting. Virgil Schneider called for discussion of the motion. Dave Pauba said he speaks against the motion. He feels that he has enough information, and he does not want to spend $13,000 of tax dollars for a special election for this issue. Bob Sipkins stated that he agreed with the last comment. He said he has heard enough. He is ready to vote on the council's proposal or to make a recommendation on a new proposal. Joy Tierney asked Bob Sipkins what alternative he would propose. Mr. Sipkins stated that he is comfortable with the third option. He is loathe to hamstring future councils. He is amenable to an ordinance, but does not want the restrictive language in the charter. He said he has not heard a compelling argument for the restriction, and that Plymouth currently does not now have a problem with taxes or the tax rate. He said that the first option is a simplistic solution to a non -problem. He would prefer to give the council the option through language enabling an ordinance. Ty Bujold said he agreed with Mr. Sipkins. He is not comfortable with the current proposal, but he is uncertain whether or not the other options are any better. He would like to work together with the council to find a solution agreeable to both bodies. He warned against hasty decisions, and said that with no public here it does not seem to be an important issue. Bill Pribble stated that is is opposed to the supermajority requirement in any format. It is his view that it is only done to enable minority control. He suggested that the Charter Commission devise its own language which would prevent minority control. Virgil Schneider called for a vote on the motion to table consideration of the supermajority issue until the next Charter Commission meeting. Commissioners Duntley, Bujold, Schneider, Pribble, Tierney, and Bobra voted in the affirmative. Plymouth Charter Commission September 9, 1996 Commissioners Singer, Sipkins, Pauba, Milner, and Peterson voted in the negative. The motion passed, 6-5. The Charter Commission discussed possible dates for a meeting. Ellie Singer moved, seconded by Bill Pribble, to establish a Charter Commission meeting for Monday, September 30 at 7 p.m. in the Public Safety Training Room. The motion carried. Virgil Schneider asked what additional information the Charter Commission wanted in preparation for that meeting. Joy Tierney stated that the commission could consider the other two options, or write their own language. Bob Sipkins said that the Charter Commission must answer the basic question of how it views supermajority requirements in general, and should such a requirement be language in the charter or language enabling an ordinance. Virgil Schneider stated his preference for having the City Council be more a part of devising a solution that is palatable to both bodies. He does not want two options on the ballot. Bob Sipkins asked if Mr. Lymangood would be willing to consider alternative language. Mr. Lymangood responded that anything was better than nothing. Mr. Sipkins asked if the third option was acceptable. Mr. Lymangood said that the third option was preferable to having two measures on the ballot. He urged the commission to make a motion to reconsider the previous question, and perhaps then vote on an alternative proposal. Virgil Schneider stated that the first option was the only one presented to the Charter Commission. The message sent was that this was the only option that was acceptable. Ellie Singer asked if Mr. Lymangood would be willing to work with the Charter Commission, given his concerns about the separation between legislative and constitutional bodies. Plymouth Charter Commission September 9, 1996 Mr. Lymangood responded that he would work with the Charter Commission only in a public hearing format like tonight, and that was televised. He noted that Mayor Tierney's vote was the tie-breaker on the motion to table. Virgil Schneider said that if Joy Tierney had not voted, the motion would have failed and nothing would have passed. Mr. Lymangood stated that we do not know that. Mr. Sipkins stated that Mr. Lymangood's response to Ms. Singer's question about working with the commission was a non -answer. He said that Mr. Lymangood did present a compelling argument, but that he also was grandstanding. Mr. Sipkins said that friction between the council and the Charter Commission could have been reduced if Mr. Lymangood had not stood behind the public hearing. Mr. Lymangood said that he was expressing his respect for the Charter Commission, and he does not want to be confrontational. His concern for a non -televised meeting of the two bodies is his issue. Joy Tierney asked what Mr. Lymangood sees as the process to resolve this issue. Mr. Lymangood responded that the Charter Commission should reconsider the previous motion to table and consider the proposal tonight. Ms. Tierney asked if the commission had enough options to consider. Mr. Lymangood said that other ordinances would have surfaced already, if other options were available. Virgil Schneider said that the Charter Commission received all the options as part of the information it receives on the topic, but that the City Council proposed only the first option to the Charter Commission. The commission's discussions have focused only on that issue. Tim Peterson stressed that the Charter Commission should make its decision on September 30 and forward its report to the City Council. Adjournment Virgil Schneider adjourned the meeting at 9:58 p.m. r DATE: September 10, 1996 TO: Mayor and City Council FROM: Kathy Lueckert, Assistant City Manager SUBJECT: Report from Charter Commission Public Hearing On September 9, 1996 the Charter Commission held a public hearing on the proposed supermajority vote requirement for a tax rate increase. The Commission heard testimony from interested parties for nearly two hours. The Charter Commission voted 6-5 to defer action on the proposed charter amendment until their next meeting, on Monday, September 30, at 7 p.m. in the Public Safety Training Room. The Charter Commission will make its report by the deadline, October 15, 1996. The vote on the motion to table action until September 30 was as follows: Ayes: Duntley, Bujold, Schneider, Tierney, Pribble, Bobra Nays: Singer, Sipkins, Pauba, Milner, Peterson Absent: Crain, Patterson, Speck DATE: September 17, 1996 TO: Mayor and City Council FROM: Dwight D. Johnson, City Manager SUBJECT: Status of Supermajority Vote for Tax Rate Increase Issue At the September 10 Council meeting, I was asked to provide a report at the next regular Council meeting on September 18'` on the overall background and current status of this issue. A considerable amount of background information has been provided in the packet. This is a summary of some of the key points. Background. This issue was first raised at a Council meeting on May 1, 1996 when Councilmember Preus announced that he had asked staff to investigate alternatives presentation at the May 15` s Council meeting. The Council was presented with options at the May 15`s meeting, and approved an ordinance pursuant to "option 1" and forwarded it to the Charter Commission as required by law. The Charter Commission met on five occasions to consider this matter. At the first meeting on May 23` d, they invited the City Council to attend the next meeting. The Council had discussion of this invitation on the June 5`h agenda, but the meeting was lengthy and was adjourned before it could be discussed. On June 19'x, the Council did discuss the matter. The Council also voted on June 19'h to affirm that the 5/7 voting requirement is "good public policy," encouraged the Charter Commission to act forthwith" so that a vote on the issue could occur in 1996, and suggested that the Charter Commission could hold a public hearing. On June 2e, the Council discussed the issue again and Councilmember Preus offered to attend the July 9h Charter Commission meeting with the encouragement of other Council members. The Charter Commission met on July 9`s and Councilmember Preus presented his views on the subject. The Charter Commission voted to ask for an additional 90 days to make its report on the matter. I On July 10', Councilmember Preus reported on the July 9`h meeting to the City Council. The Charter Commission met on July 30` s and heard from City Attorney Roger Knutson. They also decided to hold a public hearing on the issue and asked for speakers on both sides of the issue to present information at their next meeting. At their August 20'h meeting, the Charter Commission received testimony from an official of the League of Minnesota Cities, a representative of the Minnesota Taxpayer's Association, and the former City Manager of the City. On August 21", the City Council directed staff to report on the funding needed for one special election in 1997 at the next Budget Study Session. The Council also passed a motion to "respectfully request that the Charter Commission make a recommendation" on September 9's. The Charter Commission's public hearing was held on September 9t`, and Councilmembers Wold, Lymangood, and Preus spoke in addition to a representative of the Minnesota Taxpayer's Association. The Charter Commission discussed the issue and voted to table further consideration until September 30''. New Developments. The deadline for an issue to appear on the November 5`s ballot passed at 5 p.m. on September 110'. However, last Friday, September 13th, staff verified with the City Attorney that a paper ballot election could be held in conjunction with the November 5`h balloting .if both the Charter Commission could make its report and the Council could act on it by 5 p.m. on this coming Friday, September 20` s. This information was provided to all council members by memo and voice mail on the 13`h of September. The memorandum was also mailed to all members of the Charter Commission with their regular council agenda mailing on the I.P. The Chair or any two members of the Charter Commission may call a meeting. No call for a meeting has occurred to this date. Three members of the City Council have called a special council meeting for noon on Friday, September 20`s, to consider the issue if action by the Charter Commission occurs prior to that date. Current Status. The Council cannot simply pass an ordinance on its own, because the City Council has been advised by the City Attorney that the authority to do so in the current City Charter is lacking. This matter cannot be placed on the general election ballot at this time because the County's deadline for printing the ballots expired on September 11`x. The Council cannot take action at this time to place the matter on a special election ballot, either on November 5t' or any other date, because the law states that the Council must first receive the report of the Charter Commission. The Charter Commission's deadline for reporting under the law is October 15''. Council Actions on September 10, 1996: The Council approved the following actions at their September 10 meeting: 1. That meticulous notes of that meeting be taken; that the supermajority voting issue for tax rate increases by placed on the agenda of the next regular meeting, along with the proposed 1997 budget; that the Charter Commission public hearing minutes be distributed to the City Council; and that the outline of Councilmember Lymangood's comments at the Charter Commission meeting be added to the minutes of the September 10h meeting. (Done) 2. That the City Manager give a summary of the September 10'h meeting at the next regular Council meeting. (Done) 3. That staff note on the report of the Charter Commission's actions which members voted for and against the tabling action. (Done) 4. That staff provide options and timelines at the next Council meeting for calling a special election the proposed Charter amendment. (See below). 5. That staff present three options for ongoing showings of the Charter Commission's public hearing of September 9`h. (See below). Special Election Options. Staff has identified three special election options: 1. Vote on December 3`d, 1996. This is the earliest voting date if the Charter Commission takes the full length of time available to it for deliberation. 2. Vote in May, 1997. This election date would be in time for the development of the 1998 City budget. 3. Vote in November, 1997. Our special election could be held with planned elections for the Wayzata and Robbinsdale School Districts. One additional option has been identified by staff since last week. 4. Vote on November 19'', 1996 if the Charter Commission completes its report at its scheduled September 30ei meeting and if the Council would want to act on it on October 2°d, 1996. Options for showing Charter Commission Public Hearing on Cable TV. Three options have been developed for showing the Charter Commission public hearing on an ongoing basis as requested by the City Council. These include: I. Continuous 24 hour per day showings. There would be no other City meetings shown and no video text time. 2. Continue showing other City meetings from Monday through Thursday, and show the Charter Commission on a four hour interval basis on Friday, Saturday, and Sunday, leaving about an hour of video text information between replays. This option would allow 17 charter commission replays per week. 3. Option 3 is similar to option 1, but allows for video text for about 15 minutes after each replay, thus allowing the Charter Commission hearing to start on top of the hour every three hours. I Minutes Special Council Meeting September 20, 1996 A special meeting of the Plymouth City Council was called to order by Deputy Mayor Lymangood at 12:03 p.m. in the Council Chambers, 3400 Plymouth Blvd., on September 20, 1996. COUNCIL PRESENT: Deputy Mayor Lymangood; Councilmembers Anderson, Black, Wold, and Granath. ABSENT: Councilmember Preus and Mayor Tierney. STAFF PRESENT: Assistant City Manager Lueckert and City Clerk Ahrens. Deputy Mayor Lymangood called the meeting to order at 12:07 p.m. He stated that the purpose of the meeting is to consider and act on any action by the Plymouth Charter Commission on the proposed charter amendment relating to a super -majority vote requirement for a tax levy increase. Assistant City Manager Lueckert reported that the Charter Commission has not met this week and has no report to forward to the City Council. She explained that the Charter Commission met on Monday, September 9, and held a public hearing on the super - majority vote issue. At the conclusion of that meeting, the Charter Commission tabled the issue until Monday, September 30. There was an opportunity, had the Charter Commission met this week and made a report, to still have the proposed charter amendment placed on the November 5 general election ballot. This was communicated to the Charter Commission. Councilmember Wold stated that at the September 9 meeting, the Charter Commission failed to act and tabled the issue for further study. He asked Assistant Manager Lueckert to clarify what additional information or testimony the Charter Commission is waiting on in order that they would feel able to act. Assistant Manager Lueckert said that she cannot speak for the Charter Commission. She has not received a request for additional information for the September 30 meeting. Perhaps the Commission wanted additional time to consider the information they received at the public hearing. Councilmember Anderson asked if staff received any responses from Charter Commission members as to why they did not call a meeting this week. Assistant Manager Lueckert responded that she only spoken directly to the Chairperson, Virgil Schneider. He had a personal conflict with attending meetings later in the week, Qx Special Council Meeting September 20, 1996 Page 2 and he saw no need or reason to meet prior to the next scheduled meeting of September 30. Councilmember Anderson stated that because the Charter Commission has failed to act, the City Council will be unable to place the proposed amendment on the November ballot. Councilmember Granath asked how the Charter Commission was informed that if they acted this week, there would still be an opportunity to get the amendment on the November ballot. Assistant Manager Lueckert stated that the Charter Commissioners received the same information as the City Council one week ago, which explained the possible scenario of getting the issue on the November ballot. Councilmember Wold stated that he had originated the call for this special meeting because he wanted it to be very clear that the City Council is ready to act. It would have been remiss for the Council not to be prepared to act, should the Charter Commission have met and submitted a report. He said this is an important issue and it is important that the public gets the opportunity to make the decision of whether it should be adopted. He stated that the citizens should have had an opportunity to vote on this issue on November 5. Councilmember Granath stated that he was one of the three Councilmembers who called this special meeting. He respects the members of the Charter Commission but believes that the City Council has "passed them the ball and they have buried it." He noted that the Charter Commission had an additional opportunity to correct the situation by calling a special meeting this week and submitting a report, but they failed to do so. He has heard Charter Commission members comment "what is the rush?" He said that the Council is simply trying to get the issue to the voters. There will not be a general election of this magnitude until the next century. He believes the proposed amendment is a common sense proposal, and he is unsure how Charter Commission members stand on the issue because they failed to vote on it. The Charter Commission only voted to delay, and tabled the entire issue to September 30. He regrets the extent to which this proposed amendment has become an issue between the Charter Commission and the City Council. He believes that there are no winners, and the taxpayers will be the losers. Councilmember Granath said that he heard Charter Commission members, including Mayor Tierney, say they felt they were pushed by the City Council. He said that only the voters and taxpayers will be hurt. The City Council has not said that they will cut services. In fact, the past few years the Council has expanded services while cutting costs. He said that the issue cannot go before the voters because the Charter Commission, including Mayor Tierney, didn't act. 43 Special Council Meeting September 20, 1996 Page 3 Councilmember Lymangood explained that a requirement of the Open Meeting Law is a minimum three-day notice of special meetings. He said that today's special meeting was called on Friday, September 13. This was when the Council first learned that in the event the Charter Commission would have called a special meeting and submitted a report to the Council by today, the City Council could have acted to add the proposed amendment to the November 5 general election. He stated that the City Council called the special meeting for today in order to be prepared to act. Councilmember Anderson added historical perspective on the issue. He explained that he became involved in local politics six years ago because there was a problem with the City Council voting to extend their terms of office without citizen input. He formed the League of Plymouth Voters. At that time, Joy Tierney was the President of the League of Women Voters for Plymouth. The League of Plymouth Voters asked the League of Women Voters to support the quest to allow voters to decide whether terms of office should be extended. He stated that Joy Tierney would not let the League of Women Voters take a position because she could not decide on the issue. He said that "paralysis of analysis" occurred six years ago on that issue and it has occurred again on the super - majority vote issue. It is a pattern and the voters have a clear choice this fall. He stated that a minority of people - the Charter Commission - want to decide the fate of 50,000 residents. He stated that leadership is expected in this situation, and leadership has fallen down. He said that leader is the Mayor of Plymouth who didn't act six years ago and didn't act in this situation. Councilmember Anderson explained that these comments are made as background information to what is now before the Council. He stated that the deciding vote to table this issue on the Charter Commission was made by Mayor Tierney. Deputy Mayor Lymangood read the call of the meeting and respectfully requested that remarks be kept pertinent to that call. Councilmember Granath stated that he believes Mayor Tierney interjected herself squarely into this issue. She was asked to avoid a conflict of interest at the Charter Commission meeting and she chose not to do that. Councilmember Black agreed with the previous comments. She has respect for the difficult job of the Charter Commission, but believes this is simply about placing an important issue before the voters. Citizens allow the Council to run the City, and citizens should be allowed a voice on this issue. She stated that the greatest number of residents will be voting at the November 5 general election than will occur again until 2000. This issue needs the greatest number of residents voting and shouldn't be decided by a small portion of the voting population. She said that a smaller number of voters will decide the issue if it is done at a special election or in the 1998 general election. She may have a difficult time voting to place the issue on the ballot at those elections because of the small number of people voting. tq Special Council Meeting September 20, 1996 Page 4 Councilmember Wold said it is unfortunate that the Council does not have something to vote on. He believes that these comments have been important for the public record. The City Council will receive a recommendation from the Charter Commission, but he does not know how much influence that recommendation will have with him because he believes that recommendations should be timely. Councilmember Lymangood announced that the next Charter Commission meeting is scheduled for September 30 at 7 p.m. He reminded Councilmembers that they may wish to attend that meeting. He stated that the City Council has not received an official request from the Charter Commission that any Councilmembers attend. Councilmember Lymangood said that in the event the Charter Commission makes a recommendation on September 30, the City Council can consider the issue at their regular meeting on October 2. Assistant Manager Lueckert said that the statutes allow the Charter Commission until October 15 to make their report. If that is the case, the City Council has a regular Council meeting scheduled on October 16. Councilmember Lymangood stated that the City Council will be prepared to act at either time. Motion was made by Councilmember Anderson, seconded by Councilmember Black, to adjourn the meeting at 12:25 p.m. Motion carried, five ayes. City Clerk fr Agenda Number: TO: Mayor and City Council FROM: Kathy Lueckert, Assistant City Manager on behalf of the Plymouth Charter Commission SUBJECT: Charter Commission Action on Proposed Supermajority Vote Amendment to Plymouth City Charter DATE: October 1, 1996 for October 2, 1996 City Council Meeting 1. ACTION REQUESTED: Receive report on Charter Commission Action on Proposed Supermajority Vote Amendment to Plymouth City Charter 2. BACKGROUND: On May 15, 1996 the Plymouth City Council forwarded a proposed charter amendment to the Plymouth Charter Commission. The proposed amendment would require a supermajority vote (five of seven councilmembers voting in favor) to increase the tax rate. State law allows the Charter Commission sixty days to review the proposal. An additional ninety days is available to the Charter Commission after notifying the city clerk. The Charter Commission must take action on the proposed amendment by October 15, 1996. 3. DISCUSSION: At its meeting on September 30, the Charter Commission took action on the proposed supermajority requirement amendment. The action taken was to reject the charter amendment proposed by the City Council. The motions stating the action of the Charter Commission on the proposal, as well as the reasons for their action, are attached. The unapproved minutes of this meeting also are attached. 14 Plymouth Charter Commission September 30, 1996 Motion by Bill Pribble, seconded by Bujold: The Plymouth Charter Commission rejects the charter amendment proposed by the Plymouth City Council which would require a supermajority vote of the City Council to approve a tax rate increase. The motion carried. Commissioners Bujold, Pribble, Milner, Patterson, Speck, Duntley vote aye. Commissioners Peterson, Sipkins, Singer, Bobra, Schneider vote nay. Motion by Tv Buiold, seconded by Bill Pribble: The Plymouth Charter Commission hereby gives its reasons for rejecting the proposed charter amendment requiring a supermajority vote for a tax rate increase: 1. There has been no public support for the concept of a supermajority requirement for the increase of a tax rate. 2. A supermajority rule does not represent good government as it relates to issues of taxation. We endorse the principle of majority, rule when it comes to fiscal responsibility. 3. As a matter of constitutional law, we do not believe that future councils should be bound by a supermajority voting requirement on fiscal matters. Such issues should be resolved by traditional democratic procedures, at the heart of which is the majority rule. 4. Expert testimony presented to the City Charter Commission has not supported the idea of a supermajority requirement. The contrary has been true. 5. In the two year process of drafting the City Charter, this Commission considered and rejected the supermajority concept as it related to taxation. 6. The Charter Commission is irrevocably opposed to the concept of the "tyranny of the minority." Issues relating to taxation ought to be controlled by the majority. 7. The Charter commission is not opposed to future reconsideration of the supermajority requirement if valid evidence in support of the concept is presented. 8. The supermajority requirement does not exist in the form proposed in any other Minnesota city charter. 914 The motion carried. Commissioners Bujold, Speck, Pribble, Schneider, Bobra, Milner, Patterson, Duntley, Singer, Sipkins voted aye. Commissioner Peterson voted nay. Motion by Virgil Schneider. seconded by Bill Pribble: The Plymouth Charter Commission directs staff to forward to the City Council the September 30, 1996 minutes and motions approving the actions and decision of the Charter Commission as soon as these are ready. The motion carried unanimously. III Plymouth Charter Commission September 30, 1996 Minutes Present: Virgil Schneider, Pauline Milner, Jon Speck, Sandy Patterson, Kapila Bobra, John Duntley, Ellie Singer, Bob Sipkins, Tim Peterson, Bill Pribble, Ty Bujold, Assistant City Manager Kathy Lueckert Excused: Dave Pauba, Dave Crain, Joy Tierney Call to Order Virgil Schneider called the meeting to order at 7 p.m. Approval of Minutes Tim Peterson noted a spelling correction on page 11 of the minutes of the September 9 meeting. Kapila Bobra moved, seconded by Bill Pribble, to approve the minutes as corrected. Discussion of Proposed Supermaiority Amendment to Charter Virgil Schneider noted that there were several citizens present who wished to speak on the supermajority issue. He noted that this meeting was not a public hearing, but he would entertain a motion to open the meeting to hear from the citizens. Ty Bujold moved, seconded by Ellie Singer, to permit the citizens present to speak. The motion carried. Gene Schroeder, 14805 18`h Avenue North, Plymouth. Mr. Schroeder stated that he has lived in Plymouth for 28 years. He urged the Charter Commission to go no further in its consideration of the supermajority requirement. Mr. Schroeder stated that the United States is a democratic republic, and that government by the people means majority rule. Majority rule is evident in nearly every aspect of life. Mr. Schroeder said that a two thirds requirement means that a minority of 34% can revoke majority rule. He noted that in January 1995 the House of Representatives imposed a supermajority vote requirement for tax rate increases. This rule was called upon six times, but was waived five out of those six times. Mr. Schroeder sees no compelling reason to place the supermajority requirement in the Charter. He wants to avoid oligarchy, or rule by the few. John Tierney, 17915 201h Avenue North, Plymouth. Mr. Tierney stated that he has been a resident of Plymouth for 27 years, and that he is speaking only for himself. He stated that the concept of majority rule is an important one. It is not perfect, but has served the nation well. He said that it is important to consider the framing of the question of a supermajority vote requirement. Mr. Tierney said that if the supermajority vote was 0 Plymouth Charter Commission September 30, 1996 Page 2 required for street repair or ice rinks, that it might not be an issue. He said that the only reason the supermajority question is now raised is because it deals with taxes. Mr. Tierney said that the city charter is like a constitution. He said that he is speaking because of what he saw on television at the Charter Commission hearing. He said that the question is whether the amendment should be approved in its current form, or whether another option is possible. The current proposal is only a placebo, with no guarantees of success. Mr. Tierney said that the proposal is not really an issue of a tax increase, but has other implications. He noted the Plymouth has a low tax rate, and a AAA bond rating. These achievements were not the result of slogans or quick fixes, but of long term careful planning and management. Mr. Tierney said that the fiscal uncertainties at other levels of government make this amendment unwise at this time. Mr. Tierney thanked commission members for serving, and for their experience and thoughtfulness. Judy Johnson, 12950 301h Avenue North, Plymouth. Ms. Johnson said she is a resident of Plymouth and a candidate for the at -large seat on the Plymouth City Council. She said that she has listened to the debate on the supermajority issue. She sees it as a sensitive issue, and she also says it is a political issue. She said that one question asked a about the issue is what is the urgency. She has asked voters if they think their tax dollars are spent wisely. Ms. Johnson said that the voters she has spoken with have faith in their city government, and feel that the city council is making good decisions. She does not sense any urgency by voters to look at a supermajority requirement. Ms. Johnson stated that people are concerned about taxes, but at other government levels. Bob Sipkins asked Ms. Johnson if he had heard her correctly that people are not concerned about the supermajority issue. Ms. Johnson noted that the supermajority requirement is not an easy issue to explain, but that it is not on the public's list of issues. She said that much more community involvement and discussion is needed on the issue. Kapila Bobra agreed that most people don't understand the issue, and don't understand why the supermajority requirement is needed at this time. Ty Bujold stated that he had done research on the supermajority issue at the state level. In February 1993, a House proposal to require a supermajority vote on any tax rate legislation was defeated. In April 1993, a supermajority requirement amendment to a bill was defeated. In March 1995, a bill amendment requiring a supermajority for a tax rate increase was defeated. There also was legislation in 1996 requiring a supermajority vote. Mr. Bujold said that this indicates there is debate on the issue at other levels of government, but that the idea has not caught on. Bob Sipkins stated that he thinks the Charter Commission has been unduly criticized on this issue. He reiterated his comments from earlier meetings that he has not Plymouth Charter Commission September 30, 1996 Page 3 heard a compelling reason for the amendment. He said that this is nothing but a "feel good" amendment, and that it is a political gesture. He sees no rationale for the amendment, only political game playing. Mr. Sipkins said that the city council must find a sound solution to taxes, not a simplistic one. Bill Pribble asked Kathy Lueckert how much of the tax dollar would the supermajority requirement control. Kathy Lueckert stated that approximately 12 to 13 cents (the city portion only) of each tax dollar would be controlled by the supermajority requirement. Bill Pribble moved, seconded by Ellie Singer, that the letter received from Mons Tieg, PhD, be made part of the permanent record of the Charter Commission. The motion carried. Virgil Schneider asked Bill Pribble to explain his proposed alternatives. Bill Pribble stated that under the first of his alternatives, a supermajority requirement could not block a simple majority from raising the tax rate if certain conditions occurred, such as massive :toss of state aid or a decrease in the city's tax base. Under his proposal, the majority on the council would have to raise the tax rate. He said that his proposed language is not permissive. Bill Pribble said his second option is modeled after Fridley's charter requirement. Bill Pribble stated that he doesn't like supermajority requirements, and that in the corporate world supermajority requirement often are used deleteriously by a hostile minority. Bill Pribble moved, seconded by Ty Bujold, that the Plymouth Charter commission rejects the charter amendment proposed by the Plymouth City Council which would require a supermajority vote of the City Council to approve a tax rate increase. Kathy Lueckert clarified that the Charter Commission has the option of rejecting the proposal, or offering its own language to the City Council. The City Council can then choose to place the original language on the ballot, or the alternative language proposed by the Charter Commission. Virgil Schneider called for discussion of the motion. Tim Peterson said that a special election would run counter to the council's desire to get the most people to vote. 91 Plymouth Charter Commission September 30, 1996 Page 4 Virgil Schneider said that the city's budget always has been adopted by more than a supermajority vote. He feels it is ludicrous to spend money for a special election when there is no identified problem with the way the tax rate has been set from year to year. Jon Speck agreed that there is no evidence of any problem, and he said that there must be some other reason for the issue coming up at this time. Ty Bujold said that the Charter Commission has been around for five years, and that the Commission has insights into the Charter. He said that he believes that the Commission has an obligation to state its position more completely, articulating the reasons why the amendment was rejected. Virgil Schneider said that stating the reasons would be appropriate, and that the Commission owes that to the City Council and to citizens. Sandy Patterson agreed that it is important to state the reasons. Bob Sipkins stated that in five months he has not heard one commissioner speak in favor of the proposed supermajority requirement. However, he is concerned that the commission may be "sticking its head in the ground" politically. He said that perhaps the commission should not reject the proposal outright. He stated that he could support the third option. Virgil Schneider agreed with Mr. Sipkins. He said that the commission may be philosophically correct, but wrong from a practical viewpoint. John Duntley said that it does not bother him if the council puts the proposed amendment on the ballot. He would rather say as a commission member that he sees no compelling reason to approve it. He feels that the public will be misled by the amendment, and that it does not provide additional protection. Tim Peterson asked about option 3. Bob Sipkins stated the option 3 would allow each city council to decide whether or not it wants to be governed by the supermajority requirement, but would not place that requirement in the charter. Virgil Schneider stated that if the proposed amendment is adopted and there is a small voter turnout, then the amendment would be in the charter. It would be extremely difficult to ever remove it from the charter. Ellie Singer said that she agreed with Virgil Schneider. She said that it appears that all charter commission members are opposed to the supermajority requirement. She stated that option 3 would place the burden on the council. She said that she is more amenable to option 3. UO Plymouth Charter Commission September 30, 1996 Page 5 Ty Bujold said that the city council clearly wants option 1. Whatever the Charter Commission does is irrelevant to what the council ultimately will do. Tim Peterson said that the commission should give the council an alternative, and not make it a black and white issue. Bob Sipkins said that he would prefer to have something on the ballot on which both the council and the commission agree. He fears that a "white paper" stating the commission's position might go over the heads of most people. Virgil Schneider said that it does not appear that the public really cares about this issue. He has not had a single call on the issue. Vote on the Motion. Motion carried, six ayes, five nays. Commissioners Milner, Duntley, Patterson, Bujold, Speck and Pribble voting aye. Commissioners Peterson, Sipkins, Singer, Bobra, and Schneider voting nay. Virgil Schneider stated that he is opposed to the motion. He is fearful that the city council will put the issue to the voters, and there will be a small turnout because of the lack of knowledge or interest on the part of the electorate. He feels it would pass, and that it would be hard to remove the supermajority requirement from the charter. He does not feel that the requirement should be in the charter. John Duntley said that perhaps the Charter Commission could reject the proposal from the council, but suggest that if the council wants to have some kind of supermajority requirement that option 3 would be a good choice. He still feels that there is no compelling reason to approve the proposal, and that the case for it has not been proved. Virgil Schneider said that he would consider a new motion which might encompass alternative language if any commission members on the prevailing side would vote to reconsider the motion. No commissioners on the prevailing side offered a motion for reconsideration. General discussion followed about the reasons for rejecting the proposed amendment. Bill Pribble said there can be no politics in charter discussions, but that political reasons are driving the proposal from the council. Tim Peterson said that while he against the council proposal, he feels the Charter Commission has not discussed other options very completely. t 93 Plymouth Charter Commission September 30, 1996 Page 6 Ty Bujold said that the government isn't broken, and thus no amendment is needed to fix it. Ellie Singer said that she voted against the motion because she did not want to reject the proposal without reasons. Kapila Bobra stated that she has heard from other citizens that it appears that the city council and charter commission are fighting. Ty Bujold moved, seconded by Bill Pribble: The Plymouth Charter Commission hereby gives its reasons for rejecting the proposed charter amendment requiring a supermajority vote for a tax rate increase: 1. There has been no public support for the concept of a supermajority requirement for the increase of a tax rate. 2. A supermajority rule does not represent good government as it relates to issues of taxation. We endorse the principle of majority rule when it comes to fiscal responsibility. 3. As a matter of constitutional law, we do not believe that future councils should be bound by a supermajority voting requirement on fiscal matters. Such issues should be resolved by traditional democratic procedures, at the heart of which is the majority rule. 4. Expert testimony presented to the City Charter Commission has not supported the idea of a supermajority requirement. The contrary has been true. 5. In the two year process of drafting the City Charter, this Commission considered and rejected the supermajority concept as it related to taxation. 6. The Charter Commission is irrevocably opposed to the concept of the "tyranny of the minority." Issues relating to taxation ought to be controlled by the majority. 7. The Charter Commission is not opposed to future reconsideration of the supermajority requirement if valid evidence in support of the concept is presented. 8. The supermajority requirement does not exist in the form proposed in any other Minnesota city charter. Vote on the motion: ten ayes, one nay. Motion carries. 11 Plymouth Charter Commission September 30, 1996 Page 7 Commissioners Bujold, Speck, Pribble, Schneider, Bobra, Milner, Patterson, Duntley, Singer, and Sipkins vote aye. Commissioner Peterson votes nay. Tim Peterson stated that he takes exception to Councilmember Tim Wold's comments at the September 10 Special City Council meeting. On page 4 Councilmember Wold stated that "no one on the Charter Commission could make a decision" and that the Charter Commission was "irresponsible." He said that he was very disappointed with these comments. Tim Peterson moved, seconded by Ty Bujold, that the Charter Commission takes exception to comments about the Charter Commission made by Councilmember Tim Wold on September 10, and that the Charter Commission believes the comments were inappropriate. The motion carried unanimously. Virgil Schneider moved, seconded by Bill Pribble, that the Plymouth Charter Commission directs staff to forward to the City Council the September 30, 1996 minutes and motions approving the actions and decision of the Charter Commission as soon as these are ready. The motion carried unanimously. Ty Bujold moved, seconded by Bill Pribble, that unless an annual meeting of the Charter Commission is required by law, that the Charter Commission cancel the scheduled December meeting, authorize the chair to prepare the annual report, and that the chair may call a meeting if he deems it necessary. The motion carried unanimously. Bill Pribble announced that he is resigning from the Charter Commission, effective November 1, 1996 because he is moving from Plymouth. He stated that he had enjoyed his work with the Charter Commission very much, and that the Commission had always debated issues logically and thoughtfully. Commission members expressed their thanks to Bill Pribble for his work. Virgil Schneider adjourned the meeting at 8:40 p.m. IV f5o Regular Council Meeting October 2, 1996 Page 20 Finance Director Hahn said the permit fees are currently up, but the trend for the future will be decreased permit revenues. He said there will be some replacement type permits and staff levels will not continue to increase. Staff is looking at alternatives to replace those revenue sources. Councilmember Anderson asked the future Council to keep in mind that building permit revenue sources will be declining and future planning is needed. Motion was made by Mayor Tierney, seconded by Councilmember Lymangood, to accept the Financial Trend Report for the calendar year 1995. Motion carried, seven ayes. Item 9-A Consider Report from Charter Commission and Special Election Options Robert Sipkins, 2621 Comstock Lane, member of the Plymouth Charter Commission addressed the Council. He was designated by the Charter Commission to appear on its behalf and to provide the final report on the proposed charter amendment relating to the super -majority vote issue. He read from the September 30 minutes of the Charter Commission: "Motion by Bill Pribble, seconded by Ty Bujold: The Plymouth Charter Commission rejects the charter amendment proposed by the Plymouth City Council which would require a super -majority vote of the City Council to approve a tax rate increase. The motion carried on a 6 to 5 vote. Commissioners Bujold, Pribble, Milner, Patterson, Speck, Duntley voted aye. Commissioners Peterson, Sipkins, Singer, Bobra, Schneider voted nay." He said the Commission further acted: "Motion by Ty Bujold, seconded by Bill Pribble: The Plymouth Charter Commission hereby gives its reasons for rejecting the proposed charter amendment requiring a super -majority vote for a tax rate increase: 1. There has been no public support for the concept of a supermajority requirement for the increase of a tax rate. 2. A super -majority rule does not represent good government as it relates to issues of taxation. We endorse the principle of majority rule when it comes to fiscal responsibility. 3. As a matter of constitutional law, we do not believe that future councils should be bound by a super -majority voting requirement on fiscal matters. Such issues should be resolved by traditional democratic procedures, at the heart of which is the majority rule. 9 Regular Council Meeting October 2, 1996 Page 21 4. Expert testimony presented to the City Charter Commission has not supported the idea of a supermajority requirement. The contrary has been true. 5. In the two year process of drafting the City Charter, this Commission considered and rejected the supermajority concept as it related to taxation. 6. The Charter Commission is irrevocably opposed to the concept of the `tyranny of the minority.' Issues relating to taxation ought to be controlled by the majority. 7. The Charter Commission is not opposed to future reconsideration of the super -majority requirement if valid evidence in support of the concept is presented.. 8. The supermajority requirement does not exist in the form proposed in any other Minnesota city charter. The motion carried. Commissioners Bujold, Speck, Pribble, Schneider, Bobra, Milner, Patterson, Duntley, Singer, Sipkins voted aye. Commissioner Peterson voted nay. Mayor Tierney offered apologies to the Charter Commission and the City Council, as she was out of town and unable to attend the September 30 meeting. She asked if there was discussion on the additional proposals that were put before the Charter Commission by Commissioner Pribble. Mr. Sipkins said there was some discussion of several options that Commissioner Pribble had proposed. Also, there was discussion precipitated by Mr. Sipkins before the 6 to 5 vote, of his intent to bring a motion to endorse the third option which was an amendment that would simply enable the City Council and future Councils to enact by ordinance a super -majority requirement for tax levy increases. This was not voted on. He believed that there this would have been in the interest of the Charter Commission, the City Council, and the electorate that the Charter Commission and the City Council seek some kind of consensus and agreement on what it would present to the electorate. Mayor Tierney asked if there was any discussion about what the Charter Commission would do now on the issue. Mr. Sipkins said there was no discussion about future action on the issue. He said there certainly is the possibility of the Charter Commission meeting again, depending on what the Council decides to do with respect to calling a special election. That meeting may be called in the near future. P Regular Council Meeting October 2, 1996 Page 22 Councilmember Preus asked Mr. Sipkins to explain the rationale for first voting against rejecting the charter proposal and then voting in favor of the reasons to reject the proposal. Mr. Sipkins said he can only speak for himself as to the reasons he voted nay on the initial vote and aye on the second vote. He doesn't favor the general issue of a super -majority vote, and he was the first Commission member to make that position known some time ago. He believes that the four members who voted "nay" on the initial vote, agreed with him. He said that in the five months the issue has been discussed by the Charter Commission, there has not been one commissioner who has been persuaded that the super -majority vote as a concept in this proposed amendment is a good idea. He believes that the four members voting with him were interested in a compromise, notwithstanding the fact that they were opposed to the concept of a super - majority. He said that if this Council or a future Council believes that they should be.governed by a super -majority vote on taxation or other issues, they should be free to set their own rules. It is his sense that other Charter Commission members feel the same way. Councilmember Lymangood said that Mr. Sipkins said last month at the Charter Commission meeting that he would not have a problem with a given Council setting super -majority restrictions on themselves. However, the current Charter prevents the Council from doing that. Mayor Tierney said that she was not present at the City Council meeting when the issue was first discussed, but the super -majority issue was referred to the Charter Commission by the City Council with scant debate and without real consideration of the third option of adoption of an ordinance. She said the issue referred to the Charter Commission was that the Council wanted the issue to go in the City Charter - not the option to allow the City Council to vote to set its own rules. Councilmember Lymangood said that under state law when initiatives are made by City Councils, the Council is required to state a specific language. The Council went further and presented three options to the Charter Commission for consideration. He was not asked for his view of those three options during the Charter Commission public hearing. Discussion did not occur until after the motion was made to table. He said that Mayor Tierney, being a member of both bodies, could have pursued options for a compromise at that time. That opportunity is no longer available. He expressed concern about one commissioner's comment that "whatever the Charter Commission does is irrelevant to what the Council ultimately will do." He spoke against that as he would not have invested his time and endeavor to address this issue m Regular Council Meeting October 2, 1996 Page 23 if the Charter Commission's discussions were irrelevant. If the Charter Commission had voted to recommend a different option to the Council, the Council would now have the opportunity to choose between the options. Because the Charter Commission rejected the language sent to them, the Council does not have that option. It would have been very relevant had the Charter Commission chosen a different option. Mayor Tierney said this can be reconsidered by those on the Charter Commission who voted against it and a different recommendation can be made. She believes that a compromise is still possible. She said the Council came down hard and the Charter Commission came down hard on opposite sides, but a compromise is still possible. Councilmember Lymangood said he never presented his comments as coming down hard" and he does not appreciate that characterization of his presentation. Mayor Tierney said she was not making comment on his presentation. She was referring to the option adopted by the Council and the response by the Charter Commission. The harshest option was selected by the Council. Councilmember Wold said the Mayor should not characterize the Council's action as harsh. Mayor Tierney said she is characterizing the firmness of the Council's action. Of the three options voted on by the Council, the most firm option was to put the language into the Charter. There was the less firm option to make it a majority vote for the Council to select at some time. Councilmember Wold said the Mayor made the comment that the Council could give it back to the Charter Commission and allow them to reconsider it. Mayor Tierney said that she hadn't made that comment. The City Council has the option at this point to reconsider. Councilmember Wold said the Council does not have that option now. The Council can either take the Charter Commission's recommendation or adopt what the City Council originally proposed to them. The Council must select one option or the other. He asked the City Attorney to comment on the timeframe in which the Council must take action. UE Regular Council Meeting October 2, 1996 Page 24 Attorney Knutson responded that the statute does not specify a time limit under which the Council must act after receiving the report from the Charter Commission. Mayor Tierney asked whether the Council can reconsider the initial vote. Attorney Knutson said the only way the issue could be reconsidered is for the City Council to start the process over and refer something to the Charter Commission. He said that the Council cannot now select Option 1, 2, or 3. The Council can only select Option 1 or start the process over. Mr. Sipkins asked if the Council does not have an additional option of tabling the matter and, in the spirit of additional cooperation, requesting that the Charter Commission meet again to reconsider their position. It is his sense that perhaps both bodies are moving closer to the middle and that a compromise may be possible. Attorney Knutson said that option would also be available. The Charter Commission has until October 15 to report to the Council and, under Roberts Rules of Order, has until the next Charter Commission meeting to reconsider the issue provided that the Council takes no action on the report tonight. Councilmember Lymangood said someone voting in the affirmative on the Charter Commission would need to make the motion for reconsideration. The motion could not be made by anyone voting in the negative. Mayor Tierney favored continued work toward a compromise. She noted that members were missing from the Charter Commission meeting on September 30. Mr. Sipkins stated that Subd. 7 of the statute relating to charter amendments enables an amendment to the Charter by ordinance. He recommended that perhaps if the Commission is allowed to reconsider the issue, without the Council taking action this evening, that may be another option. He believes that the electorate is better served by reaching a compromise, especially when the alternative is to spend $13,000 on a special election where the turnout could be very slim. Manager Johnson said that if the Charter Commission reconsiders the issue, the Commission should clearly indicate in their recommendation whether they are proceeding under subdivision 5 or subdivision 7 of the statute. 166 Regular Council Meeting October 2, 1996 Page 25 Councilmember Lymangood raised a point of order. It is his understanding that this issue is proceeding under subdivision 5 which relates to amendments proposed by the Council, and that subdivision 7 is unavailable to the Charter Commission at this time. Manager Johnson said that the Charter Commission can initiate a charter amendment process under the statute at any time. Attorney Knutson said that the procedures in subdivisions 5 and 7 are not mutually exclusive. If the Charter Commission came forward with a recommendation, the Council could proceed under either subdivision 5 or 7. If the Charter Commission were to come forward with a recommendation, the Council could operate under either subdivision. Councilmember Anderson asked if it is correct that the Charter Commission would likely find subdivision 7 more palatable than subdivision 5 because an ordinance could be adopted by the Council versus an approval by the voters. Mr. Sipkins said that all he is representing is that it behooves the Council and Charter Commission to keep working toward a compromise that will be to the benefit of the electorate and that enables this Council and future Councils to use a super -majority if they so choose without it being a mandatory provision. Councilmember Anderson agreed and said that is what he is trying to do. He would like something back from the Charter Commission to work with, and asked that this be relayed to the Charter Commission members. Mr. Sipkins said he is pleased to hear that because some other comments in the past have caused some of the fellow commissioners to take positions that perhaps have been more harsh than they would be otherwise. He believes it is unfortunate that this issue has become controversial and filled with recriminations. He would like the Charter Commission to revisit the issue once more to determine if a compromise is possible. Councilmember Anderson said that this issue is one in which elected officials are representing the interests of the voters. He has a concern when appointed people decide for the will of the majority. The Councilmembers were elected based upon a certain public stance that many Councilmembers took and on many points that were pledged to the voters. He wants it to be clear to the Charter Commission that the Council simply wants to follow through with what the public has embodied in them as elected officials. 161 Regular Council Meeting October 2, 1996 Page 26 Mr. Sipkins appreciated that sentiment, but said the Charter Commission has held several meetings at which the only individuals speaking in favor of the proposal were members of the Council. He said that at a recent meeting, one candidate running for City Council indicated that none of 300 to 400 people she met during door -knocking cared about the issue. In addition to the fact that the Commission does not believe there is a present problem, there does not appear to be any public sentiment favoring the proposal other than among six existing Councilmembers. He said that is perhaps a reason that it has taken the Commission as long as it has to consider the issue. The Commission has been looking for public support and expert testimony which would indicate the proposal is good government. The Commission has not found that to be the case. Mayor Tierney added that the Charter Commission has been authorized by the general public, and the Charter was adopted by the majority of the public. There has been public involvement in the issue. Councilmember Granath thanked Mr. Sipkins for his involvement in the issue. He is disappointed and frustrated because the significant evidence that there is public support for this is that Councilmembers were elected. This issue was specifically injected in the last campaign by Councilmember Preus, who was elected city-wide in a hotly contested race. He said that when the elected people are taking a position and developing it through the electoral process, it shows there is popular support. That doesn't mean it will necessarily be popular enough to pass, but it means that we should find out. This fall would have been a prime opportunity to do that in the general election. He noted that in the Charter Commission minutes, Commissioner Schneider explained his reasons for being opposed to the motion and then indicated he is fearful that the City Council will put the question to the voters and there will be a small turnout; however, he believes it would pass. Councilmember Granath said that if Commissioner Schneider is accurate, then it indicates there may be significant public support for the issue. He said that there can be reasonable differences on whether this is a good or bad idea, but his frustration is that the City has missed an opportunity to get the issue in front of the voters. He fully respects the reasons behind the majority sentiment on the Charter Commission opposing the concept, but said the paramount issue is that the voters should have had an opportunity to directly vote on the issue this fall. Motion was made by Councilmember Lymangood that the Plymouth City Council disagrees with the Charter Commission findings 1-4 and 6-8 and further be it resolved to adopt RESOLUTION 96-555 CALLING FOR AN ELECTION ON A CHARTER AMENDMENT with an election date of November 1998. In. Regular Council Meeting October 2, 1996 Page 27 Councilmember Lymangood said he agrees with Item 5 in the Charter Commission's findings, but disagrees with the other findings. He stated that by placing the issue on the ballot in 1998, it will be considered by the most voters possible. If the Charter Commission wishes to reconvene and make another recommendation, they can do so. The City Council could then alter its motion. He said the Charter Commission had opportunities to act, and the City Council scheduled the item on its agenda following those meetings. He favors compromise, but at some point the issue needs to be concluded. He encouraged the Charter Commission to reconsider the issue if there is sufficient energy to do so. The City Council would then have another option to consider. Mayor Tierney asked staff to clarify whether the Charter Commission has opportunity after the October 15 deadline to consider this issue. Manager Johnson responded that the Charter Commission must finish this process initiated by the City Council by October 15. The Commission has other options under state law to make charter amendment proposals to the Council. He said that the Council's resolution calling for an election on the issue could be amended or undone up until 45 days before the 1998 election date. Motion to amend was made by Councilmember Lymangood, seconded by Councilmember Anderson, to add "unless further action on this item is taken prior to 45 days before the election date." Councilmember Preus expressed concern about the timing stated in the amendment. He is unsure that anything can be done between 45 days and perhaps six months before the election date. If the Charter Commission came forward with a different proposal, and the proposal is to come from the City Council, the process will have to be started over again. The alternative is if the Charter Commission came forward with its own proposal, in which case the City Council would have the option of dropping its proposal. He believes that the Charter Commission has left the City Council in the difficult situation of either doing what the Council proposed or doing nothing. Councilmember Lymangood said the intent of his motion is that the Plymouth City Council can take action on this issue again up until 45 days prior to the November 1998 election. 163 Regular Council Meeting October 2, 1996 Page 28 Councilmember Preus said that it needs to be understood that the City Council is limited to leaving its question on the 1998 ballot or removing it completely, absent a new proposal by the Charter Commission. Manager Johnson said that the City Council would also reserve the right to invoke another subdivision 5 charter amendment process at any time. Attorney Knutson restated the amendment, that the City Council would have to take action before 45 days of the next election, if the Council wanted to remove the question from the ballot. Councilmember Wold understood that the intent of the amendment is to clarify that the Council could reconsider the issue. However, the Council always has that option under Robert Rules and under state law up until 45 days before the election. He does not believe that the amendment accomplishes anything new. He said the Council would give full and sincere consideration to any proposals received between now and 45 days before the next election. He understands the intent, but does not believe it is needed. Vote on the amendment failed: Lymangood and Anderson ayes; Wold, Preus, Black, Granath, and Tierney nays. Councilmember Preus spoke in favor of the main motion. He expressed disappointment in the manner in which the Charter Commission has addressed this issue. He believes that Mr. Sipkins has taken reasonable positions and would have allowed the Commission to come back to the Council with an alternative. However, the issue cannot go on the November ballot, and the Council is left with only the options of its own proposal or taking no action at all. The Charter Commission was told on' many occasions what the deadlines and options were. They knew that they could present an alternative and that if they didn't, the Council was left with only its proposal. The Charter Commission waited to table until it was too late to get the issue on the November ballot, and then voted to reject the Council's proposal. All of the findings given by the Charter Commission in rejecting the Council's proposal were reasons that he discussed with the Charter Commission last July. He questioned why the majority of the Charter Commission would decide to delay for several months other than to prevent the voters from having an opportunity to address the issue. While he appreciates that the Charter Commission members disagree with the philosophy of the proposal or whether it is good government, it seems that the Charter Commission majority made a deliberate effort to prevent the entire issue from going to the voters this November. Under the state law provision under which the City Council proposed the charter amendment, the Charter Commission was to review it, IM Regular Council Meeting October 2, 1996 Page 29 state whether they agree with it, and provide a response to the Council. He believes that the Charter Commission majority made a decision early on and then decided to deliberately postpone as long as they could. They went beyond their responsibilities. Councilmember Preus addressed the specific reasons cited by the Charter Commission. He disagrees with the first reason that there has been no public support for a concept of a super -majority requirement for an increase in the tax rate. He has talked with many residents during campaigning. He acknowledges that this is not an issue that people are actively promoting; however, they support it and have indicated that it's exactly what is needed in governments at all levels. It needs to be more difficult to raise taxes. In response to the second finding, he said that an individual from the Citizens Taxpayer Association at a Charter Commission meeting explained that taxation has gone too far at most levels of government. This would help to add another check to bring taxes back to where they should be. He said that the City can take a proactive approach and demonstrate ideas for keeping taxes in line. This could be adopted by other levels of government. He believes that the Charter Commission's position on this is narrow and shortsighted. In response to the third finding, Councilmember Preus believes that majority rule operates well on most items. However, it has failed on items relating to taxation. He said the City of Plymouth has been quite good, but there is the potential to get into the same rut as other levels of government. With respect to the fourth finding, he stated that after reviewing the minutes of the Charter Commission, he would not characterize the testimony given as "expert" any more than members of the City Council. These were individuals with certain political views, and he doesn't believe that political views qualify as expert testimony. In response to the sixth finding, he didn't recall the phrase tyranny of the minority" being used at the Charter Commission meetings and viewed it as expressing a bit of paranoia. He said that in practical circumstances the tax rate is reached through give and take among the members, and ultimately a compromise. He does not believe that process constitutes a "tyranny of the minority." Councilmember Preus stated that he interprets the seventh reason given by the Charter Commission as that they have rejected every argument made thus far and that they will never reconsider this because there is nothing new to add. He has some concern with leaving the door open to have this item go back to the Charter Commission because the majority of the Commission has taken an absolutely strong position that they think it is a bad idea and they will never approve it. However, Mr. Sipkins has been extremely conciliatory. lbs Regular Council Meeting October 2, 1996 Page 30 Councilmember Preus takes that as a good gesture and he will always be willing to consider any good positive alternative by the Charter Commission. Councilmember Preus said his response to the eighth finding that the super - majority requirement does not exist in the form proposed in any other Minnesota city charter is that maybe it should be. He added that maybe it should be imposed on other levels of government as well so that taxation can be brought back in control. He is disappointed in how the majority of the Charter Commission handled this issue. He believes that the Commission exactly knew its views on this issue months ago and took an action deliberately designed to prevent it from going to the voters. The role of the Charter Commission was not to do this, but rather to consider the issue and give its view on whether it was good or not, or to present an alternative. Motion to amend was made by Councilmember Lymangood, seconded by Councilmember Anderson, that the Plymouth City Council wholeheartedly agrees with and publicly acknowledges the intellectual leadership that Councilmember Preus just demonstrated through his comments and his support of this concept from the beginning. Mayor Tierney spoke against the motion. She said it is unfortunate that this issue started in a way that polarized the City Council and the Charter Commission. She would have liked the two bodies to work together. She stated that Councilmembers brought this issue forward as a political issue from the campaign platform at a time when she was not present. The issue was not well discussed by the City Council. Councilmember Lymangood made a point of order. He stated that Councilmember Preus originally brought this item to the City Council on May 1 when Mayor Tierney was present. Mayor Tierney stated that the issue was brought up on May 1 as a future issue. She said that Councilmember Preus was either unaware, or did not bring to the Council's attention for discussion, that the Council could have one proposal and the Charter Commission could present an alternative proposal. She does not consider it being well versed or well prepared to suggest something to the Council for a vote, especially a proposal that was firmly rejected by the Charter Commission years ago. She said that this was taking two opposite views and trying to bring a compromise. This is a philosophical issue, and education on such a process takes time. She feels that either side can take offense. She said the issue did not come to the Charter Commission as friendly or conciliatory; therefore, she cannot support that Councilmember Preus has done a good job on this. Mayor Tierney stated that when the Council and City Attorney started looking at the issue, there were three 164 Regular Council Meeting October 2, 1996 Page 31 proposals, and other alternatives were discussed by the Charter Commission. There are probably additional alternatives. She said that the Council's single proposal does not speak to the ability to compromise. She fails to see that the Charter Commission is not doing its duty in trying to come to a compromise or understanding on the issue. She said that to try to put this before the voters as some important issue that needs to be addressed immediately does not make sense. The City has a Aaa bond rating and the lowest tax rate of the 77 cities over 10,000 population in Minnesota. The majority vote has held solid and true for the City of Plymouth, and there is no evidence that the super - majority would do better. The evidence would suggest that putting something as firm as the position adopted by the City Council could be a detriment in the future. She said that to try to get two groups with chosen polarities to work together in a compromise will take time, education, and desire to work together. It is important to give due consideration to the interests of both bodies. She is not convinced that veering from majority rule is always good. She said that the phrase "tyranny of the minority" was used at the Charter Commission meeting. She said that giving the minority the opportunity to have the power through a super -majority vote requirement can undo the democratic process. She questioned why a super -majority vote would be required on this issue, rather than on all issues. Councilmember Wold stated that the amendment is solid and clear, and he will support it. He commended Councilmember Preus for moving forward, considering the options, and bringing this option to the Council. He was sorry to hear the Mayor say that an amendment proposed by the Council under state law (charter amendment subdivision 5) was viewed by the Charter Commission as being forceful. He doesn't understand why there would be a divergence in the process established by state law. Councilmember Preus selected a legitimate process as provided by state law to bring an issue forward. Councilmember Wold is concerned that anytime the Council may propose an amendment under this section of state law, the Charter Commission will oppose it, view it as being hostile, or take all tactics to delay. He said that if future Councils are going to follow this process, they should allow 6 1/2 months because the Mayor has clearly indicated that the Charter Commission will delay. He finds that disturbing. Mayor Tierney said that she said nothing about delay. The Council deliberately chose a date when she was out of town and wanted to put before the voters the most restrictive of the options relating to the super -majority requirement. Councilmember Wold stated that Mayor Tierney has said on more than one occasion that this process "got the gumption up" of the Charter Commission ray Regular Council Meeting October 2, 1996 Page 32 or that the process forces the issue on the Charter Commission. These comments gave him the understanding that she believes it is a shifty sort of deal. He said that Councilmember Preus looked at the options and selected a mechanism for bringing the issue forward as provided by state law. Mayor Tierney said that there will be no agreement on this and suggested moving forward. Motion to amend carried, six ayes; Tierney nay. Councilmember Black supported the main motion. She is disappointed that the issue will not be considered by the voters at this election because she is not as tied to the 5/7 vote as she is to letting the voters decide the issue. Unfortunately, it is too late to get the issue on this November election ballot. While there will be a smaller number of voters in the 1998 election, it is the best remaining option. She clarified that the comments made by Councilmembers that there are "no other options" refers to the fact that the issue cannot be brought before the largest number of voters until the year 2000. Mr. Sipkins reminded the elected councilmembers that the members of the Charter Commission are a wholly nonpolitical group. He has no idea of any of their politics. Those who have sat on the Commission since it was formed have diligently worked long hours, and are individuals that the City should be proud of. Mr. Sipkins vehemently disagreed with the suggestion of Councilmember Preus that the Commission either individually or collectively intended to operate in a manner as to deprive the electorate on a vote on this issue. He said that regardless of what future issue is sent to the Charter Commission by the Council under subdivision 5, whether a super -majority or other proposed amendment, that the Charter Commission will give it as full deliberation as deemed necessary regardless of the timing because the members see that as their charge by law. He does not believe there was an intent to delay on this issue. If the Council remains as acrimonious as he has heard this evening and as he had read in previous minutes, then he believes the Charter Commission members are the unfortunate individuals who have been pulled into this, who have done their best to remain out of the politics on this issue, and who have received all of the criticism. He objects to that. Councilmember Wold stated that his previous comments were based on what Mayor Tierney had said. He appreciates hearing from Mr. Sipkins that subdivision 5 is recognized by the Charter Commission, as he was concerned about Mayor Tierney's comments that subdivision 5 was offensive to the Charter Commission. lot Regular Council Meeting October 2, 1996 Page 33 Mayor Tierney said that she had not made that comment. Mr. Sipkins said that the Charter Commission is a non-political body and none of the Charter Commission members, except perhaps Mayor Tierney, have enjoyed being dragged into this political situation. He believes that the Charter Commission members are worthy of the Council's and the electorate's respect. Councilmember Anderson said that the Council agrees that respect is due the Charter Commission. However, the "ball was dropped" by the Charter Commission and the issue cannot be placed on the November ballot. Councilmember Anderson said that he was elected by a group of people who pay taxes in the City, and they asked him to let them vote on the issue. He said that the problem he has with the liberal form of government, such as the President, is that they think they should make the decisions rather than let the citizens make the decisions. Councilmember Anderson said he wanted the Charter Commission to take a position on the issue, regardless of the position, in order to get the issue before the largest number of voters in November. It was an obligation of the Charter Commission and they chose not to exercise that. He said that Councilmembers Wold, Black, and Preus ran for election with a specific pledge that they would bring the super -majority tax issue to the Council for a vote. They were elected by a large percentage of the population and that validates what the Council is doing. He said that Ms. Johnson, the local candidate who spoke before the Charter Commission, has not run for or held political office. He said the Council is not trying to attack people; they just want the voters to decide the issues. Mr. Sipkins responded that Councilmembers Anderson and Granath have indicated that public support for this is somehow expressed in the vote that elected three members to this Council. He believes that the majority of people who voted for them, including him, voted for them because the City was in great need of an arena. He doesn't think the vote had much to do with the super -majority issue because it was not their only issue. Since their campaigns were inextricably tied with building an arena, it is disingenuous for anyone to say that it creates evidence of strong public support, especially when everything the Commission has seen at public meetings indicates that the only individuals interested in the issue sit on the City Council. Councilmember Granath stated that he fully respects the members of the Charter Commission but disagrees with the way this occurred. He blames the Charter Commission for it, but this has nothing to do with anyone's integrity. Councilmember Granath said the discussion has centered on how much of Regular Council Meeting October 2, 1996 Page 34 support is out there for the issue. Councilmembers believe the threshold only, needs to be sufficient to let the voters decide on the issue. Had the Charter Commission taken a position earlier, the issue could have gone to the voters in November. Now the issue will not be resolved for some time. He believes that this was a good opportunity to reach the largest number of voters and that there is at least credible evidence to suggest that there is enough interest on the issue to have an election. Motion was made by Councilmember Lymangood, seconded by Councilmember Anderson, to waive the 10:00 p.m. adjournment rule and extend the adjournment time to 10:20 p.m. Motion carried, seven ayes. Councilmember Preus said that it was not his intent in any fashion to attack the integrity, enthusiasm, or dedication of members of the Charter Commission. He said that the Charter Commission knew the statute, the issues, and the time frame. The majority of the Charter Commission chose to table the issue, and the result is the issue is now prevented from going to the voters in November. He is disappointed because it appeared quite clear that some members if the Charter Commission tabled the issue with the sole purpose of preventing it from going to the voters, instead of genuinely needing more time to consider the issues. He said that the statute provides that the Charter Commission reviews a proposed amendment and provides a recommendation. The Charter Commission has done that, but they have also done it in a fashion to take enough time so it cannot go to the voters. Councilmember Preus said that he believes the comments about the issue being acrimonious are only from the side of the Charter Commission. If there are things that the City Council has done to cause them to come to that conclusion, it is unfortunate. He doesn't believe that the Council views the issue as acrimonious, rather Councilmembers are disappointed. He agreed with Councilmember Anderson that the Charter Commission "dropped the ball" so the issue could not be resolved in a timely fashion. Mr. Sipkins said that the issue was referred to the Charter Commission rather late. The Charter Commission only used the time that was allotted to it by statute. If this issue was the core of the platform on which Councilmembers ran, then it was incumbent on those members to get the issue to the Charter Commission earlier. Councilmember Preus said that under the statute, the City Council can propose a charter amendment at any time. Just because the statute allows the Charter Commission 60 days, with an additional possible 90 days, does not mean that the entire time has to be used, especially on this relatively simple 110 Regular Council Meeting October 2, 1996 Page 35 issue. The Charter Commission could have come back with the same amount of information and the same recommendation in a more timely fashion. Mr. Sipkins said the same thing could be true of the process if the issue had been forwarded to the Charter Commission on July 15. While it is true that the Council can take action at any time they choose, no action was taken until May. He disagrees that the Charter Commission "dropped the ball" because it could have been referred to the Charter Commission earlier. Councilmember Anderson requested a roll call vote on the motion. Councilmember Lymangood clarified that his motion does allow flexibility on this issue in the future at the initiative of the Charter Commission. He said that the intent of his motion is to allow time for the discussion to continue. He noted that the Council could have set an election date on the issue which would have prevented further consideration of the issue. He read the motion.. Motion carried: Preus, Granath, Black, Anderson, Wold, Lymangood, ayes; Tierney nay. Mayor Tierney stated she believes a compromise can be worked out. She hopes that this can be accomplished before the 1998 election. As the Council has been aware, there seems to be no urgency involved in the issue at all because nothing is broken and nothing needs to be fixed. The hurry and urgency is not an issue. Motion was made by Councilmember Lymangood, seconded by Councilmember Anderson, to move to the next agenda item. Motion carried, seven ayes. Item 9-B Committee and Commission Vacancies Motion was made by Councilmember Wold, seconded by Councilmember Anderson, to direct staff to advertise for committee and commission vacancies beginning the week of October 14, 1996, as recommended by staff. Motion carried, seven ayes. I// CITY OF PLYMOUTH HENNEPIN COUNTY, MINNESOTA RESOLUTION NO. 96-555 RESOLUTION CALLING FOR AN ELECTION ON A CHARTER AMENDMENT BE IT RESOLVED by the City Council of the City of Plymouth, Minnesota, as follows: 1. The City Council has adopted an ordinance amending the Plymouth City Charter, subject to voter approval, to provide as follows: A two-thirds majority of all members of the Council is required to adopt a tax levy resolution that increases the City's tax rate over the prior year. Tax rate means the quotient derived by dividing the City's tax levy by the City net tax capacity. " 2. The proposed Charter amendment was submitted to the Plymouth Charter Commission. The Charter Commission has reviewed and rejected the proposed Charter amendment and has reported its decision back to the City Council. 3. The proposed Charter amendment shall be submitted to the voters of the City of Plymouth. The form of the ballot attached hereto is approved. The election shall be held between the hours of seven o'clock a.m. and eight o'clock p.m. on the. 3rd day of November , 19 98 4. The City Clerk is hereby authorized and directed to post and publish according to law a Notice of Election and Ballot, and to prepare ballots for use at the election, provided the form of ballot shall have such changes as are necessary to be in the form approved by the rules by the Secretary of State. 5. The election shall be held and conducted in accordance with the statutes of the State of Minnesota applicable, and the Council shall meet as required by law for the purpose of canvassing said election and declaring the results thereof. 42898 10/0110/01/96 1996. ADOPTED by the City Council this day of Joycelyn Tierney, Mayor ATTEST: Z curie F. Ahrens, City Clerk 42898 10/01/96 11310/01 OFFICIAL ELECTION BALLOT CITY OF PLYMOUTH HENNE PIN COUNTY, MINNESOTA YES "Shall the Plymouth City Charter be amended to provide that a two- thirds majority of all members of the Council is required to adopt a tax levy resolution that increases the City's tax rate over the prior NO year. Tax rate means the quotient derived by dividing the City's tax levy by the City net tax capacity?" INSTRUCTIONS Put an (X) in the square before the word "YES" if you desire to vote for the question; or put an (X) in the square before the word "NO" if you desire to vote against the question. 42897 liq Plymouth Charter Commission October 21, 1997 Present: Virgil Schneider, Larry Marofsky, Jon Speck, Dave Pauba, Mary McKee, John Duntley, Joy Tierney, Lori Schwartz, Ellie Singer, Bob Sipkins, Tim Peterson, Terry Donovan, Assistant City Manager Kathy Lueckert Excused: Scott Martin Absent: Kapila Bobra, Ty Bujold Call to Order Virgil Schneider called the meeting to order at 8:05. Charter Commission members introduced themselves. Discussion of Proposed Supermajority Vote Amendment Virgil Schneider stated that the City Council has placed on the November 1998 ballot the proposed charter amendment on the requirement for a supermajority vote of the city council for a tax rate increase. The Charter Commission held general discussion about the proposed amendment. No one on the Charter Commission spoke in favor of the proposed amendment. The Commission indicated its willingness to discuss with the City Council other possible options for a supermajority vote requirement. Terry Donovan moved, seconded by John Duntley: BE IT RESOLVED that the Charter Commission of the City of Plymouth, Minnesota, does hereby recommend that the Plymouth City Council repeal Ordinance 96- 9, an ordinance amending the City Charter concerning taxation, and Resolution 96-555, a resolution calling for an election on a charter amendment; and BE IT FURTHER RESOLVED that the Plymouth Charter Commission invites the Plymouth City Council to a joint public meeting if the Plymouth City Council is interested in further discussion of the issue of requiring a supermajority vote for a tax rate increase. Vote: Ayes: Schneider, Speck, Marofsky, Pauba, McKee, Duntley, Tierney, Singer Schwartz, Sipkins, Peterson, Donovan. Nays: None. Charter Commission Annual Meeting Virgil Schneider moved, seconded by Larry Marofkky, that the Charter Commission annual meeting be established on December 2, 1997 at 7 p.m. The motion passed. Other Issues Larry Marofsky questioned Section 5.02, Subd. 1 of the Charter regarding contributions. He questioned the use of the word "proceeding," and wondered if this section is enforceable. He also questioned if this section prohibits a general contribution to an agency (for example, a union), where the money could be used to promote or oppose an initiative proposal, unknown to the donor. Larry Marofksy also stated his concern about whether or not this section might violate free speech rights. Joy Tierney moved, seconded by Ellie Singer, to refer this issue to the City Attorney. The motion passed. Ellie Singer moved, seconded by Virgil Schneider, to adjourn the meeting. The motion passed, and the meeting adjourned at 8:05 p.m. City of Plymouth Charter Commission October 21, 1997 BE IT RESOLVED that the Charter Commission of the City of Plymouth, Minnesota, does hereby recommend that the Plymouth City Council repeal Ordinance 96- 9, an ordinance amending the City Charter concerning taxation, and Resolution 96-555, a resolution calling for an election on a charter amendment; and BE IT FURTHER RESOLVED that the Plymouth Charter Commission invites the Plymouth City Council to a joint public meeting if the Plymouth City Council is interested in further discussion of the issue of requiring a supermajority vote for a tax rate increase. Adopted by the Plymouth Charter Commission on October 21, 1997. Vote: Ayes: Schneider, Speck, Marofsky, Pauba, McKee, Duntley, Tierney, Singer Schwartz, Sipkins, Peterson, Donovan. Nays: None. 117 Adopted City Council Minutes November 12, 1997 Page 5 fiber Johnson said that she will support the program with a maximum on a one-year trial basis because it fits within the Council's goal to City employees. Councilmember Pr`Ni, asked if Health Partners would participate in the cost of the program. Assistant Manager Lueckert sal at Health Partners is not willing to contribute funds toward the program, and HeaNILIplartners has been unsuccessful in obtaining a corporate membership with LifeTime Fhoqess. MOTION was made by Councilmember Johnsols, econded by Council Spigner, to direct staff to prepare an agenda item for Council co ideration to approve the proposed Employee Fitness Program, with a first-year 000 cap, a one-year trial period to be communicated to employees, and with establish tandards to be met after the one-year period. Motion carried, six ayes. Charter Issues Assistant City Manager Lueckert explained that during 1996, the Plymouth Charter Commission and City Council discussed the merits of requiring a supermajority vote 5/7) of the City Council for a tax rate increase. In May 1996 the City Council adopted Ordinance 96-9 requiring a supermajority vote. The Charter Commission reviewed the proposed amendment and did not recommend its adoption and incorporation into the charter. In October 1996, the City Council adopted Resolution 96-555 which places the supermajority amendment on the ballot in November 1998. She stated that at its October 21, 1997, meeting, the Charter Commission affirmed its opposition to the amendment in its current form. The Charter Commission adopted a resolution recommending that the City Council repeal Ordinance 96-9 and Resolution 96-555. In the same resolution, the Charter Commission indicated its willingness to discuss with the City Council at a joint meeting other options for a supermajority requirement should the Council be interested in such discussions. The Charter Commission has invited the City Council to meet with them at their annual meeting on December 2, 1997. Mayor Tierney verified that the Charter Commission does not support the supermajority vote requirement for a tax rate increase. She encouraged the City Council to meet with the Charter Commission to discuss the issue, and noted that there are several new Councilmembers and Charter Commission members since this issue was addressed. She said that in the fall of 1996, the City Council was prepared to back away from the requirement, but made no subsequent change. it Adopted City Council Minutes November 12, 1997 Page 6 Councilmember Johnson asked the City Attorney to comment on what would occur if the Charter Commission proposed an alternate question for the 1998 ballot. She believes it would be preferable to have one question go to the voters. Attorney Knutson said that the two questions would both be placed on the ballot. There could be a problem if the questions are contradictory and both are adopted. Councilmember Preus said that the City Council considered all possible options in 1996 and decided to put the supermajority question forward to the voters in 1998. He said it is not true that the City Council was unsure about the amendment a year ago, as stated by the Mayor. He sees no reason to go through the discussion process again. The Charter Commission can proceed as they see fit. Mayor Tierney said that in the fall of 1996, she received a phone call from (former) Councilmember Lymangood indicating that the Council was establishing a special meeting to discuss other options. She believes there was a move by the City Council to rescind its action because there was discussion of calling a Charter Commission meeting if the Council was willing to reconsider the issue. However, the Council made no change. Mayor Tierney said the Council can either repeal the ordinance or meet with the Charter Commission to discuss the issue further. Councilmember Spigner said the Council has a third option to take no action and allow the question to be voted on the November 1998 ballot. Mayor Tierney said that there are times when the Charter Commission may not be acting in a way that the City Council would like, but that is why she suggests a joint meeting. She believes that a supermajority vote requirement.could negatively impact the City's bond rating, and that the City Council is forcing the issue. Motion was made by Councilmember Johnson, seconded by Councilmember Spigner, to meet with the Charter Commission on December 2 for discussion of the supermajority vote issue if the meeting is televised and open to the public. Councilmember Johnson said, as a new Councilmember, she would be interested in participating in a discussion on the issue. If the issue is put before the voters, she would like to have input. Councilmember Spigner said that she does not want to take away anyone's right to vote on the issue. She believes the issue should remain on the 1998 ballot for a decision by the voters. 1i9 Adopted City Council Minutes November 12, 1997 Page 7 Councilmember Preus said it is unfair to say that the City Council is forcing this issue. It is up to the voters to approve or deny it. He believes that a meeting with the City Council and Charter Commission will result in a lengthy debate. Mayor Tierney said that she will have a major concern if the Charter Commission proposes another question for the ballot. Councilmember Spigner asked if Mayor Tierney was speaking as a City Council or Charter Commission member. Mayor Tierney responded, "both". Councilmember Black asked why the Charter Commission would want to propose a question if it will put the City in a situation of having two conflicting questions on the ballot. The City Council gave the Charter Commission an opportunity to act with them. Now the Charter Commission is considering placing alternate language on the ballot because they don't like the action taken by the Council. Assistant Manager Lueckert stated that the Charter Commission has taken no official action to place anything on the ballot. Councilmember Johnson said she values the opinion of the Charter Commission, and she would like an opportunity to participate in the discussion. . Mayor Tierney said the Charter Commission would like the opinion of this City Council on the ballot language. Manager Johnson said there are three new Councilmembers and five new Charter Commission members since the issue was addressed in 1996. In addition, the State has completely rewritten the tax laws. Councilmember Preus said he would be unable to attend the December 2 meeting. He supports Councilmember Johnson's intent, but won't support the motion because of the comments made by the Mayor. Councilmember Johnson reminded the Council that the request for a joint meeting came from the Charter Commission. The Charter Commission would like to know how this Council feels about the proposed amendment. She said there is a potential of two competing ballot questions, and she believes that dialogue could resolve the issue. She asked the City Attorney to comment. Attorney Knutson responded that one ballot question could require a 5/7 vote and another a different percentage vote, and both questions could pass. Igo Adopted City Council Minutes November 12, 1997 Page 8 Mayor Tierney said there is no case law on what happens if two conflicting Charter amendments pass. Councilmember Preus asked Attorney Knutson to speak further to the issue. Motion was made by Councilmember Bildsoe, seconded by Councilmember Johnson, to call the question. Motion failed: Johnson, Bildsoe, and Spigner ayes; Black, Preus and Tierney nays. Chuck Lymangood addressed the Council. He said the Mayor's characterizations of what occurred last fall are false. There was no movement on the part of the Council to soften the proposed amendment. He suggested that someone should ask the City Attorney to respond to the question asked by Councilmember Preus of which language would prevail if two conflicting ballot questions are adopted. Mayor Tierney said that former Councilmember Lymangood had informed her that a different motion was being considered to address the supermajority vote issue and asked whether the Charter Commission would meet. She said that this left her with the impression that the question for the ballot may change from the one initially proposed by the Council. She asked Attorney Knutson to comment on which language would prevail if two conflicting ballot questions are adopted. Attorney Knutson said that he is unsure that the most restrictive would apply and further research is needed. He is aware of no court decisions on this issue. Mayor Tierney expressed concern about dueling amendments that could get tied up in the courts. Councilmember Black said that she has not changed her opinion on this issue. She feels there is no need to meet with the Charter Commission. When the amendment appears on the 1998 ballot, she may vote against it, but she believes that the voters have a right to vote on the issue. She is hopeful that there will be good debate on the issue prior to the election, including a League of Women Voter forum, so that voters can make an informed decision. She encouraged other Councilmembers to meet with the Charter Commission if they wish to do so. Councilmember Spigner said that individual members can attend the meeting, but she does not wish to accept the invitation to meet as a full Council. Councilmember Johnson suggested that the City Council could also hold a study session with former Councilmembers in attendance to discuss the merits of the proposal. 1k) Adopted City Council Minutes November 12, 1997 Page 9 Councilmember Preus supported a study session, but would not want it to interfere with other priorities of the City. He suggested the study session be held during the first quarter 1998. Mayor Tierney said it should be held as early in January as possible. Councilmember Preus asked the City Attorney to comment on the Mayor's status when attending a Charter Commission meeting. Attorney Knutson said the conservative answer is that she is there in both capacities. Councilmember Johnson withdrew her motion. Motion was made by Councilmember Johnson, seconded by Councilmember Spigner, that the City Council discuss with former Councilmembers the supermajority vote issue in a study session the first quarter 1998. Councilmember Spigner noted that if individual Councilmembers wished to attend the December 2 Charter Commission meeting they were free to do so, but not as representatives of the entire Council. Motion carried; six ayes. Sto n/Speed Humps Policy is Works Director Moore presented the staff report on an "All -Way" Stop Sign Polic taff believes there is merit is considering the City of Lakeville Policy. MOTION was a by Councilmember Preus, seconded by Councilmember Johnson, to direct sta conduct the analysis on a recommendation for an "All - Way" stop for Zircon Lane, lley Forge Lane, and the Cottonwood/47`'' intersection using the criteria established in tity of Lakeville policy. 1. Councilmember Bildsoe said that the Lakevi olicy is a good place to start. The policy is objective, yet takes many variables into a unt. Motion carried, six ayes. Mayor Tierney said that if the City is going to use speed humps, then a Council should adopt a policy for their placement. lkx UNAPPROVED MINUTES Plymouth Charter Commission December 2, 1997 Minutes Present: Virgil Schneider, John Duntley, Jon Speck, Terry Donovan, Lori Schwartz, Bob Sipkins, Ellie Singer, Joy Tierney, Mary McKee, Kapila Bobra, Ty Bujold, Larry Marofsky Excused: Tim Peterson, Dave Pauba, Scott Martin Others: Councilmember Judy Johnson, Chuck Lymangood, Assistant City Manager Kathy Lueckert Call to Order Virgil Schneider called the meeting to order at 7:04 PM. Approval of Minutes Mary McKee moved approval of the minutes of the October 21, 1997 Charter Commission meeting. Ellie Singer seconded the motion. The motion passed. Discussion of Proposed Supermajority Amendment Assistant Manager Lueckert presented a brief staff report. She said that the City Council had discussed the October 21 Charter Commission resolution, but had declined to take any action to rescind or repeal ordinances pertaining to the proposed supermajority amendment. Ms. Lueckert stated that the City Council had discussed coming to this meeting, but also did not take any official action. The City Council did vote to place a discussion of the supermajority issue on the agenda for a future council study session, most likely in February. She then called the attention of the Charter Commission to the opinion of City Attorney Roger Knutson on the implications of having two similar proposals (one from the council and one from the Charter Commission) on the same ballot. Mr. Knutson opines that if both proposals passed, the two would have to be harmonized somehow. If the two are contradictory and both are approved by voters, Minnesota state statutes do not provide guidance on how to resolve the conflict. To avoid this, the ballot should contain language instructing voters to vote for one or the other, but not both, or to consider the proposals at two separate elections. In the latter case, the most recently passed amendment would prevail. Ms. Lueckert stated her recommendation that the Charter Commission not put its own version of the supermajority amendment on the ballot. Kapila Bobra stated that she is still interested in some kind of compromise language so that both the City Council and the Charter Commission look good to voters. However, she has not changed her opinion of the merits of the supermajority vote issue. 03 Plymouth Charter Commission December 2, 1997 Page 2 Joy Tierney stated that she has passed out information, including her own letter to the Charter Commission and City Council as well as her notes on the September 20, 1996 City Council meeting, and an article pertaining to applying the principles of Sun Tzu to city management. Ms. Tierney said that the Charter Commission can present its own language on the supermajority issue to the voters. Ms. Tierney indicated that she has directed city staff to place on the next council agenda a resolution which would direct notification of the charter commission any time a charter issue is scheduled on a city council agenda. Ms. Tierney presented some of her views of the recent history of the supermajority issue. She described in more detail the information she had passed out to the Charter Commission. She said that her desire is to not have two provisions or amendments on the ballot. Terry Donovan asked if the City Council had taken any action on the Charter Commission's resolution. Kathy Lueckert said that the council had not. Judy Johnson said that the City Council will discuss the issue again at a February study session. Ms. Johnson stated that she will take forward to the City Council any new proposals for language from the Charter Commission. She is concerned that the new members on both bodies need time to study the issue. Ms. Johnson does not want to repeat the recent past, and she wants both bodies to work together with open dialog and new ideas and thoughts. Virgil Schneider thanked Ms. Johnson for attending the meeting. Terry Donovan said that he is waiting for the City Council to respond to the Charter Commission's October resolution. He wants the Council to take action, one way or another. Ellie Singer stated that she is disappointed with the City Council study session. She said she has not heard what the City Council's viewpoint is, and has not heard why the Council thinks the supermajority vote is a good idea. She said she would like the Council to debate why the proposed amendment should or should not be in the charter. Larry Marofsky asked what the legal deadline was for getting an issue on the ballot. Ms. Lueckert responded that the legal deadline is 45 days prior to the election; however, the practical deadline is closer to 60 days. Larry Marofsky said that there is time to further consider the issue. laq 0 Plymouth Charter Commission December 2, 1997 Page 3 Ty Bujold stated that the Charter Commission did more than just debate the issue, that it sought out outside opinions. He hopes that the City Council is engaging in the same process. He stated that he is concerned about the Charter Commission negotiating with the City Council. He still believes that the supermajority requirement is not a good idea. Mr. Bujold stated that he does not believe it is the Charter Commission's obligation to compromise, that the commission considered the proposed amendment and rejected it. Joy Tierney stated that nothing was decided by the City Council on November 12. The situation is status quo. Larry Marofsky said that he has a problem with the concept of compromise, and that he doesn't see the other alternatives as any more viable or valuable. He does not want a conflict with the City Council. He does not want two amendments on the ballot, and feels that the focus should be on voter education on the issue. The City Council will have to live with the amendment if it passes, but it could be changed later—even to a unanimous requirement. Larry Marofsky moved, seconded by Ellie Singer, that the Charter Commission of Plymouth, Minnesota requests that the Plymouth City Council consider the October 21, 1997 Charter Commission resolution recommending repeal of the City Council's actions placing the supermajority vote requirement on the ballot at a regular meeting of the City Council. Judy Johnson stated that any councilmember could place this request on the agenda, but she had hoped that a different proposal could come up at the February study session. Larry Marofsky suggested that the charter commission resolution be considered by the city council by April 1, so that the council would affirm or deny the Charter Commission's request to rescind the actions. Virgil Schneider said that the Charter Commission should hold a public hearing on the issue, and invite the public to come and comment on the supermajority proposal. The Council could then vote the idea up or down. Larry Marofsky stated he would amend his motion to ask that the City Council consider the resolution at a regular council meeting, and to hold a public hearing on the Charter Commission resolution by April 1, 1998. Ellie Singer, as the seconder of the motion, was amenable to the amendment. Kapila Bobra stated that the same experts should be invited to speak at this hearing, from the Minnesota Taxpayers Association and the League of Minnesota Cities. The hearing should provide education to the public. ISS J Plymouth Charter Commission December 2, 1997 Page 4 Virgil Schneider said that it is not the Charter Commission's place to tell the City Council who to invite. Ellie Singer said that the Charter Commission can't tell the Council to hold a hearing. Judy Johnson said that those on the council who do not favor the amendment are in the minority. Ellie Singer stated that the Charter Commission should be allowed to educate the City Council and the public on the supermajority issue. Bob Sipkins said that he did not understand the point of the public hearing, and that it was clear from the November 12 council minutes where councilmembers stood on the issue. He stated that he feared that the Charter Commission was going about this in the wrong way, and that the experiences of last year would be repeated. The decision by the Charter Commission should be based upon the collective belief of the body that the supermajority amendment should be opposed or that the commission is interested in compromise, and then proceed accordingly. He said that he does not sense interest in compromise on the part of the Charter Commission. Larry Marofsky said that he doesn't know if the council is interested in compromise, but that he is basing his opinion on the information available. He said that his motion is one last shot at preventing friction, but he could be persuaded otherwise. Bob Sipkins said that the council minutes indicate to him that the council wants the issue on the ballot for voters to decide, even though individual council members may not vote in favor of the issue. If the council has its amendment and the charter commission also places an amendment on the ballot, only the lawyers win. If there is no room for compromise between the council and the commission, then that fact should be accepted. Lori Schwartz asked if there were some action the council could take short of rescission of the proposed amendment. Bob Sipkins said that it is his feeling that the council wants the issue before the voters. Some compromise may have be possible on Alternative 3 for the supermajority requirement, which was somewhat better than Alternative 1 in his opinion. Judy Johnson asked if the council had considered other alternatives as a compromise. Chuck Lymangood attempted to gain recognition from the chairman to speak. 114 Plymouth Charter Commission December 2, 1997 Page 5 Terry Donovan said that sufficient information was available, and that he didn't see a need for visitors to speak. Virgil Schneider stated that he does not want to discuss past history, and that he wants to go forward. Judy Johnson said that compromise with the council may be possible. Virgil Schneider said that the Charter Commission was not approached in the last year with a compromise proposal from the City Council. Judy Johnson said that she is willing to compromise now. Six of seven councilmembers were in favor of the supermajority amendment last year, but that may not be the case with this city council. Mary McKee said that the November 12 minutes do not reflect people willing to compromise. Judy Johnson said that she made a motion to have the entire city council come to this meeting, but later withdrew it because she did not think she had support. She said she then made a motion to discuss the charter issue at a council study session after the first of the year. Joy Tierney said that there were not enough votes to repeal the proposed amendment. She said that she believes that some on the council were interested in compromise in September 1997. Chuck Lymangood asked if all information given out at the meeting was available to the public. Terry Donovan asked what was the timeline for guests to speak. Virgil Schneider said there is no set timeline. He called on Chuck Lymangood to speak. Chuck Lymangood said that he is concerned about Open Meeting Law requirements, which state that all information given out at a meeting must be available to the public. He said that he has the agenda materials, but he does not have the information distributed by Mayor Tierney. Kathy Lueckert stated that Mayor Tierney brought this information to the meeting tonight. lad Plymouth Charter Commission December 2, 1997 Page 6 Chuck Lymangood said that the September 20, 1996 city council meeting was called because it was the last possible chance to meet legal deadlines to place the supermajority issue on the November 1996 ballot. The City Council was anticipating a report from the Charter Commission by that date. If the Charter Commission report had come in, and had suggested a compromise, that compromise could have gone on the ballot. Virgil Schneider spoke to the motion, and said that it seems like the council has a long time to get the issue on the agenda. Larry Marofsky said that if the study session is in February, this gives more time to get the issue on a regular agenda. Judy Johnson said that she wanted to discuss charter issues in January, but could get four votes only for a February discussion. She said she hoped that the City Council would meet with the Charter Commission. She is willing to take other ideas forward. She is worried about the issue becoming political, and she would rather work out differences beforehand. Joy Tierney said that public testimony can be taken at a regular meeting. Virgil Schneider said that the public would be allowed to speak at a public hearing, but this is not always the case with regular agenda items. Larry Marofsky said that at a public hearing, everyone hears the same thing. He said his motion does not draw a line in the sand, and that compromise is still possible. Judy Johnson said that alternatives could be suggested at a public hearing. Larry Marofsky said that he would not propose a compromise without a meeting, but recommendations may come up during the course of the meeting. He wants to avoid ugly situations. Virgil Schneider asked if there were further questions on the motion. Ty Bujold, seconded by Lori Schwartz, moved to call the question. The motion to call the question was approved, John Duntley voting no. Virgil Schneider asked Kathy Lueckert to read the motion: Motion by Larry Marofsky, seconded by Ellie Singer: 611 Plymouth Charter Commission December 2, 1997 Page 7 The Charter Commission requests that the Plymouth City Council consider the October 21, 1997 Charter Commission resolution recommending repeal of Ordinance 96-9 and Resolution 96-555 at a regular meeting of the City Council; and that the Charter Commission requests that the City Council hold a public hearing by April 1, 1998 on the Charter Commission resolution of October 21, 1997. Vote on the main motion: 11 ayes, 1 nay, Bob Sipkins voting no. The motion passed. Contributions Virgil Schneider called the Commission's attention to the City Attorney's report on Charter Section 5.01, Subd.l, pertaining to contributions. Virgil Schneider said that he was confused by the double negatives in the first paragraph of the letter: is the section constitutional, or not? Larry Marofsky said that the case law included with the report seems to indicate that the section is unconstitutional. Virgil Schneider said that if the section is unconstitutional, then language should be placed on the ballot to repeal Section 5.20, Subd.1 Kathy Lueckert said that she will have the City Attorney clarify the confusing language in the first paragraph of his report, and also could have him draft language to repeal Section 5.02, Subd. L Ellie Singer moved, seconded by Joy Tierney, to have the City Attorney draft language to correct Plymouth City Charter Section 5.02, Subd. 1. The motion passed unanimously. Annual Meeting Virgil Schneider called the Commission's attention to the draft of the annual report to Judge Mabley. He asked for comments and suggestions. Terry Donovan moved, seconded by Kapila Bobra, to approve the annual report to Judge Mabley and fonvard it on to him. The motion passed unanimously. Virgil Schneider stated that he was stepping aside as chair of the Charter Commission. Virgil Schneider suggested that Bob Sipkins had represented the Charter Commission on several occasions, and would be a good chairman. 191 Plymouth Charter Commission December 2, 1997 Page 8 Joy Tierney moved, seconded by Kapila Bobra, that Bob Sipkins be elected chairman of the Charter Commission for 1998. It was moved and seconded that nominations for chairman be closed. The motion passed. Main motion to elect Bob Sipkins as chairman of the Charter Commission in 1998 was approved unanimously. Ty Bujold moved, seconded by Lori Schwartz, that Ellie Singer be appointed 1998 vice -chair. The motion passed unanimously. Joy Tierney moved, seconded by Lori Schwartz, that Terry Donovan be appointed secretary in 1998. The motion passed. Neat Meeting Virgil Schneider moved, seconded by Larry Marofsky, that the chairman of the Charter Commission call a meeting after the City Council discusses the Charter Commission's October 21, 1997 resolution on the supermajority issue. The motion passed. Ty Bujold thanked Virgil Schneider for his leadership and service to the Charter Commission as chairman from 1991-1997. The meeting adjourned at 8:35 PM. 130 0 DATE: TO: December 2, 1997 Plymouth City Councilmembers and Charter Commission Members From: Mayor Joy Tierney Subject: The Supermajorit_y Vote Amendment to the City Charter Public confidence in the integrity of the Government is indispensable to faith in democracy; and when we lose faith in the system, we have lost faith in everything we fight and spend for." Adlai E. Stevenson The Charter Commission has twice been purposefully brought into being in the City of Plymouth. The activation of 1968 as well as the reactivation of Plymouth'.s::Charterz*Commission in .1991 were a result of,*divisive cfty issues that appeared to be eroding public confidence in. Plymouth's governmental form and practice. Now an issue has arisen that again has potention for erosion of the public trust. The Plymouth City Council has voted to place on the ballot in 1998 a charter amendment that the Charter Commission has consistantly been unanimously opposed to. The Charter Commission, in response`tb:this.11can propose its own amendment. Given that there could*then'be°two conflicting amendments presented to the voters with: .an,uricertain legal outcome if both should pass, the City Council and the Plymouth Charter Commission could both stand to lose.credibility and the citizens of Plymouth could once again -see divisiveness and political notoriety return. This is .the very situation -that so many of us*in this city have worked hard to not let happen again. This is the reason I ran for the City Council in 1991 for. Mayor in 1993, and why.I worked to reactivate the Charter Commission and am proud to serve my full term on the Commission. Nevertheless, we now have the issue before us and a compromise solution must be found. 131 PLYMOUTH A BeautifulPlace To Live nn DI VAAnI MU OnI ll MIAOn . Ill VAgni lTl l --I-e%^A CLAA .Ann Trl rt11 lr\Ir rr.•r.• ten.. ---- A Review of Issues and Proc4 I will propose that the City Council pass a resolution that at any future regular or special City Council meeting where Council initiated Charter amendments are being proposed o:t voted on that all Charter Commission members be informed.: I content that the process by which this=supermajority.'.a'mendment came to the City Council for a vote was more.politically-.-- motivated that policy motivated. First, the issue came before the Council when*I -:the only member of the Council on the Charter Commission, was put of town. While all and perhaps most of the Councilmembers-,did-'not know of my planned absence from that Council meeting°:iia ``was -known' by the Deputy Mayor months in advance. Given the patently untrue charges made against me and the Charter Commission (that my being on the Charter Commission and the City Council posed a conflict of interest, that any concerns I had about the process meant I should not serve .on both bodies -simultaneously,. and that the City Council should not meet with -.the Charter Commission to discuss the issue with the later exception that -.it be.cable cast), and the egregious disrespect shown°.the Cha rterCommssion, I contend*that political gamesmanship had.` -'to' be `;"at_:work 'here: Second, The manner in which this amendmentcamebefore,the.City Council has..left theimpressron that; this was! -.a deTiberat`ely%.. orchestrated .end run around the ;Charter,Commission' even of ;,that was not the intentibnof-alJ`Councilmembecsfe t`?s"+at`l'east; my hope that'. all Councilmembers were -not. _de' sireousr` of''bh" inginsuchamannerbecause, as' was later discogered,end-runningtheCharterCommissonl`cannot be^done..,TheP Charter`c.Commission is or can be involved: in ahl' Charter ;`AmeridmentsJ Apparent`lythiswasunknowntotheCityManager:;"and Assistant'` City ManagerpriortotheCouncil'vote.'; It was one of.my"..'first.que tions asked of the City =Manager 'when, I' read ,the:,ze'solu ion upon ..myreturn, "Can':•ahe,aCh}arter<<Commisson 'put ,beforetM- own resolution?.'."We placed `man 'immediate -,--"con fereceRcali`:.to : the City Attorney and his answer was' YhF, "Yes:;;: The`serioiisness. of this issue_became:apparent to :me' immediately }.Neither :theCouncilnorthe, staff.:: had -as ked:.the .'questiorii . Neither•tiie;.:..-. Council nor the, staff,,.thought< it..mportant `to noti f the CharterY.:• Commission as a:'body, or `myself}`as a ,member`of :t1id* Charter Commission that*".resolutions were.:-propared`;*and ready.,.-for%a'-:Councilvote. The Councih' did.'riot do' adequate homework' prior to `'the vote. It did not-adequately.discuss •and 'debate.; the issue .atthetimeofthevote*;;''(if:; the: minutes are- a "true .reflection) . It refused to listen to my concerns in future discussions. The Council does'now have .opportunity to.revisit this issue and return to its dil'igent:.ways for which'. this year's Councilcantakepride. 1 3;L In a recent,Editorial in the Star Tribune under the captionOurperspectiveJusticedelayed," the first paragraph reads, It goes without saying that politicians love toplaypolitics. It's all in a day's work to plotan. pander,.•block and barter, bicker and back -stab. Often;these.antics do'no harm: They're simply thecondimerit`..on;. the- dry;'--daily;-bread "of - lawmaking. Butsometimes':thls kind of gamesmanship is poisonous. It may be delicious to the players, but it sendsthespectatorsintospasms. A case in point is thegame, of political chicken Congress is playing'at theexpenseofthefederalcourts." This editorial court vacanciesgassaoresultn to xPoftheSenaeconcern te spolitically about -the number of motivated slow"justice P tiallyPaceofconfirmation, delayed, justicedeniedjusticedegraded. The federal courts are not our issue but the integrity of ourcharter, our City s Constitution, is. Former Councilmember Chuck Lymongood arrived at the City Councilstudysession -of November 12 where the Council was discussingtherequestby;the Charter Commission to rescind thesupermajority,resolution .or meet':with.the Charter Commissiontod, options he .came .with a ;video 'camera":and the bookiscuss by Sun Tzu, "The Art= of..War:'.' I' be1ieve`.he was ' trying to tellussomethin from `thewery e' inn ng'` hasKguided„Phis .behavior on the. issues ti ,- gl _ I have copied'Wi.11iarrkE -Kirchhoff;'.s use of 15 of Sun Tzu'sateaching atR'he:selected.to illustrate their,`:"Applicationtothe '.field-of':public administration." He states that most, noteworthy ofSun,Tzu' t fighting s teachinis. best.". It'is difficult'to believe that l' this tis- uthe* lessonformerCouncilmember,:Lymongood.drew:from ahis-book or wantedto:conveysto the_ Council And'staff.;present'at the meeting that s. night Here are "some "other quotesthat may be more ahewantedustobelievehisa PPropriate.to what and ; possibl • `-_ .. approach -has-beenbeen on this issues' y other'issues)'. We.read about a policy.oftemporizing; and. harassment.. longterm campaign ofharassment.-.. sowing doubt and disenssion.employ deceit andunorthodoxtacticsextensively.... fo knowwhy,he.has been extolling.the virtues thissbooknever sinhecameontheCouncil. It might be well to ask him. ce The minutes of September 20, meeting. You 1996 are copied for you as mycredibilitybecame.a point of discussion at the November 12canseebymy.notes:that I made on the bottomofpage3whenIfirstreceivedtheminutesof -that meeting, that Councilmember Lymongood requesWthat I call:for a special 133 meeting .of the Charter'Commission because "he" was willing.tocompromise. Three.-members',.of the City Council requested thespecialmeetingtheFriday -before. They apparently wanted VirgilSchneideraschairtocall:the meeting but he was leaving townandwasunableto. I, likewise, was to be out of town and couldnotattendsucha.meeting:but suggested he contact any of the other Charter Commission'. members as they only needed a majority8) to conduct:;busness.:..His responmse to this suggestion wassometo'the'_effect that he didn't want to influence the charter commission -so he -would not call around to find others. Later I was criticised for -not calling the meeting and you canseebytheminutes. that rather unfair and indeed untrue statements were made about'me, such as, Councilmember Andersonstating, "Joy Tierney would not let the Leaguetof Women Voterstakeapositionbecauseshecouldnotdecideontheissue." Indecision had nothing to do with it. I and the League ofWomenvotersdid'not want to sign on to his law suit againsttheCity. Our course was to get a Charter Commission activetohandlethecontroversialissuesofgovernment.) I quesstheyviewedmeasobstructionistwhereasIbelieveIhadlegitimatereasonsandthattheprocessbywhichthecouncilwasapproachingthisissuewasflawed. I have been through a similar time on the City Council whereCouncilmemberssentletters 'to.the editor which 'includeddeliberately .misledding:information. Copies are available ofthispastPlymouth" event '.if,:you have not seen them or'wouldlike. a copy.). I believe it `is important for- the CharterCityCouncilnot:Commission and thetorepeatthepast, but to continue goingforwardevermindfulthat`we„are working. for the'long=term bestinterestofthe"C ty.:not'fer"short-term political gains, 13H Chuck Lymangood 11780 40th Place N Plymouth, MN 55441 December 8, 1997 yia hand d . iy ry Dwight Johnson City Manager City of Plymouth 3400 Plymouth Blvd. Plymouth, MN 55447 Dear Mr. Johnson; I have enclosed for you four copies of my proposal to resolve the issues I addressedatthecouncilmeetinglastWednesdaynight. I respectfully request you to distribute copies to Mayor Tierney, Councilmember Johnson and Councilmember Preus at your earliest convenience and in the most expeditious manner possible. As I hand this document to you I understand its contents now become public. I hope you and Councilmembers Johnson and Preus are successful in your endeavorstoresolvethissituationpriortoJanuary7, 1998. If any further communication or information from me will assist you in your efforts, please do not hesitate to contact me. Sincerely, a eA Chuck Lymangoo enc. cc: Joycelyn Tierney, mayor Judy Johnson, councilmember Christian Preus, councilmember 1350* M-010) _ DI I I, Charles G. Lymangood, do hereby submit this proposal to the City Manager of the City of Plymouth, Mr. Dwight Johnson, as my suggested format to resolve and partially respond to the actions, statements, and written memo of Mayor Joycelyn Tierney on the night of December 2, 1997. I believe the actions of Mayor Tierney towards me and the city council of the City of Plymouth expressly and implicitly violate both the spirit and the letter of the Pro Plymouth Pledge. I fully intend and I am now making preparations for a very spirited defense against this personal, unprovoked, surprise and vicious attack against me and my family's name. I fully intend to staunchly defend the political document - the Pro Plymouth Pledge - which has kept the political peace in Plymouth for almost four full years. It is my understanding that the expressed will of the city council is to table further public debate of this issue until such time as all council members are present, specifically, January 7, 1998. I will abide by and submit to this expressed intention on the part of the council. I also expect that all other parties will abide by this understanding and that I would be informed if this understanding is incorrect or if anyone wishes to change this plan of action. I suggest the City of Plymouth use this window of opportunity, the time between now and January 7, 1998, to attempt to resolve this issue for the mutual benefit of the parties involved and most particularly for the benefit of the people of Plymouth. 134 I propose that the two current at -large councilmembers, Councilmember Judy Johnson and Councilmember Christian Preus act as my representatives, my intermediaries if you will, to meet and discuss with you and the mayor my terms of a peaceful settlement to this conflict. I believe my choice of these particular two councilmembers is fair, more than reasonable on my part, and is also logical as to the elected at -large positions they hold on the council. My choice of these two individuals is a conscious and deliberate attempt to amicably resolve this conflict. I ask my representatives, Councilmembers Johnson and Preus, to encourage the mayor to agree to the following three points: I. The mayor will agree in writing that the content of her memo and the way in which it was submitted was a violation of the Pro Plymouth Pledge. II. The mayor will agree in writing, upon further reflection and with the best interests of the people of Plymouth at heart, to rescind her memo of December 2, 1997 in its entirety. III. The mayor will agree to publicly apologize to me, to my family, to the Plymouth City Council and to the people of Plymouth for any ill will said memo and her public statements have created. This apology is to be delivered at a regular Plymouth City Council meeting with all members present and also at the next regular meeting of the Charter Commission. 13} In addition, I have other procedural issues the council may well wish to consider instituting to insure future meetings of its council and commissions do not repeat this unfortunate incident. Furthermore, if the mayor and the selected representatives are able to reach agreement under the items outlined above, I will agree to not make any further public statements about the memo. In the true spirit of Christian forgiveness it will be as though it never occurred. It is as though a worn garment, the Pro Plymouth Pledge, has been stained. With forgiveness the stain is not only removed, but the whole garment is fully restored to its original pristine condition. In the absence of an agreement, I fear the actions on the evening of December 221997 will become known as the "night which will live in infamy" in Plymouth history. Finally, I also believe that if the mayor agrees to the above outlined conditions her stature and public standing will increase immeasurably. How unfortunate it would beat the pinnacle of her many many years of public service to the people of Plymouth that her legacy would now be tarnished because of the actions of a single evening. Please, GIVE PEACE A CHANCE. Respectfully submitted, Charles G. Lymangood 131 Chuck Lymangood 11780 - 40th Avenue North Plymouth, MN 55441 December 30, 1997 Dear Mr. Lymangood, I am responding to your City Manager directed proposal of December 8 concerning the supermajority Charter issue. The political nature of this issue should preclude the City Manager from responding. Let me clarify my position. I was first elected to the Plymouth Council in 1992. The divisive political behavior in Plymouth in the preceding years had brought the City local and state news coverage that while colorful was most unpraiseworthy and embarrassing to the City. About six months into my first year, the City Manager resigned. Prior to this the majority on the City Council had been public about their desire to affect this resignation. However, it wasn't the resignation that raised the greated concerns with me but the manner in which it came about and the behavior of the major players after the event. Responding to a need to apprise the public of the situation, the Mayor and a Councilmember, with whom I was serving, sent letters to the editor. Unfortunately, their letters attack nature offered a rendition of outrageously dubious truth. By responding to one of these letters I wrote my version of what I believed to•be the truth of the situation. My response was submitted to the City Council, the staff and our City'Attorney Firm at the time. (The City Attorney was requesting a 32% budgetary increase for his Firm that I was strongly objecting to. I have provided all Councilmembers with copies for their information.) My biggest concerns then were similar to those I have now with the supermajority issue that is before us. While I stand on the side of the Charter Commission and remain opposed to the Council approved resolution, it is the perceived deliberate attempt to cut me, i.e., the Charter Commission, out of the debate, the numerous efforts at silencing my expressions of concern, the in -your -face intimidations, and the knowing dissemination of false information to the public that have caused 131 . PLYMOUTH A Bcaufi%dPlacc To Livc 3400 PLYMOUTH BOULEVARD • PLYMOUTH, MINNESOTA 55447-1482 • TELEPHONE (61. 21 5r' , .:::_ CITY OF PLYMOUT- Chuck Lymangood 11780 - 40th Avenue North Plymouth, MN 55441 December 30, 1997 Dear Mr. Lymangood, I am responding to your City Manager directed proposal of December 8 concerning the supermajority Charter issue. The political nature of this issue should preclude the City Manager from responding. Let me clarify my position. I was first elected to the Plymouth Council in 1992. The divisive political behavior in Plymouth in the preceding years had brought the City local and state news coverage that while colorful was most unpraiseworthy and embarrassing to the City. About six months into my first year, the City Manager resigned. Prior to this the majority on the City Council had been public about their desire to affect this resignation. However, it wasn't the resignation that raised the greated concerns with me but the manner in which it came about and the behavior of the major players after the event. Responding to a need to apprise the public of the situation, the Mayor and a Councilmember, with whom I was serving, sent letters to the editor. Unfortunately, their letters attack nature offered a rendition of outrageously dubious truth. By responding to one of these letters I wrote my version of what I believed to•be the truth of the situation. My response was submitted to the City Council, the staff and our City'Attorney Firm at the time. (The City Attorney was requesting a 32% budgetary increase for his Firm that I was strongly objecting to. I have provided all Councilmembers with copies for their information.) My biggest concerns then were similar to those I have now with the supermajority issue that is before us. While I stand on the side of the Charter Commission and remain opposed to the Council approved resolution, it is the perceived deliberate attempt to cut me, i.e., the Charter Commission, out of the debate, the numerous efforts at silencing my expressions of concern, the in -your -face intimidations, and the knowing dissemination of false information to the public that have caused 131 . PLYMOUTH A Bcaufi%dPlacc To Livc 3400 PLYMOUTH BOULEVARD • PLYMOUTH, MINNESOTA 55447-1482 • TELEPHONE (61. 21 5r' , .:::_ P.2 my anger. I realize the memo you object to is passion filled. On the other hand, I find no untrue facts mixed in with my burst of righteous indignation. I stand in strong opposition to the use of political tactics that violate sound democratic principles full and open public debate and comment, honest presentation of the facts, and adherence to a fully participatory process. This supermajority issue is remininiscent of this prior one which is still all too vivid in my mind. To add to the consternation, the Charter Commission, which was brought back to life in Plymouth to handle divisive issues like the odd/even vote, number of Councilmembers, the ward system, citizen involvement when spending Community Improvement Funds and etc., was treated and continues to be treated with embarrassing disrespect, intentionally or unintentionally. Frustration magnifies for me when I see the amount of time, effort and money that has been and will continue to be diverted from other deserving city issues onto this one. I've been there before. Mr. Lymangood, you have stated in your proposal that you are trying to broker an agreement, that I have made an unprovoked attack against you, that I have violated the Pro -Plymouth Pledge and that I owe you and the Plymouth City Council an apology. I will address your concerns. First, I hope I am seeing some interest on your side to broker some kind of resolution between the City Council and the Charter Commission. No one could be more pleased than I to see this issue resolved expediously and in the best interest of the citizens of Plymouth. Whatever proposal you or anyone you choose to work with could broker would certainly be given consideration. City Manager Johnson, as always, will be willing to help with specific substantive issues. However, staff does not interject themselves into political battles. Did I engage in an unprovoked attack at the December 2nd Charter Commission meeting? I do not see it that way. I will admit to showing some battle fatigue, but, as your know, I had tried numerous times to get you and the others on the previous council to address my process and procedure concerns but my requests were met with indifference at best and hostitity at worst. Your hostility, in particular, was most apparent to me. This, along with your refusal to talk to.me directly and the reports I heard of how'you frequently talked about the quiding strategy of your political life, "The Art Of War," had -me wary of your, tactics and behaviors. (I bought the book over two years ago so I would have knowledge of where you may be coming from.' Prior to that, in 1994 or 1995 I handed out the Governing Magazine article on the book as it relates to City Managers. 10 P.3 Anyway, I was not unfamiliar with the book or your stated devotion to its principles or at least "war".) On the surface, however, the appearance of a book on "war" at a Council study session where the Charter issue is being discussed does send a message. Given my previous experience and knowledge I saw this as a tactical maneuver designed to send a message that was not at all related to peace. I do not believe I was out of line in informing the Charter Commission of this display. You have taken a major leadership role in moving the adoption of the supermajority charter amendment and are, obviously, interested in continuing to be involved. Furthermore, I have been of the believe that your strategy of war with like tactics and behaviors was something you took pride in. I have found this offensive, but how can I offend you if what you have done is something you take pride in and count as a success? Did I violate the Pro Plymouth Pledge? As you may know last January neither Councilmember Johnson nor I voted to approve the Pro Plymouth Pledge. When words and hehaviors of Councilmembers too frequently miss the intent of the Pledge, which is civility, it becames a document to be mocked. Furthermore, when the expressed disapproval of misrepresentations of fact or rude behavior becomes a violation of the Pro Plymouth Pledge, the Pledge becomes a hammer by which truth was pounded down. .I could not nor will not pledge to such mockery. Indeed, I believe Councilmembers have a obligation to the citizenry to provide them with correct information and to themselves to not give in to harassment. If the City Council would seek the help of an outside facilitator in working out these differences and develop a pledge that is meaningful to all citizens and councilmembers and gets full Council respect, then I will be willing to support such a pledge. It isn't the intent of the Pledge I object to. It is the practice. Do I owe you and the Plymouth City Council an agology? How can one apologize for beliefs., feelings and facts? The December 2nd memo may not have been eloquent. (It was done in enough haste to be disjointed and contain several typos.) It did, however, contain truthful statements that: Expressed my concern that the City Council be attuned to the importance of proper procedures. PA the attempts to control information were acceptable. It may also mean that a combative mode on this issue is still alive and well. Put forth information that I believed was important to the Charter Commission as well as this City Council. I have talked to both Councilmembers Preus and Johnson following their meeting to discus your request. (I have thanked them for taking the time to do this, as they were under no obligated to do so.) However, your letter does not specify particular offenses so I don't believe we are totally clear as to what I am to apologize for. First of all, I cannot rescind my memo of December 2nd. Are you objecting to the facts or the tone? I'm sure additional time spent on it would have produced a better, more readable and less angst filled product even if the facts remained the same. However, I believe I'm entitled to some righteous indignation. I stand by my assessment that Council procedures on notification, discussion and citizen involvement were sub -par and that they will not be made whole by a cover-up. For the Plymouth City Council to find that it has committed a procedural glitch should not be startling news. It has happened before and it will happen again. When such is discovered, however, it is proper to address it and make the necessary policy or other changes to help correct the glitches if possible and, if not, to try to ensure that it not happen again. Silencing those who point out the problem is not the solution. You will have to explain why I am to apologize. I cannot apologize for your behavior or your overall strategy or "war." These are choices you made and made publicly. I shouldn't have to apologize for observing them. I certainly shouldn't have to apologize for the misleading statements you made about me. This leads to other questions: If you are not proud of them then what motivated your behavior? Did they or did they not effect the outcome you desired? What did you intend by displaying the book, "The Art Of War" at the Council study session? As I stated before, I honestly thought you were taking pride in what you did. I would gladly accept correction if I am mistaken. P.5 your proposal for PEACE. However, I am open to any solution you may have to this potentionally embarrassing and resource consuming course this charter issue is on. As much as I like PEACE, my main goal in serving the citizens of Plymouth is to return PRIDE to our city's governence. Anything you can do there, I would welcome as well. Sincerely, Joy/ Tierney Mayor of Plymouth cc: Plymouth City Councilmembers Plymouth Charter Commission q3 CD CD P7' CD CD crCDo `b d sv pC7 C-Dw d CL '-+ 3 O O O p O ''+i CD 3" C r-: 0 C:LACDa. p CD , t y CD CD OCD p CD C -D CD CDCD --` CD D CSD tea. U ci CD + n CD r-+- rr- r n O O CD CD 71 CD CD CSD U4hUQ p p s rr 0 CD CD CD CD On . 0 O O ` n A . O 0 CD C C)N CCD CDD y ~'. " CD CD O O ~ O C'D CO 0 p N O CSD cru . n C'D'' p cn CD 0 'C r -r- CD CD CD C A N CD CD CD Q, p` ' N r+ CD CD 0CD CD N. W y O l n CCD Com. D CD CD .jam UQ O CD p CD CD UQ D p p. 0 I MN C) mac) O V> TJI'tc) O CD crcz y CD C) 3 n 3 C)CD CD FD in. CD O CD C4'-+ CD O0v s CD CD S-, CD a- CD A C7 n Qom.. C C) CnQ•o P O p.0 C/) p. o CD o m h CD O O UQ i-, CD CDCDm CSD CSD O o O CD CD CD CL x CD CD t r -r CD n CD CD " ham n CD + CD 3 C"D r CD CD 05 on CD CD CD wCD CD CD Z vn a o CD n CD O CD O CD CD4. _ v CD CD CCD CD CD En CD CD CD r . CD o CDCvCD tCD rt CD U4ar Sy O CD CD CD N r -r CDr , O .. 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Item 8-13 (9-F) Discussion of Charter Commission December Resolution Mayor Tierney said that the Charter Commission adopted a resolution in late 1997 relating to the supermajority vote issue and is looking for a response from the City Council. The City Council discussed the resolution at a study session, but took no action. Councilmember Johnson clarified that while the Council took no immediate action at the study session, the Council indicated that the issue would be placed on a future study session agenda. Assistant Manager Lueckert explained that at its December 2, 1997 meeting, the Charter Commission adopted a resolution asking the City Council to consider its October 21 resolution. The October 21 resolution requested that the Council repeal Ordinance 96-9 and Resolution 96-555; these actions place the proposed supermajority charter amendment on the ballot in November 1998. She said the Charter Commission's December resolution requests the City Council to discuss the possible repeal of the ordinance and resolution at a regular City Council meeting and further requests that the City Council hold a public hearing on the possible repeal of the proposed supermajority amendment by April 1, 1998. Assistant Manager Lueckert stated that the City Council has several options: 1) As requested by the Charter Commission, discuss the Charter Commission's October 21 resolution at the January 7 meeting, or schedule the discussion for a future regular meeting; 2) Schedule a discussion of the Charter Commission's request for a future study session, possibly in February or March; and 3) Take no action on the Charter Commission's request. She said the Charter Commission recognizes that their resolution is a request to the Council and that the Council is not bound to take any action. Mayor Tierney said that if the Council decides to take no action, she would like a written response made to the Charter Commission. Councilmember Preus said that when this issue was discussed at the City Council study session, the Council directed that the issue be placed on a study session agenda during the first quarter of 1998. He sees no reason that further action is needed by the Council at this time. Councilmember Black agreed that no further action is needed at this time. She has reviewed the entire file on the supermajority vote issue. She believes that the report forwarded to the City Council by the Charter Commission on lqf Proposed City Council Minutes January 7, 1998 Page 13 this issue did not present all of the facts, both pro and con on the issue, and did not present options for addressing concerns. She said the discussion on the issue to date has been emotional and full of opinions and views. The facts have not been clearly explained. She does not believe the Council can do this work tonight, and she favors further discussion at a study session. Councilmember Johnson concurred with Councilmember Black's comments. She suggested that the Charter Commission could be invited to attend and participate in the upcoming study session on the issue. Councilmember Wold asked if any new information was presented by the Charter Commission regarding this amendment. Assistant Manager responded no. Councilmember Wold stated that in light of no new information being presented, he is perplexed why the Council would again discuss the issue. He has heard all of the arguments against the proposed Charter amendment and was not persuaded. Councilmember Wold said that the Council should reconsider an issue if there is a problem with the method of voting, new information, or some issue not given due consideration. In this case, the Council saw all of the facts, studied the issue, and overwhelmingly voted to support it. He believes the Council should move on to other issues. Councilmember Spigner agreed that the Council should not spend additional time on the supermajority vote issue, especially at a study session. She supports Option 3 to take no action on the Charter Commission's request. Councilmember Johnson said that there are new members on the City Council and the Charter Commission. She said the argument was made during the 1996 Council discussion, that the voters, through implied approval, were supporting the supermajority issue because candidates had included that in their campaign literature. She has heard all of the arguments, but has not had the opportunity to discuss and weigh the arguments with the City Council. Chuck Lymangood, 11780 40'' Place North, spoke in favor of the item. He said that the City Council took action at the November 12 study session to place the issue on an upcoming study session agenda; however, the Charter Commission was told that the Council took no action. He spoke with the Mayor today and believes that the Council should hold a meeting on the issue, with an invitation to the Charter Commission to attend the meeting, and that the Council should take a vote to rescind or not to rescind. He believes that a vote should be taken by the Council in order to clarify the misunderstandings M11 Proposed City Council Minutes January 7, 1998 Page 14 that have occurred. He believes that a lack of proper communication between the City Council and the Charter Commission is interfering with the addressing of the issue. The Charter Commission was told that the Council took no action, so the Commission twice more asked the Council to consider the issue. He suggested that the Council place the issue on an agenda as soon as possible. Mayor Tierney said that the issue should be addressed in a study session by April 1 so that the City Council could then place the issue on a regular agenda or conduct a public hearing. She agrees that the issue should be considered at a regular meeting with the Charter Commission present. Councilmember Preus said that the Council has already placed the item on a future study session. He is not ready to commit to a regular Council meeting or public hearing on the issue. Councilmember Black said that citizens need information on the supermajority issue in order to make an educated vote. She would like to get information on the pros and cons of the proposal to the public. Motion was made by Councilmember Johnson, seconded by Councilmember Wold, that the upcoming Council study session be held in the Council Chambers, videotaped, and replayed on Channel 37. Councilmember Wold agreed that the public should have the right of greatest access to that meeting. Councilmember Johnson said that although all City Council meetings are noticed, she would like to generate additional interest and notice of the study session. Motion to amend was made by Councilmember Preus, seconded by Councilmember Wold, to establish the study session on the supermajority vote issue on March 11 at 7:00 p.m., with the Charter Commission invited to attend. Motion to amend carried, seven ayes. Main motion as amended carried, six ayes; Spigner nay. Item 8-C (9-G) Discussion of Mr. Lymangood's Forum Comments Councilmember Wold said that Mr. Lymangood's comments at a previous Plymouth Forum were tabled to this meeting, as well as the content of those 1"I Proposed City Council Minutes January 7, 1998 Page 15 comments which were regarding a December 2 memo written by Mayor Tierney. Chuck Lymangood, 11780 40" Place North, referenced the placement of this item on the agenda. He said that his tendency would be to address issues contained in the Mayor's memo item by item; however, he will not do so because he does not want to "make a war." He said that when two Council members purposefully place an item at the end of the agenda and involve the City Manager's office in doing so, it is disrespectful to him. He said it was also disrespectful that the staff report distributed to the City Council and the news media included the Mayor's memo but not his memo which attempted to make peace on the issue. Mayor Tierney said that the City Council has received both her memo and the response of Mr. Lymangood. She directed staff to provide both memos to the news media. Councilmember Johnson said that no disrespect was intended with respect to the placement of this item on the agenda. Councilmember Black requested that Mr. Lymangood be allowed to make his comments without interruption. Mr. Lymangood said that he had taken the time to write a memo and expected it to be included along with the Mayor's memo, as a matter of respect. He said the issue for the City Council is how the Council is going to conduct debates and discussion in a respectful manner in order to get to the issues and not interject personalities. He distributed a list of observations about the Mayor's memo and suggestions for the City Council. He read an excerpt from Dr. Martin Luther King's speech "I Have a Dream." Mr. Lymangood said it is his dream that the citizens, employees, and elected leaders of Plymouth would be judged not by the color of false accusations made about them, but by the content of their contributions to the City of Plymouth. Councilmember Black said that she believes each individual is entitled to their view on the supermajority vote issue. She may vote against the proposed amendment when it appears on the ballot, but it is her view that residents deserve the opportunity to vote on the issue. She is concerned about the attitude, tone, and statements in the Mayor's memos of December 2 and December 30 because she believes the correspondence was disrespectful to Mr. Lymangood and potentially disrespectful to City Council members. There have been accusations that the supermajority vote issue has eroded the public trust of the voters. She takes issue with that statement. Several X50 Proposed City Council Minutes January 7, 1998 Page 16 candidates placed the supermajority issue on their campaign material because they believed there is already a breach of confidence by the public in local government. One of those reasons is that they feel their taxes, at times, have been increased unduly to pay for programs they do not want. The supermajority issue was proposed to help restore the public's confidence and give them the opportunity to vote on the issue. Councilmember Black said that it is her view that a single issue, such as the proposed supermajority issue, cannot erode public trust. It is the handling of the issue that erodes public trust, i.e. including bickering, bringing in of personal views, emotional discussions, disrespect shown others. She believes that the Mayor's memo of December 2 and letter of December 30 promotes that kind of distrust through its tone and content. She said the December 30 letter stated that not all council members voted in favor of the Pro -Plymouth Pledge. She has reviewed the alternatives discussed by the Council and noted that all versions contain the language, "to be civil to our fellow councilmembers, staff, and citizens by dealing courteously, honestly, and respectfully, and refraining from personal attacks." Even though some members may have not voted for the Pro -Plymouth Pledge, they in effect voted for that language because it was in all proposed versions. She would like a factual presentation on the supermajority issue so the voters have as much information as possible when voting on the issue. She would like an explanation and clarification of certain statements in the Mayor's memos such as "in -your -face intimidation", "silencing my expression of concern," and end run around the Charter Commission." She doesn't know what these comments mean and doesn't believe this was done. The Charter Commission receives notices of the Council meetings, and she asked what additional notice they desire. Mayor Tierney said that some of the statements noted in her memo and letter related to occurrences of the prior City Council. She agrees that it is the handling of an issue that erodes public trust and this has happened to a certain extent on this issue. She is concerned that there is a potential for two conflicting issues to come before the voters, and she believes it is time that the Council and Charter Commission meet to discuss the issue. Mayor Tierney volunteered to privately or publicly meet to discuss past behavior of Councilmembers. She said that the Charter Commission has requested that the Council meet with them. It is not friendly that the City Council has not honored the request or made an adequate response. She believes it is positive that the Council has now agreed to meet with them. Councilmember Spigner said she doesn't believe that the Council has honored the Charter Commission's request to meet with them. She clarified that the s) Proposed City Council Minutes January 7, 1998 Page 17 City Council has set a study session to study the supermajority vote issue, and the Charter Commission is welcome to attend. Assistant Manager Lueckert said it is her understanding that the Council will conduct a study session and the Charter Commission is welcomed and invited to attend. Mayor Tierney said she would be willing to meet with Councilmember Black to review other details in her December 2 and 30 correspondence. Councilmember Spigner said that she would like the Mayor to explain specific issues in her letters with the entire Council. Councilmember Wold said that he is concerned with many issues in the Mayor's letters that are too numerous to discuss at this meeting. He said that the letters accuse him of doing something that was politically -motivated and not policy -motivated, of playing games, and of doing a variety of things that he did not do. He believes that the Mayor made unfounded and unsupported accusations against a former Councilmember. Councilmember Wold asked whether the Council is now going to take an issue that was overwhelming supported by the City Council and play games with it. He said the Mayor compared this Council to the "dark days of the past" when letters were sent to the editor of questionable tone, theme, and fact. However, this has not been recently repeated. Councilmember Wold said the Mayor's memos are disturbing, and he suggested that the Mayor rescind the memos and admit that they were ill-conceived. He stated that Mr. Lymangood asked for a simple apology which the Mayor responded to with another vicious attack against Mr. Lymangood and other former Councilmembers. He is saddened and very concerned where the Council is headed. Mayor Tierney said there is remaining business on the agenda and this issue can be discussed later. Councilmember Wold said he will not relinquish the floor. Mayor Tierney said that when she tried to speak on this issue 1 '/z years ago, Councilmember Wold strongly spoke up and said that Mayor Tierney was not allowed to speak and that the Council did not want to hear her concerns. She deeply resents that the Council voted to call the question in order to cut off her concerns. She recognized Councilmember Johnson. Councilmember Preus made a point of order. He said that Councilmember Wold has the floor, and the Chair does not have the right to unilaterally take it S.t Proposed City Council Minutes January 7, 1998 Page 18 away. The five-minute rule does not apply to Councilmembers, and he requested that Councilmember Wold be allowed to continue his comments without interruption. Mayor Tierney reminded Councilmember Wold that the behavior requested by the Council tonight is the same behavior that she expected of the Council 1'/2 years ago when discussing the supermajority issue. She supports allowing members to fully speak on issues. Councilmember Wold responded that under parliamentary procedure, once a motion has been adopted to call the question, there may be no further discussion. He characterized the Mayor's correspondence as "bashing a former councilmember." Councilmember Johnson said that during her campaign she brought forward a complaint against a former councilmember for a violation of the Pro Plymouth Pledge. She. said that everyone makes mistakes, and the Council needs to move on with its business. If Councilmembers want to get into details of a memo, then the issue should be placed on a study session. Councilmember Spigner said that these are good points; however, her main concern is the image that has been placed on the City Council by these memos. She said the Council can place this item on a study session to "cover up" the discussion. She does not want only one or two council members to meet with the Mayor for clarification of the issues when the entire Council and the public need clarification. She said that some of her constituents have read these memos, and they have unanswered questions. She stated that the public does not understand why the Council is bickering on the dais, and she believes that the City Council should review the document under which they have chosen to govern their behavior. Councilmember Johnson stated that her intent was not to cover up issues by placing the discussion on a study session. Mayor Tierney said that she would be willing to meet with some or all Councilmembers to discuss the issues in her memos. She noted that the Council had tabled this agenda item until all Councilmembers could be in attendance. However, the supermajority vote issue came before the City Council when she was not present at the meeting. When she expressed her displeasure that action was taken at a meeting when she, as a representative of the Charter Commission, was not present to participate, she was informed that it was not appropriate for her to be speaking. S3 Proposed City Council Minutes January 7, 1998 Page 19 Mayor Tierney said that the accusation that the Charter Commission violated the Open Meeting Law is not correct, and it puts the City in a potentially embarrassing situation. She said this is an internal Council issue, and she took deference from past antagonistic behaviors on the part of some Councilmembers. She said that when a person appears at a meeting with a war book to discuss a divisive issue, it is evidence of what she has been tolerating from a certain councilmember or others. She believes it sends a message. Mayor Tierney called the next agenda item. Councilmember Wold said that he refuses to move on to the next agenda item. He said the Mayor is making innuendo and speaking to the intent of others' behaviors which is a problem and her assumptions are completely inaccurate. He said that it is not his fault that the Mayor wrote these memos, that she mischaracterized this issue and the events surrounding this issue, or that she attacked Mr. Lymangood and the entire City Council. Motion was made by Councilmember Johnson, seconded by Councilmember Black, to suspend the rules by moving to the other items on the agenda, and when those are completed to continue the discussion on this item at this meeting. Motion failed: Johnson and Tierney ayes; Bildsoe, Wold, Preus, Spigner, and Black nays. Motion was made by Councilmember Wold to postpone this issue to the next regular Council meeting. Mayor Tierney ruled that the motion died for lack of a second. Mayor Tierney stated that she will call a special meeting to provide history on this issue. She said there is a lack of understanding about this issue and her feelings, which largely relate to the previous Council. She believes it is counterproductive for this Council to bring up this issue, and she applauds the efforts of this Council for agreeing to meet with the Charter Commission. She called the next agenda item. Councilmember Preus stated that during the past six weeks, Mr. Lymangood has been publicly attacked and unfairly insulted. However, Mr. Lymangood recommended a solution on the last agenda to get a good, positive relationship between the City Council and the Charter Commission. He said that Mr. Lymangood's conduct and statements on this item are peaceful. He has suggested that the Council should stick to the issues and has provided a list of five suggestions for consideration. 5-1 Proposed City Council Minutes January 7, 1998 Page 20 Councilmember Preus stated that Councilmember Black did an excellent job of discussing concerns and asking good questions in a conciliatory manner about the two memos written by the Mayor. He believes that Councilmember Black deserves an answer to her questions tonight. He said that Councilmember Spigner spoke to the public's desire to understand this issue, for the Council to address substantive issues, and to end personal attacks. He believes that the City Council has been incredibly productive during the past three years, and 1998 can be equally as productive. This can be accomplished in a peaceful or combative fashion. He said that Councilmember Black indicated that the Mayor's memos of December 2 and 30 are combative, and he was personally offended by many of the statements which were unfair and untrue. He suggested that the Mayor retract the memos so the Council can move on with its business in a peaceful and productive manner. He said that he had called the Mayor a week ago and asked her to apologize and retract the letters, which would be an honorable and good thing. Mayor Tierney said that she has apologized to Mr. Lymangood for being hasty in writing the first memo. She doesn't know how to retract a memo that she believes contains truthful information. She admits that the memo was written in anger due to frustrations with past behaviors. She doesn't appreciate when the Council is discussing a sensitive issue to have someone declare that "this is going to war." She found that statement offensive. She apologized for typos in the memos and for writing down what she could have said in public. She will call a meeting to discuss it further. Councilmember Black agreed with Councilmember Preus that it is important that the Mayor apologize and move on. She has read all information on the proposed supermajority issue and disagrees that the content of the Mayor's December 2 and 30 memos is fact. She believes that some fact is contained in them, but it is colored by the Mayor's anger and frustration which puts it into the realm of offending Mr. Lymangood, as well as Councilmembers. She said that the Council is not asking the Mayor to apologize for the fact that is contained in the memos. The Council is asking for an apology for the tone and personal perspective that slanted the facts in the memos. Mayor Tierney suggested that if Mr. Lymangood would come forward and state that he is not declaring war on this issue, they could shake hands and declare the issue closed. Councilmember Johnson suggested that the Council act on the five suggestions submitted by Mr. Lymangood. lSt Proposed City Council Minutes January 7, 1998 Page 21 Motion was made by Councilmember Johnson, seconded by Councilmember Black, to respectfully request the Plymouth Charter Commission to consider adding at each of its subsequent annual meetings a provision for public input. Motion carried, seven ayes. Motion was made by Councilmember Johnson, seconded by Councilmember Black, to adopt RESOLUTION 98-30 REGARDING PREPARATION OF CITY COUNCIL MINUTES. Motion carried, seven ayes. Mayor Tierney asked Mr. Lymangood to come forward to shake hands and put the issue to rest. Councilmember Preus said that Mayor Tierney's proposal that Mr. Lymangood come forward and shake hands is premised on the Mayor's conclusion that Mr. Lymangood declared war. This conclusion was unfairly drawn because Mr. Lymangood had a book with him which has the primary purpose of avoiding war. Councilmember Preus said that Mayor Tierney is now asking Mr. Lymangood to defend himself, giving the impression that he is no longer declaring war. He said these are unfair allegations, and the Mayor should retract the statements and shake Mr. Lymangood's hand. Mayor Tierney said that she did not state Mr. Lymangood was declaring war in her memos, and she had supplied additional information in her correspondence on the book he was carrying. She said that because Mr. Lymangood did not explain why he was behaving in the way he was, she was left to make her own conclusions based on past behaviors. She said that she has been at odds with him in the past, and suggested that it be put in the past now. Councilmember Black said that from reading Mayor Tierney's memo of December 2, she believed that Mayor Tierney was stating that Mr. Lymangood was declaring war, based on the title of the book he was carrying. If that was not Mayor Tierney's intent, it was not clear. Mayor Tierney said that she had not heard why Mr. Lymangood carried this book to the Council study session and, therefore, individuals are left to their own devices to interpret his intent. Councilmember Black said that at the November 12 study session, Mr. Lymangood held up the book and talked about how it referenced avoiding war. f& Proposed City Council Minutes January 7, 1998 Page 22 Mayor Tierney said that when a sensitive issue is being discussed, individuals should show sensitivity toward it. There was not the sensitivity that she would like to have seen at that study session. She asked Mr. Lymangood to address the issue. Mr. Lymangood said that he attended the study session on November 12 and had two books with him. The second book was on composting. He questioned the right of a public official to make an interpretation and put these words in print, when a citizen is silently reading a book. He said that Roberts Rules of Order clearly states that the Council is prohibited from inferring intentions from people's actions and directed to address the issues. He was silently reading a book and never referred to it at that meeting. Mr. Lymangood said that he was bored at the study session, and left for 20 minutes to go for a jog. He said that he was exercising his legal right to tape the meeting, and the City Manager asked for a copy of the tape to help make the meeting minutes. He said that the Mayor wants to shake his hand, but won't publicly apologize for misspelling his name four times. Mayor Tierney apologized for misspelling Mr. Lymangood's name four times. She said it was a hurriedly written memo and that she had earlier apologized to Mr. Lymangood for the misspellings. Mr. Lymangood said that the Mayor placed a document into the public discussion and now believes that a private apologize suffices; however, the public insult remains. He said that if the Mayor would apologize for violating the Pro -Plymouth Pledge and for wrongly inferring intentions, and would commit tonight to deal with the issue and not personalities, he would shake her hand. Mayor Tierney apologized for misspelling Mr. Lymangood's name. She said that the memo was hastily written and that she was very frustrated with a year- long discussion of an issue that she would like resolved, rather than taking time at each Council meeting. She said that she had thought there was a reason that Mr. Lymangood was holding up a book on war, and that he was not just reading it. Mayor Tierney said that she would like to shake his hand because there appears to be a misunderstanding about what that meant. If it meant further problems, it should be openly discussed. She said that she cannot apologize for a misinterpretation of Mr. Lymangood's intent when she knows that it has been part of his conversations for years. She said that she did not know what he meant by his action and apologized if her inference was wrong. Y471 Proposed City Council Minutes January 7, 1998 Page 23 Councilmember Preus said that the Mayor is wrong and should apologize. He said the Mayor proved she is wrong with her statement that she does not know Mr. Lymangood's intention. Yet, she put the worst conceivable interpretation of his acts. He said that this is not what anyone else wants and asked that the Mayor apologize. Mayor Tierney said that she has apologized. Motion was made by Councilmember Spigner, seconded by Councilmember Black, "Whereas, in light of the content of the Mayor's memo of 12/2/97, the way in which it was presented, and her refusal to publicly apologize to Chuck Lymangood and to the Plymouth City Council, therefore, be it resolved that the Mayor's above referenced actions violate sections 2, 3, 4, and 6 of the Pro Plymouth Pledge." Councilmember Johnson requested copies of the Pro -Plymouth Pledge, which staff distributed. Councilmember Spigner said that this issue may be too imbedded to address tonight, and the Council needs to move ahead to consider other items on the agenda. She said that tonight's meeting is important because the Council will be making appointments to boards and commissions, designating the official newspaper, and acting on other important citizen issues. She personally apologized to the citizens for anything they observed at this meeting and disagreed with or didn't like. She said this was not representative of Plymouth's elected officials. She asked that the Council move on to other issues. Councilmember Johnson stated that it is difficult for her to support the motion because she feels it is uncharted territory. She said that no one has previously brought forward a violation of the Pro Plymouth Pledge; however, past minutes indicate that there have been violations by various council members. She said that she believes someone violated the Pledge against her last year. She brought the issue to the City and nothing happened. She cautioned the Council to be careful and thoughtful before deciding consequences of violating the Pledge. Councilmember Spigner said the Council is just making a statement of fact and moving on. She doesn't believe there are any consequences; it is merely a public statement of fact. Motion carried: Wold, Preus, Spigner, Bildsoe, Black, and Johnson ayes; Blac-kTierney nay. Proposed City Council Minutes January 7, 1998 Page 24 Motion was made by Councilmember Preus, seconded by Councilmember Black, to adopt RESOLUTION 98-31 TAPING OF SPECIAL CITY COUNCIL MEETINGS. Motion carried, seven ayes. Councilmember Johnson said that this could be done by audio or video tape. Motion was made by Councilmember Johnson, seconded by Councilmember Black, to direct staff to make copies available free of charge to whomever asks of all three memos, and any other documents deemed appropriate, pertinent to this subject. Motion carried, seven ayes. 8-1) (6-A) Approve Minutes Councilmember Spigner asked for clarification on the draft minutes of the November 12 Special Council meeting. M ager Johnson explained that discussion on the Wellness Committee prop_ 1 has been added to the draft minutes of November 12, submitted by staff fo\ Regul he City Council. Motion Councilmember Johnson, seconded by Councilmember Spignehe proposed minutes of the November 12 Special CouncDecember 10 Special Council Meeting, and the Decemouncil Meeting as submitted with the January 7 agenda packet. Councilmember Preus made a orrection to Page 8 of the December 10 Special Council meeting minute reflect the vote on the motion to set the Council conference and travel budg at $4,500. This change was accepted as a friendly am dment to the main motion. Motion carried, seven ayes. Item 8-E (6-Z) Outdoor Mobile Performance Stage Councilmember Preus said that it is his understanding, b ed on the staff report, that the City previously rented a portable stage t e City of Richfield at the cost of $1,000 per day. This option is no longe vailable, and the cost of purchasing a stage is estimated at $85,000. He asked iher alternatives were considered, including renting from entities other tha the City of Richfield. AN INFORMATION REPORT AD - TAIX AN® EXPHN01TURE LIMITS ON L®CAL. G®VER/VMEJVTS Center for Urban Policy and the Environment Indiana University Advisory Commission on Intergovernmental Relations March 1995 M-194 INTRODUCTION States have imposed a variety of statutory and constitutional limitations on local fiscal autonomy. These limitations, which exist in 46 states, have: Resulted in more use of fees and mis- cellaneous revenues and less use of broad-based tax sources; Shifted power and responsibility to the state through increased reliance on state revenue sources and state assumption of service responsibili- ties; and Shifted responsibility for local gov- ernment functions through the cre- ation of special districts. I The limitations have been designed osten- sibly to (1) control and reduce property taxes, 2) control the growth of government and pub- lic spending, and (3) improve fiscal account- ability.2 This report presents the results of an extensive study of local tax and expenditure limitations (TELs) imposed by states. The study emphasizes design, amount of allowable growth, affected local governments, circum- vention mechanisms, length of implementa- tion, and significant alterations. TAX AND EXPENDITURE LIMITATIONS IN CONTEXT Many explanations have been offered for the most recent wave of tax and expenditure limitations—the so-called "tax revolt." Most of these explanations suggest that Qovernment had become too large to suit the voters, and that the intended effect was a scaling back of government. However, support for limitations occurs relatively independently of the public's desire for government services. In fact, many surveys in states with TELs suggest that citi- zens were satisfied with the level of public ser- vices and often desired more, but simply wanted to avoid paying for them.3 The local property tax was the initial tax limitation target. This tax is highly visible and has historically raised the ire of taxpayers.4 The earliest efforts to limit property taxes took place in the 1880s—a period associated with the emergence of local home rule—and they have continued, augmented by limitations on state and local general revenues and expendi- tures. Tax and expenditure limitations impose potentially formidable budgetary constraints. However, with continued demands for public services, these constraints will often cause dis- tortions in the structure of state and local rev- enue and expenditure systems and in the distribution of relative levels of responsibility for providing government services. Currently, states impose one or more limi- tations on the ability of local governments to raise revenue and spend money (see Box on next page). The most common categories of limits are those on: ECJ Overall property tax rates; Specific property tax rates; Property tax levies; General revenue or expenditure increases; TYPES OF LIMITS Overall Property Tax Rate Limit Sets a ceiling that cannot be exceeded without a popular vote. Applies to the aggregate tax rate of all local governments. Is potentially binding if coupled with a limit on assessment increases; otherwise, it can be easily circumvented by altering assessment practices. Specific Property Tax Rate Limit Is the most common form of TEL. Sets a ceiling that cannot be exceeded without a popular vote. Applies to specific types of local jurisdictions (e.g., school districts or counties) or narrowly defined service areas. Is potentially binding if coupled with a limit on assessment increases; otherwise it can be circumvented by altering assessment practices or through interfund transfers for specific services. Property Tax Levy Limit Constrains total revenue that can be raised from the property tax, independent of the rate. Is often enacted as an allowable annual percentage increase in the levy. Is potentially binding because of the fixed nature of the revenue ceiling, but can be limited through diversification of revenue sources (which is its underlying intent). General Revenue or General Expenditure Increase Caps total revenue that can be collected and attempts to constrain spending. Is often indexed to the rate of inflation. Is potentially binding because of the fixed nature of the revenue or expenditure ceiling. Assessment Increase Controls ability of local governments to raise revenue by reassessment of property or through natural or administrative escalation of property values. Is potentially binding if coupled with an overall or specific property tax rate limit; otherwise it is easily avoided through an increase in property tax rates. Full Disclosure/Truth-in-Taxation Requires public discussion and specific legislative vote before enactment of tax rate or levy increases. Is nonbinding because a formal vote (generally a simple majority) of the local leg- islative body can increase the tax rate or levy. Source: Phil G. Joyce and Daniel R. Mullins, "The Changing Fiscal Structure of the State and Local Public Sector: The Impact of Tax and Expenditure Limitations," Public Administration Review 51 May/June 1991): 240-253. fil Assessment increases; and Full disclosure (truth -in -taxation) requirements. While none of the limits are necessarily binding with respect to the overall revenues or expenditures of local governments, some are more effective than others.5 Limits on annual increases in property tax levies, annual revenue total or for specific types of local govern- ments), and expenditure increases are poten- tially the most binding because they impose a fixed ceiling. At the other extreme, full disclo- sure is a minimal constraint that requires only a public hearing and a simple majority vote by the legislative body to override and raise a property tax levy (even if there is no tax rate increase). Overall limits on the combined property tax rate levied by all local jurisdictions (e.g., county, municipality, and school district) and limits on the property tax rates of specific local governments are potentially significant and binding if they are combined with a limit on assessment increases. Otherwise, rate limita- tions may be circumvented by changing assessment practices. Likewise, limits on assessment increases are not binding without rate limits. There is considerable variation in the use of limitations (see Table 1, page 5): 36 states have a combination of limits Arizona, California, Colorado, and New Mexico have the most restrictive combinations). 12 states limit overall property tax rates. 30 states limit specific local govern- ments' tax rates (24 limit counties; 27 limit municipalities; and 23 limit school districts). 27 states limit local tax levies (24 limit counties; 24 limit municipali- ties; and 15 limit school districts). 6 states limit the growth in assess- ments. 2 states limit general revenue growth one limits counties, municipalities, and school districts, and one limits only schools). 8 states limit expenditure growth (4 limit only schools, and 4 limit coun- ties and municipalities). 22 states (at least) have some form of full disclosure requirement (4 have no other limitations). 4 states (Connecticut, Maine, New Hampshire, and Vermont) do not have limits. There are various mechanisms to suspend limits, ranging from simple local legislative votes to authorization by state tax commissions and state legislatures to popular referendums. Limits also are applied to varying tax bases. Most of the limits exempt long-term debt service costs. The exemption may offer an incentive to reclassify expenditures and shift the revenue structure to include a higher reliance on debt financing. Focus OF THE REPORT This report focuses on limits imposed on counties, municipalities, and school districts. Each type of jurisdiction is considered sepa- rately because, with the general exception of assessment limits and full disclosure provi- sions, fiscal constraints are not applied uni- formly. Limits on special districts and specific functions were not considered. Limits on local sales tax rates are not specifically included, but they may be in overall revenue limits. Previous examinations of TELs have tended to neglect school districts.6 This appears to be a significant omission, given that school districts accounted for 37 percent of total local expenditures in 1991.7 Limitations on school districts, counties, and municipali- ties are often enacted together. Allowable Growth The most significant structural feature of revenue, expenditure, and assessment limita- tions is the amount of allowable growth. Growth may be restricted to a specific percent- age increase. Nevada, for example, limits county and municipal annual property tax rev- enue increases to a flat 6 percent. The restric- tiveness of percentage limits is determined by general economic conditions. In periods of sig- nificant price inflation, real revenue or expen- diture growth may be seriously constrained. Some limits tie allowable growth to changes in inflation and/or population. In many cases, growth is allowed to keep pace with inflation to ensure sufficient resources to maintain pro- vision of goods and services (e.g., Illinois). Allowable growth associated with population change is intended to accommodate additional demands on government as a result of absolute increases in population, but not those associat- ed with real income increases or the effects of changes in population characteristics. With expenditure pressures generally unabated and increasing, if growth provisions are too stringent, governments may experience increasing fiscal strain, regardless of the absolute capacity of their potential resource base. Yet if growth factors are relatively relaxed, the limitation will have little effect. Overriding Limits Revenue and expenditure limitations often are constructed so that only property taxes are constrained, leaving other broad- and narrow -based taxes as alternatives. In these instances, local governments may turn to sup- plemental revenue sources. In a fiscal environ- ment that threatens to reduce government rev- enue and spending, evading limits is a logical strategy to sidestep (probable) reductions in programs, service provision, salaries, etc. Sometimes, such limitations are intended to shift reliance to other types of revenues. It also is common to include one or more circumvention mechanisms, usually in the form of voter overrides and exemptions. Voters may authorize an "excessive" overall increase or an increase for a specified purpose. Over- rides typically require a simple majority, although several states require a supermajority. The most common limitation exemptions include special levies (e.g., for roads, recre- ation, mental health centers); debt service typically general obligation bonds); court judgments; and pension liabilities. Less fre- quent are exemptions for home rule or charter local governments, appeals to a state board, and excessive increases decided by the vote of a jurisdiction's governing body. METHODOLOGY The tables in this report present compara- tive information on limitations in effect for each state, including the original effective date of the provision. Amendments that significant- ly altered the limitation's structure have been noted when appropriate dates could be deter- mined. This information is essential for an accurate assessment of a limit's impact, as the effects are expected to grow over time. A decade ago, Steven Gold called the information available on tax and expenditure limitations "piecemeal, scattered and of incon- sistent quality.118 That information remains inconsistent and often contradictory. The data for this study were gathered through extensive legal research (see Appendix A for legal cita- tions), follow-up surveys of state and local officials, and telephone conversations. S 0 PROPERTY TAX RATE LIMITS: OVERALL AND SPECIFIC GENERAL Rate limits are the predominant form of state restrictions on local property taxes. Local governments in 33 states are affected by over- all and/or specific tax rate limits. HISTORICAL TREND The specific rate limits in use in nine states were enacted from the 1870s through the 1890s. Rate limits (in combination with debt limits) originated as a reaction against the local government practice of financing private enter- prise, particularly railroad expansion, for pri- vate benefit.9 Public demand for accountability in government spending also has acted as a cat- alyst for rate limits since the 1800s. Between 1914 and 1939, seven states adopted overall rate limits, and ten states adopted a specific rate limit for at least one type of local government. In 1932, negative reaction to increasing tax levies in Michigan led to a voter -initiated amendment to the state Constitution that created the state's initial limit. The latest wave of limits started in the 1970s. Overall limits were enacted in Alabama 1972), California and Idaho (1978), and Ari- zona (1980). Two statutory provisions strengthened existing constitutional amend- ments (Nevada and Washington). Although the popularity of rate limitations waned in the 1980s, there has been an increase in activity in the 1990s: A 1991 voter initiative enacted Ore- gon's overall property tax rate limit. A 1992 constitutional amendment in Colorado limits a district's tax rate to that of the prior year, unless a majori- ty of the electorate approves an increase. Minnesota repealed the specific rate limit on municipalities effective fiscal year 1992-93. Effective 1993-94, Wisconsin's coun- ties are limited to the FY 1992-93 tax rate. STRUCTURE Overall Rate Limits A rate limit's restrictiveness depends on the maximum limit, definition of the taxable base, voter overrides, exemptions, and whether assessment increases also are limited. Maximum authorized rates range from 0.5 percent (Class I property in Kentucky) to 3.64 percent (Nevada). A 1.0 percent aggregate limit is imposed on all property classes in five states, on Class III (residential) property in Alabama, and on Class II (residential) property in West Virginia. The effects of the rate limit vary greatly by state because real property valuations are based on measures as diverse as acquisition cost, market value, cash value (adjusting for depreciation), and true cash value. Assessment ratios also vary from 30 percent to 100 per- cent.10 For example, a 1 percent rate is applied to assessed value that is one-third of market value in Ohio and full cash value in Arizona. Oregon's limit is applied to real market value, with a 100 percent assessment ratio. If property values and rates were held equal between Ohio and Oregon, Ohio's fractional base would make its limit three times more restrictive. Most states exclude debt service, but a few states include it in rate limits. One exam- ple is Nevada, which also has the highest absolute rate of 3.64 percent with an allowable increase of up to 5 percent if directed by law. West Virginia includes county and municipal debt service but not that of school districts. In California, exclusions for debt service on bonds issued after July 1, 1978, require a two-thirds majority vote of the public. In Washington, the limit may be exceeded to pay debt service on bonds if approved by a three- fifths majority vote of the electorate. Voter -approved additional levies are a common override mechanism (Arizona, New Mexico, Ohio, Oklahoma, Washington, and West Virginia). Oklahoma voters may approve an emergency 5 mill limit for school districts, a 10 mill local support levy, and others. Exclu- sions that allow special purpose levies outside of the limit also are common. Arizona excludes special districts from the limit, and Washington excludes debt service, voter -approved increas- es, payments on contracts, port and public util- ity districts, conservation futures, emergency medical service levy, and others. Specific Rate Limits Specific rate limits have features similar to overall rate limits. Voter -approved increases and special purpose levies are common fea- tures, and almost all specific limits exclude debt service. There also are some exceptions: 7 Nevada's 30 mill limitation on municipalities includes debt service, and there are no approved increases. Texas excludes county debt service for specified projects (e.g., dams and roads). All municipal debt service is included, with no special levies or approved increases. Kentucky counties and municipalities must have a two-thirds majority pop- ular vote to approve debt that exceeds total revenue in a given year. New York does not allow special pur- pose levies for counties, municipali- ties, or school districts, and includes debt service on short-term debt for non -capital purposes. New York is unique in applying its rate limits against the average full value of tax- able real estate for the preceding five years. This guards against an unusual- ly large tax bill in the event of a dra- matic increase in valuation. Illinois and North Dakota determine a local government's maximum rate by population. Pennsylvania and West Virginia set maximum rates by class of property, and Missouri and Utah use total assessed valuation. School districts in Iowa, Montana, and Nevada are subject to mandatory rather than maximum rates. A school district in Iowa that wants State School Foundation Program funds must levy 5.4 mills for its general fund. OVERALL PROPERTY TAX RATE LIMITS - SUMMARY PROFILE Twelve states have overall property tax rate limitations, 9 of them in the West or South. No northeasternstatesapplytheseoveralllimits. These limitations are relatively old, with 8 (66%) enacted prior to 1978. Elevenstateslimitratesacrossmultipleclassificationsofproperty (sometimes at different rates); one applies only to resi- dential property. Debt service is excluded from the limit in 9 states (75%), special purpose and excess levies areallowedin6states (50%), and home rule jurisdictions are exempted in 2 states. Six states also have general over- ride provisions through popular referenda (one state requires a supermajority). Occurrence Classification Exclusions Override Provisions Prior to 1978: 8 Multiple Classifications: 11 Debt Service: 9 Popular Referenda: 1978 or After: 4 Residential Only:1 Simple Majority: 5 Special Purpose & Supermajority: I Excess Levies: 6 Legislative: Home Rule Exemption: 2 Additional Levies: 1 Special Purpose Districts: 1 Temporary: 2 SPECIFIC PROPERTY TAX RATE LIMITS - SUMMARY PROFILE Specific property tax rate limitations are imposed by 30 states, and 88% of them were adopted before 1978. At least 9 states had some form of specific limitation before 1900, and 20 had them by 1950. In the Midwest, 83% of states impose specific rate limitations, followed by 76% for the West, 56% for the South, and only 33% for theNortheast. Over the last two decades, these limitations were applied most frequently to municipalities (29 states or91%). Counties were limited in 26 states and school districts in 24, while 21 states (66%) applied limitations to allthreesimultaneously. Exclusions and override provisions are common. Full or partial debt service exclusions existinatleast22states (69%). Special levies in excess of the rate limits are permitted in 19 states (e.g., salaries andpensions, fire services, capital outlays, and highways). Home rule communities are exempt in three states. In some states, rate limits apply only to general services, operations, or particular funds. General overrides are permitted bypopularreferendain21states, with a supermajority required in at least three. Occurrence Prior to 1978: 28 1978 or after: 4 Scope Units Applied to: Counties: 24 Municipalities: 28 School: 24 States Limiting All: 21 Exclusions Debt Service: 22 Special Levies/ Classifications : 19 Home Rule: 3 rv, Override Provisions Popular Referenda: Simple Majority: 18 Supermajority: 3 Legislative: 1 17 Colorado Constitution, Article X, § 20(3)(4). 18 ACIR, State Limitations on Local Taxes and Expenditures. 19 Research along these lines includes Helen F. Ladd and Julie Boatright Wilson, Proposition 2 112: Explaining the Vote (Cambridge: Harvard Uni- versity, John F. Kennedy School of Government, 1981); "Why Voters Support Tax Limitations: Evi- dence from Massachusetts' Proposition 2 1/2," National Tax Journal 35 (1982): 121-147; and Who Supports Tax Limitations: Evidence from Massachusetts Proposition 2 1/2," National Tax Journal 36 (1983): 256-279; Paul Courant, Edward Gramlich and Daniel Rubinfeld, "Why Voters Sup- port Tax Limitations: The Michigan Case," Nation- al Tax Journal 38 (1985): 1-20. 20 Robert M. Stein, Keith E. Hamm, and Patricia K. Freeman, "An Analysis of Support for Tax Limita- tion Referenda," Public Choice 40 (1983): 187- 194. 21 John E. Peterson, "Tax and Expenditure Limita- tions: Projecting Their Impacts on Big City Finances," in Kaufman and Rosen, eds., The Tax Revolts: The Case of Proposition 13 (New York: Harper, 1981). 22 Ladd, "An Economic Evaluation of State Limita- tions on Local Taxing and Spending Power," National Tax Journal 31 (1978): 1-18. 23 Perry Shapiro and W. Douglas Morgan, "The General Revenue Effects of the California Property Tax Limitation Amendment," National Tax Journal 31 (1978): 119-128. 24 Dale Bails, "A Critique of the Effectiveness of Tax -Expenditure Limitations," Public Choice 38 1982): 129-138. 25 Howard Chernick and Andrew Reschovsky, The Distributional Impact of Proposition 13: A Microsimulation Approach," National Tax Journal 35 (1982): 149-170. 26 Dennis Delray et al., Fiscal Restraints and the Burden of State and Local Taxes (Santa Monica, California: RAND, 1981). Roger Kemp, "California's Proposition 13: A One -Year Assessment," State and Local Govern- ment Review 14 (January 1982). 28 Danziger, "California's Proposition 13 and the Fiscal Limitations Movement in the United States." 29 Carolyn Sherwood -Call, "Tax Revolt or Tax Reform: The Effect of Local Government Limita- tion Measures in California," Economic Notes (San Francisco: Federal Reserve Bank, 1987). 30 Gary J. Reid, "How Cities in California Have Responded to Fiscal Pressures since Proposition 13," Public Budgeting and Finance 8 (Spring 1988): 20-37. 31 David Merriman, "The Distributional Effects of New Jersey's Tax and Expenditure Limitations," Land Economics 62 (1986): 354-361. 32 Sharon Bernstein Megdal, "Estimating a Public School Expenditure Model under Binding Spend- ing Limitations," Journal of Urban Economics 19 1986):277-295. 33 Lawrence E. Susskind and Cynthia Horan, Proposition 2 1/2: The Response to Tax Restric- tions in Massachusetts," in Lawrence E. Susskind, ed., Proposition 2 112 (Cambridge: Massachusetts Institute of Technology, 1983). 34 Richard J. Cebula, "Tax -Expenditure Limitation in the U.S.—Two Alternative Evaluations," Eco- nomic Notes (1986): 140-151. 35 These include Daphne A. Kenyon and Karen Benker, "Fiscal Discipline: Lessons from the State Experience," ,National Tax Journal 37 (1984): 437- 446; and Marcia Howard, "State Tax and Expendi- ture Limitations: There Is No Story," Public Budgeting and Finance 9 (1989): 83-90. 36 Joyce and Mullins, "The Changing Fiscal Struc- ture of the State and Local Public Sector." NOTES 1 James N. Danziger, "California's Proposition 13 and the Fiscal Limitations Movement in the United States," Political Studies 28 (1980): 599-612; and Philip G. Joyce and Daniel R. Mullins, "The Changing Fiscal Structure of the State and Local Public Sector: The Impact of Tax and Expenditure Limitations," Public Administration Review 51 May/June 1991): 240-253. z Advisory Commission on Intergovernmental Relations (ACIR), State Limitations on Local Taxes and Expenditures (Washington, DC, 1977); and James Danziger and Peter Smith Ring, "Fiscal Limitations: A Selective Review of Recent Research," Public Administration Review 43 (Janu- ary/February 1982): 47-55. 3 H.E. Brazer, "On Tax Limitations," in Norman Walzer and David Chicoine, eds., Financing State and Local Government in the 1980s (Cambridge, Massachusetts: Oelgeschlager, Gunn, and Hain, 1981). 4 In a survey conducted annually by the Advisory Commission on Intergovernmental Relations, the property tax'consistently ranks among the worst, or least fair, of major federal, state, and local taxes. It holds this distinction jointly with the federal income tax. During the 1970s, the property tax gen- erally was considered worse than the income tax, followed by a period from 1979 to 1988 when the income tax held this distinction. The property tax was worst again in 1989 and 1991 (see ACIR, Changing Public Attitudes on Governments and Taxes). 5 See Steven D. Gold and Martha Fabricius, How States Limit City and County Property Taxes and Spending (Denver: National Conference of State Legislatures, 1989); ACIR, Significant Features of Fiscal Federalism, 1992, Table 7; and Joyce and Mullins, "The Changing Fiscal Structure of the State and Local Public Sector." 6 Gold and Fabricius, How States Limit City and County Property Taxes and Spending. 7 U.S. Department of Commerce, Bureau of the Census, Government Finances: 1990-91 (Washing- ton, DC, 1994), Table 29. 8 Steven D. Gold, "Results of Local Spending and Revenue Limitations: A Survey," Perspectives on Local Public Finance and Public Policy 1 (1983): 109-147. 9 ACIR, State Limitations on Local Taxes and Expenditures; and Dennis R. Judd, The Politics of American Cities: Private Power and Public Policy, 3rd ed. (Glenview, Illinois: Scott, Foresman and Company, 1988). to National Property Tax Manual (Vertex Inc., 1991). 11 Gold, "Results of Local Spending and Revenue Limitations." 12 Gold and Fabricius, How States Limit City and County Property Taxes and Spending. 13 Citizens Research Council of Michigan, "Truth in Local Property Taxation and Assessment," Council Comments 929 (May 1982). 14 ACIR, State Limitations on Local Taxes and Expenditures. 15 "Proceeds of taxes" include general tax rev- enues, proceeds from investment of tax revenue, revenues from user fees and charges that exceed the cost of providing the service, and year-end unappropriated fund balances originating from tax sources. For local governments, proceeds also include state subvention revenue. California Tax Foundation, Up to the Limit: Article XIII B Seven Years Later (Sacramento, 1987). 16 California Taxpayer Association, Growth within Limits: Reshaping Article XIII B (Sacramento, 1988). 10 NCSLnet MFiscal Letter: State Tax and Expendit... Page 1 of 7 al ? 14 16 nlevia, 19, M e/ kV i lll _v 10 11111111THE FISCAL LETTER Government Finance Issues in the States The Fiscal Perspective: State Tax and Expenditure Limits by Mandy Rafool (mandy, rafoolnncsl. orQ), NCSL Fiscal Research Analyst Traditional Tax and Expenditure Limitations Other Tax And Expenditure Limitations Features of Tax and Expenditure Limitations Have Tax and Expenditure Limitations Been_ Successful? Stratevies to ManaLe State Tax and Expenditure Limitations Editor's Note FISCAL LETTER Government spending is out of control." "My taxes are way too high." "There must be some way to control the growth of government." Frequently uttered comments like these illustrate much of the sentiment driving the tax and expenditure limitation (TELS) movement in the states. Tax and expenditure limits have evolved to keep government spending in check by placing constitutional or statutory restrictions on the amount a government entity can spend or tax its citizens. Some states have multiple limits in place. This article provides an overview of traditional revenue and spending limits. It also describes other methods states use to limit government's ability to increase or impose new taxes, such as voter approval and supermajority requirements, and last, it examines the impact limits have on state government. States particularly susceptible to any kind of tax and expenditure limits are those states with citizen initiative procedures. Traditional Tax and Expenditure Limitations Traditional limits on state government are either revenue, expenditure or appropriation limits. The restrictiveness of these limits varies considerably as there are many different ways to define and calculate each limit. Variations make it difficult to categorize state limits, but generally, they fall into one of four categories described below: Revenue limits --Revenue limits tie yearly increases in revenue to personal income or some other type of growth index such as inflation or population. Only six states use revenue limits: Colorado, Florida, Louisiana, Massachusetts, Michigan and Missouri. The laws in each of these states provide for the refund of excess revenues to taxpayers. Expenditure limits --This is the most common type of state limit. Expenditure limits, like revenue limits, are typically tied to personal income or a growth index. However, expenditure limits curb state appropriations and are generally not as restrictive because it is easier for states to control spending levels than to anticipate incoming revenues accurately. The impact of expenditure limits on state government depends upon the limit parameters. In some states, like Colorado where increases in appropriations are limited to 6 percent of the previous year's appropriations, the limit is restrictive. But in most states, particularly those where the limit is tied to a growth index and the economy is expanding, the limit remains high enough to have little effect. Somewhat more restrictive are 2/26/98 / / 11:32:55 AM NCSLnet Fiscal Letter: State Tax and Expendit... Page 2 of 7 expenditure limit laws with refund provisions for revenues that exceed the authorized spending level. States with refund provisions include California and Hawaii. Appropriations limited to a percentage of revenue estimates --This type of limit simply ties appropriations to expected revenues. It does not establish a firm limit or tie growth to a measurable index. Delaware, Iowa, Mississippi, Oklahoma and Rhode Island have this type of spending limit in place. Hybrids --States also have combined limit features, creating hybrids. For example, Oregon's spending limit is tied to personal income growth, with a provision requiring refunds if revenues are more than 2 percent of the revenue forecast. IE Other Tax and Expenditure Limitations State laws may also dictate voter approval and legislative supermajority requirements that are not tax or expenditure limitations in the traditional sense. Such requirements can limit state revenue and expenditure options, so they are discussed here as limitations. Often these measures are more restrictive than traditional limits. Voter approval requirements --This is the most restrictive type of limit since all tax increases (or tax increases over a specified amount) must receive voter approval. Only three states have adopted voter approval requirements. Currently, Colorado requires voter approval for all tax increases, and Missouri and Washington require voter approval for tax increases over a certain amount. Supermajority Requirements --Recent debate over requiring a three-fifths vote of the United States Congress to raise taxes has rekindled interest in state supermajority requirements and how they affect state finances. As shown in Table 1, 12 states use supermajority requirements to restrict legislative fiscal power, with the possible addition of Nevada if approved by voters in November 1996. Supermajority requirements dictate either a two-thirds, three-fourths or three-fifths majority vote in both chambers to pass tax increases or new taxes. Table 1 : State Supermajority Requirements on Legislative Tax Powers State Adopted Referendum Legislative Applies To or Voter Majority Required Initiative Arizona 1992 I 2/3 All taxes Arkansas 1934 R 3/4 All taxes except sa and alcohol California 1979 I 2/3 All taxes Colorado 1992 I 2/3 All taxes Delaware 1980 R 3/5 All taxes Florida 1971 R 3/5 Corporate income to Louisiana 1966 R 2/3 All taxes 2/26/98 14 11:32:59 AM NCSLnet Fiscal Letter: State Tax and Expendit... Mississippi 1970 R 3/5 Oklahoma 1992 I 3/4 Oregon 1996 R 3/5 South Dakota 1978 I 2/3 Washington 1993 I 2/3 Notes to Page 3 of 7 All taxes All taxes All taxes Sales and income to All taxes *** Tax increases automatically sunset unless approved by the voters at the next election. The constitution limits the corporate income tax rate to 5 percent; 3/5 vote is needed to increase beyond 5 percent. Tax increases producing revenue that does not exceed the spending limit must be approved by two-thirds legislative vote; tax increases that produce revenue over the limit, must be approved by a two-thirds legislative majority and by the voters. Pending voter approval in November 1996: Nevada Source: NCSL Survey of Legislative Fiscal Officers, April 1996 Features of Tax and Expenditure Limitations States laws and constitutions prescribe various methods and formulas to determine the limits on taxes and expenditures. These include both absolute limits on revenue and spending, and limits on the size of revenue and expenditure increases. Expenditure or revenue growth may be tied to a certain growth percentage as in North Carolina where the spending limit is equal to 7 percent of state personal income. Limits also may be tied to the rate of growth in personal income or some other index like population growth or inflation, as in Utah and Washington. Some states, like Missouri and Michigan tie limits to a personal income ratio (total state revenues to personal income in the base year) from a specific year, and finally, some states limit appropriations to a percentage of the revenue estimate or forecast. Obviously different limit characteristics promote different results. Some of the variables are listed below, and all these factors contribute to the restrictiveness of state tax and expenditure limits. How was the limit initiated? Was it by citizen initiative or the legislature? Generally citizen initiated limits are more restrictive. Is it statutory or constitutional? Constitutional amendments are usually more difficult to change than statutes. Is it a limit on revenues or expenditures? As previously discussed, spending is easier for state governments to control. What is the basis of the limit? In many cases, the base year chosen to limit expenditures --often the late 1970s or early 1980s --was a high water mark for state spending. A high base year makes it less likely that a limit will be triggered. How much of the budget is limited? Often the limit only applies to the general fund. How much of the budget does that really limit? How are earmarked funds treated? What are the provisions for change? Most states build in flexibility by providing provisions for emergencies or long -run changes in basic economic characteristics such as a declining population or ongoing recession. What are the provisions in the limit for shifting program responsibility? Can government 2/26/98 /3 11:33:00 AM NCSLnet Fiscal Letter: State Tax and Expendit... Page 4 of 7 entities shift programs onto one another? How are surplus funds treated? Surplus funds in most states go into "rainy day" or other special funds; however, a number of states require refunds of surplus revenues. Table 2 summarizes state tax and expenditure limits. Table 2: State Revenue and Expenditure Limitations State Adopted Constitutional Limit Applies Nature of Limit or Statutory to Alaska 1982 Constitutional Appropriations Growth of population and i Arizona 1978 Constitutional Appropriations 7.23 percent of personal i California 1979 Constitutional Appropriations Personal income growth & p Colorado 1991 Statutory Appropriations Appropriations limited to 1992 Constitutional Expenditures & year's appropriations Revenue Spending limited to growth population and inflation, increases require voter ap Connecticut 1992 Constitutional Appropriations Greater of inflation or in growth Delaware 1978 Constitutional Appropriations 98% of estimated revenue Florida 1994 Constitutional Revenue 5 year average personal in growth Hawaii 1978 Constitutional Appropriations 3 year average personal in growth Idaho 1980 Statutory Appropriations 5.33 percent of personal i Iowa 1992 Statutory Appropriations 99t of adjusted general fu receipts Louisiana 1979, Statutory Revenue Ratio to personal income i 1993 Constitutional Appropriations Per capita personal income Massachusetts 1986 Statutory Revenue Growth of wages and salari Michigan 1978 Constitutional Revenue 9.490 of prior year's pers income Mississippi 1982 Statutory Appropriations 98%- of projected revenues Missouri 1980 Constitutional Revenue 5.64% of prior year's pers 2/26/98 H 11:33:01 AM NCSLnet Fiscal Letter: State Tax and Expendit... Page 5 of 7 Tennessee 1978 Constitutional Appropriations Personal income growth Texas 1978 Constitutional Appropriations Personal income growth Utah 1988 Statutory Appropriations Growth in population and i Washington 1993 Statutory Expenditures Growth in population and i tax increases beyond limit approval Source: NCSL Survey of Legislative Fiscal Officers, April 1996. Tqz Have Tax and Expenditure Limits Been Successful? Traditional Tax and Expenditure Limits. Most studies conclude that state limits alone have not been as effective in slowing down the growth of government as proponents envisioned. (They are much more effective when combined with local limits). This is primarily due to the way they are designed and how easily state governments can get around the limits. It is worth noting, however, that some of the most potentially binding state limits have passed since 1990 and have not been analyzed in any empirical studies. Another measure of effectiveness of a tax or expenditure limits is how often the state triggers the limit and what happens if it does. In most states, particularly those in which the limit is tied to a growth index and the economy is expanding, the limit remains high enough to have little effect. But 2/26/98 11:33:01 AM 1996 Constitutional Revenue income voter approval required fo increase over $50 million percent of state revenues Montana 1981 Statutory Appropriations Personal income growth Nevada 1979 Statutory Expenditures Growth of population and i New Jersey 1990 Statutory Appropriations Personal income growth North 1991 Statutory Appropriations 7 percent of state persona Carolina Oklahoma 1985 Constitutional Appropriations 12 percent adjusted for in 950 of certified revenue Oregon 1979 Statutory Appropriations Personal income growth Rhode 1992 Constitutional Appropriations 98% of projected revenue Island South 1980,1984 Constitutional Appropriations Personal income growth Carolina Tennessee 1978 Constitutional Appropriations Personal income growth Texas 1978 Constitutional Appropriations Personal income growth Utah 1988 Statutory Appropriations Growth in population and i Washington 1993 Statutory Expenditures Growth in population and i tax increases beyond limit approval Source: NCSL Survey of Legislative Fiscal Officers, April 1996. Tqz Have Tax and Expenditure Limits Been Successful? Traditional Tax and Expenditure Limits. Most studies conclude that state limits alone have not been as effective in slowing down the growth of government as proponents envisioned. (They are much more effective when combined with local limits). This is primarily due to the way they are designed and how easily state governments can get around the limits. It is worth noting, however, that some of the most potentially binding state limits have passed since 1990 and have not been analyzed in any empirical studies. Another measure of effectiveness of a tax or expenditure limits is how often the state triggers the limit and what happens if it does. In most states, particularly those in which the limit is tied to a growth index and the economy is expanding, the limit remains high enough to have little effect. But 2/26/98 11:33:01 AM NCSLnet Fiscal Letter: State Tax and Expendit... Page 6 of 7 in some states where spending increases are limited to a percentage of the previous year's appropriation, the limit can be restrictive. In addition, a few states have provisions requiring taxpayer refunds if the state hits the limit. California, Missouri and Oregon have had to rebate excess revenues. Although taxpayers' share of rebates is usually small, it is an effective way to control government growth, since to avoid paying refunds, state legislatures may reduce taxes to lower the revenue base. When it appeared that revenues in Michigan would exceed the limit in FY 1995, the Legislature cut state income taxes by 2 percent. In anticipation of triggering the limit in FY 1997-98, the Colorado General Assembly passed a number of measures in the 1996 session to reduce revenues including a child care tax credit, a reduction in the insurance tax rate and a sales/use tax exemption on manufacturing tools. This strategy, however, can create problems in slow growth years since the base is now at a lower level. Voter Approval and Supermajority Requirements. Many fiscal policy experts believe that voter approval and supermajority requirements have placed tighter constraints on state governments than traditional revenue and expenditure limits. Requiring voter approval for state tax increases is a fairly new practice that exists in only three states. As a result, the effectiveness of voter approval requirements does not have much of a track record. In 1992, Colorado became the first state to require voter approval for all tax increases and new taxes. Washington and Missouri also require voter approval on tax increases over a specific level. A simple way to measure the effectiveness of voter approval requirements is to look at the voter approval record. By using defeat as a measure, one can argue that the requirement is effective when voters say no to new taxes or tax increases. This happened in Colorado when voters rejected extending the tourism tax that supported the state travel office and tourism promotion. Many people felt that there was no need for a tourism tax and that they did not benefit from the revenues, so when given the opportunity, they voted it down. An interesting observation related to the perceived ineffectiveness of tax and expenditure limits is the number of states that have adopted supermajority requirements. As a tool to slow the growth of government and control tax increases and spending, they are thought by many tax reformers to be more effective than traditional limits. But the restrictiveness of supermajority requirements ultimately depends upon the make-up of the legislature and on the state's tax system. In states with one predominant party, it may be easier for the majority party to get enough votes to approve tax increases. In other states, the requirement proves very restrictive. Staff from supermajority states report that diligent consensus building by legislative leaders is necessary to gain approval of most tax increases. States with tax systems that fail to provide revenue growth commensurate with economic growth may have trouble coping with such requirements. Strategies to Manage State Tax and Expenditure Limitations The past 20 years demonstrate that state governments have managed to live with tax and expenditure limits and that many of the early gloom and doom prophecies have not been realized. Listed below are several strategies that states may have used to help manage limits. Build up the state's rainy day fund so money is available for slow growth years. Shift responsibility to local governments if permitted. Go to voters only in cases of emergency. Maintain the revenue base during slow growth years by planning on one-time tax refunds rather than reducing the revenue base permanently. Earmark new taxes, when needed, for a popular program to encourage voter approval. Prioritize spending and try to spend less; perhaps some government functions can be met throup,h the private sector. 2/26/98 6 11:33:01 AM NCSLnet Fiscal Letter: State Tax and Expendit... Page 7 of 7 Index fees and increase them on a gradual basis so that there won't be a need for a large increase at one time. Although these strategies are not necessarily considered good fiscal policy, they are tactics to help states manage under tax and expenditure limitations. Regardless of whether or not tax and expenditure limits achieve the desired outcome, more than half the states have some type of limit in place and it appears that they are here to stay. Anti-government sentiment remains strong and tax reform crusaders are quick to promote limits as a way to tie the hands of government. I Editor's Note Mandy Rafool is a Research Analyst with NCSL's Fiscal Affairs Program. This article was excerpted from a longer legislative finance paper she authored on state tax and expenditure limitations. The full report is available upon request through the NCSL Marketing Department at (303) 830-2054. The Fiscal Letter Vol. XVIII, No. 5, 1996 ISSN 0197-299XI Fiscal Affairs Program National Conference of State Legislatures 1560 Broadway, Suite 700 Denver, Colorado 80202 William T. Pound, Executive Director Editors: Karen Carter, Arturo Pdrez and Mandy Rafool (editor-fiscalQncsl.org) 2/26/98 / 7 11:33:01 AM Common Cause -- Washington Watchdog kww April 11, 1997 VOW , Dear Representative: Common Cause strongly urges you to vote against H.J.Res. 62, a Nlony constitutional amendment to require Congress to obtain a tr.a l X two-thirds majority vote to pass legislation which increases tax revenues. This requirement would fundamentally damage the principle of majority rule that is a cornerstone of our democratic system. The proposal would provide enormous and unjustified power to a IRKE: minority of Representatives. One-third of the House — ---144 AGTIO Representatives — would be able to block the will of a majority of0 £' " ` Y: Members of Congress on any matter that involved an increase in tax revenues. As the The Washington Post said in an editorial last year, the measure would "abandon the principle of majority rule. It would be a huge mistake, the ultimate mortgaging of future national welfare to present political weakness." The Constitution gives Congress the power, by a majority vote, to pass legislation to raise or lower taxes, to increase or decrease spending and to make other changes in law. If a majority of Members of either house of Congress decides not to raise taxes, taxes will not be raised. There is no reason to amend the Constitution simply because many Members oppose increasing taxes in principle. The will of the majority can and should be sufficient to decide the matter. Further, the proposal would limit Congress' ability to deal effectively with the federal budget deficit, particularly with wasteful corporate welfare. As budget expert Robert Greenstein has noted, "[t]he requirement for a two-thirds majority would apply not only to measures to raise tax rates but also to measures to cut unproductive tax expenditures that grant subsidies to powerful special interests." Thus, by limiting Congress' ability to approve tax increases, the proposal would hobble efforts to reduce or eliminate those corporate welfare tax breaks and loopholes which, if ended, will increase tax revenue now lost to wealthy corporations. Congress should be searching for ways to more vigorously attack corporate welfare benefits, not for ways to constitutionally enshrine corporate welfare tax breaks. The proposed amendment would also restrict Congress' ability to react to changed economic circumstances. In a rapidly changing economy, it is especially critical that Congress retain the flexibility to adapt government spending and revenue to the overall needs of Page 1 of 2 2/26/98 /g 4:43:59 PM Common Cause -- Washington Watchdog the nation's economy. Amending the Constitution is a serious matter and rarely done. Yet this resolution has been rushed through the House with minimal opportunity for public debate -- simply to accommodate the need for the political symbolism of a vote on April 15, the day tax returns are due. This process in itself shows flagrant disrespect for the Constitution. Common Cause strongly urges you to oppose H.J.Res. 62, the so-called tax limitation constitutional amendment, which would cede Congress' power over taxation to a small minority of the Congress. Sincerely, Ann McBride President Copyright 1997, Common Cause 2/26/98 / I Page 2 of 2 4:44:04 PM Which States Require a Supermajority Vote to ... WHICH STATES REQUIRE A SUPERMAJORITY VOTE TO RAISE TAXES? by Scott Mackey Changes Limits Implications Chart Return to Publications Directory Introduction Page 1 of 3 With the recent addition of Nevada and Washington, 12 states now have constitutional provisions requiring a "supermajority" vote to pass some or all tax increases. Arkansas was the first state to require that tax increases be approved by a margin larger than a simple majority. In 1934, Arkansas voters approved a constitutional amendment referred by the legislature that required a two-thirds vote to increase "the rates for property, excise, privilege, or personal taxes now levied." Courts have interpreted this amendment to apply only to taxes on the books in 1934, so sales taxes and alcohol excise taxes are exempt from the requirement. Louisiana added a supermajority requirement in 1956, as did Mississippi in 1970 and Florida in 1971. All three of these measures were joint resolutions adopted by the legislature and referred to the voters for approval. The Louisiana and Mississippi measures apply to all tax increases. The Florida measure applies only to bills that increase the corporate income tax above a constitutional cap of 5 percent. Changes Brought By Citizens The supermajority restrictions approved in the remaining eight states can be characterized as "tax revolt" measures. Restrictions in Arizona, California, Colorado, Nevada, Oklahoma, South Dakota and Washington were approved by voter initiative. Only in Delaware, which requires a three-fifths majority, was the measure referred to the voters by the legislature. California's "Gann Amendment," passed in 1979, was a continuation of the tax revolt that began in 1978 with the passage of Proposition 13. South Dakota's restriction also passed during the height of the'78 tax revolt. It applies to sales, income and property taxes. However, since the state has no personal or corporate income taxes, and property taxes are levied locally, the restriction applies only to the general sales tax. Of the measures passed this decade, Colorado's restrictions are the most severe. The Colorado legislature may pass an "emergency" tax increase with a vote of two-thirds of both houses. However, the tax increase will automatically sunset 30 days after the next general election unless voters decide 2/26/98 0?, 0 4:47:53 PM Which States Require a Supermajority Vote to ... Page 2 of 3 to make it permanent. s TR Limits on Select Taxes In addition to supermajority requirements, five states have constitutional prohibitions against certain taxes, or constitutional language that limits or otherwise restricts legislative consideration of tax changes. The Florida and Nevada constitutions prohibit the legislature from enacting a personal income tax. Wyoming's constitution requires that any income tax approved by the legislature provide a full credit for all other taxes paid; this restriction essentially nullifies raising any revenue by an income tax. Louisiana's constitution prohibits the legislature from increasing income tax rates or changing exemptions or tax bracket amounts. This provision has been in effect since 1934 when the state first adopted an income tax. Michigan's constitution sets the sales tax rate at 6 percent, and prohibits the legislature from taxing prescription drugs or food purchased for home consumption. i'TOR Political and Fiscal Implications Supermajority requirements for tax increases can strengthen the minority party in states where such votes are needed to pass a tax increase. In Arkansas, Louisiana and Mississippi, however, the majority party traditionally has had more than enough votes to approve tax increases along a party line. Staff from supermajority states report that diligent consensus building by legislative leaders is necessary to gain approval of most tax increases. Constitutional restrictions can affect the balance of tax sources by making it far easier for the legislature to raise one state tax more than another. It also limits a legislature's ability to undertake reforms that address tax balance or other issues. Florida and Louisiana, for example, rely more on sales taxes and much less on income taxes than the average state, particularly if local sales taxes are included. The potential spread of supermajority requirements is probably limited to the 24 states, mostly in the West, with the voter initiative process. They are just one of a number of "tax revolt" measures that may be favored by anti -tax or anti-government groups. The passage of five new supermajority measures since 1992 may lead such groups to seek their passage in the 12 other initiative states without such restrictions. Supermajority Requirements & Other Constitutional Restrictions on Legislative Tax Powers Referendum Legislative Year or Voter Majority State Adopted Initiative Required Applies to Arizona 1992 I 2/3 All taxes Arkansas 1934 R 3/4 All taxes except s California 1979 I 2/3 All taxes Colorado 1992 I 2/3 All taxes* Delaware 1960 R 3/5 All taxes Florida 1971 R 3/5 Corporate income t 2/26/98 4 / 4:47:55 PM Which States Require a Supermajority Vote to ... Page 3 of 3 Louisiana 1966 R 2/3 All taxes Mississippi 1970 R 3/5 All taxes Nevada 1994 I 2/3 All taxes Oklahoma 1992 I 3/4 All taxes South Dakota 1978 I 2/3 Sales and income t Washington 1993 I 2/3 All taxes*** Tax increases automatically sunset unless approved by the voters at the next e The constitution limits the corporate income tax rate to 5t; 3/5 vote needed t Tax increases producing revenue that exceeds the revenue limit must be approve About the Author: Scott Mackey is a program principal with NCSL's Fiscal Affairs Program in Denver. 2/26/98 07 V? 4:47:59 PM Westchester Today: News Page 1 of 1 O'Rourke presents bill requiring two-thirds vote to hike tax By David McKay Wilson OGannett Suburban Newspapers Westchester County Executive Andrew O'Rourke yesterday submitted a bill requiring that county legislators muster a two-thirds vote in order to increase county property taxes. He made the announcement at a White Plains news conference that was attended by three Republican county legislators. It came two months after O'Rourke said in his State of the County address that he would submit the proposal so it could be put on the November ballot. It should be harder to raise taxes," O'Rourke said. "And we should leave that decision up to the people of Westchester County." Currently, a majority of nine of 17 legislators is needed to increase property taxes. The bill would require that 12 of 17 legislators approve an increase. O'Rourke said that over the past 25 years, on only three occasions had the board passed tax increases with less than 12 votes. To qualify for the November ballot, the proposal must first pass the county Board of Legislators by early August. To come for a board vote, it must be signed out of the Legislation Committee, which is chaired by Legislator Thomas Abinanti, D-Greenburgh. Abinanti yesterday dismissed the proposal as a "gimmick that would be nothing but a blueprint for gridlock. While I believe in minority rights, in our system, the majority rules." He said that O'Rourke retains the right to line -item veto any addition to the budget and he can only be overridden with a two-thirds vote of the board. He noted that O'Rourke had served as a county legislator from 1974 to 1982 before becoming county executive. Every tax increase over the past 22 years has been an O'Rourke tax increase," Abinanti said. Which one of those tax increases does he think was a mistake?" Legislator Louis Mosiello, R -Yonkers, who was at the news conference, had campaigned for the super -majority vote during last fall's campaign. This fulfills a a pledge I made to the voters," Mosiello said. "It's a 100 percent win for the taxpayers of Westchester County." Return to Westchester Today Home Page 2/26/98 pZ J 4:34:52 PM Open space bill to test two-thirds rule Page 1 of 2 Nevada Appeal news Wednesday, February 26, 1997 10:25 AM Open space bill to test two-thirds rule By Kelli Du Fresne A new law requiring a two-thirds vote of the Legislature for tax increases may make the road toward enactment of Carson's quarter -cent sales tax increase a rugged one. Supporters of the increase hope the Legislature will enact the increase since it was approved by voters in November. This may be the first piece of legislation to test the two-thirds vote requirement for a tax increase," said Assemblyman Mark Amodei, R -Carson City, who is sponsoring the bill in the Assembly. "I think that since it was voter approved, it puts it in a positive light." Carson voters approved a quarter -cent sales tax increase to fund parks and recreation improvements, open space acquisition and maintenance of park facilities, but implementation of the tax is in the hands of the Legislature. Carson Mayor Ray Masayko said, "It's received a vote of the people. I don't think the members of the state Legislature are going to reject it, two-thirds majority notwithstanding." At the same time Carson residents agreed to fund park improvements, voters statewide approved Question 11, which amended the Nevada Constitution to require a two-thirds vote of both houses in the Legislature to approve tax increases. That means the proposal must be supported by 14 of 21 senators and 28 of 42 Assembly members. Masayko said the city is working with the legislators to let them know the tax was approved by voters. It's to everyone's advantage to pursue the two-thirds majority," Masayko said. "The rules of engagement have changed. The imposition of any taxes requires the supermajority. We want to go overboard making sure we obey the will of the people of the state of Nevada." The so-called Quality of Life bill is being written by the Legislative Counsel Bureau. Last week, Assembly Speaker Joe Dini, D-Yerington, put in a request to hurry the process. On Tuesday, Amodei said the bill was not written yet, but he still hopes to be able to introduce the bill this week. Bill introductions are heard in the Assembly on Mondays, Wednesdays and Thursdays. Amodei earlier thought the tax would be implemented by changing Carson City's charter, giving the Carson City Board of Supervisors the power to enact the tax. That may be off now," he said. "It sounds like the charter amendment is not accurate." The bill will go to the taxation committee after it is introduced. Supporters hope lawmakers pass the tax by the end of March so collections can begin July 1. City Finance Director Mary Walker said she is not concerned about winning legislative approval for the tax increase. We want to follow the two-thirds requirement," she said. "We want it to apply. We feel with the voters approving it we should not have a problem passing it through the Legislature." 2/26/98 a J/ 4:38:42 PM Open space bill to test two-thirds rule Page 2 of 2 The tax increase is expected to raise $1.5 million. Plans call for using 40 percent of the revenues for park improvements, 40 percent for open space acquisition and 20 percent for maintenance of any new park facilities built using the tax monies. In addition to Amodei, city officials are asking assemblymen Dini, Pete Ernaut, R -Reno, and Lynn Hettrick, R-Gardnerville, to co-sponsor the bill. Before the tax increase is enacted, the governor must also approve it. Regional Pages: Incline Village South Lake Tahoe I Tahoe City I Truckee Carson City Minden/Gardnerville Main Pages: Home I Tour I News Outdoors I Fun I Real Estate I Marketplace CyberCitizen Interactive I Comments? Copyright, Lake Tahoe News Network. Materials contained within this site may not be used without permission. Check out the Nevada Appeal Marketplace Go here if you are not seeing the full framed version of the Nevada Appeal Online. 2/26/98 o25" 4:38:42 PM City Section - Thursday, November 20, 1997 Page 1 of 2 Following the failure of Measures H and I in the Nov. 4 consolidated city elections, Davis citizens have been forced to realize that democracy in America does not always mean that the majority prevails. As a result of Proposition 218, which passed in November 1996, the political system requires that more than a majority of voters approve a ballot measure. The proposition called for certain taxes, fees and assessments proposed by local governments to receive a two-thirds, or "super majority" approval. Measure I, the Parks Preservation Tax, and Measure H, the school construction bond, both appeared on this month's ballot requiring two-thirds voter approval for passage. Specifically as a result of the "super majority" rule, both measures failed because a little more than one-third of the voters opposed them. Measure I, for example, garnered the majority of the votes, 65.5 percent, though failed because it was shy of the two-thirds majority requirement. Davis Mayor Lois Wolk, a supporter of both measures, said the "super majority" rule is undemocratic. The rule) allows the minority to determine the resources of the community," she said. In contrast to Wolk, Shneor Sherman, chairperson of the Committee for Efficient Government, an organization that campaigned against Measure I, said the "super majority" rule does not interfere with the democratic process. What does it take to amend the Constitution of the United States?" he asked, commenting that a Constitutional amendment requires approval from two-thirds of the House of Representatives, two-thirds of the Senate and three-quarters of the states. We don't have majority rule changing something like the Constitution," Sherman said. Sherman added that he believes it is important for tax measures to require a "super majority" approval. What we have said in this country is that something important requires more than a majority," he said. "Taxes are important enough to require a two-thirds majority." 2/26/98 ;14 11:45:39 AM City Section - Thursday, November 20, 1997 Page 2 of 2 Wolk said she disagrees. Tax measures, she asserted, should not have the same standards as the Constitution. The constitution of a country is very different than teaching swim lessons at a park," she said, alluding to impacts that the failure of Measure I will have. Proponents of the measure have said that the failure of the measure may spark program and staff cuts. UC Davis political science professor Larry Peterman said that although under Prop. 218 majority does not rule, in such instances, the "super majority" rule is, in fact, democratic. We have the same thing on the national level in some cases," he said, explaining that presidential vetoes require two-thirds of the Congress to overturn. "Majority does not rule all the time." Peterman added that the rule of the majority is often not where the problem lies, as in the recent election "only a third of the electorate voted." Proposition 13, which was passed in 1978, ceased the ability of school districts to apply for local bonds. In 1986, Proposition 146 established the two-thirds majority from voters for school district bonds. Because of this "super majority" requirement, Wolk said many communities no longer attempt to put measures such as I and H on the ballot. Most communities don't try to put school bonds on the ballot," she said. Wolk said that California schools have deteriorated since Prop. 13's "super majority" requirement for school bonds. California) schools are some of the worst in the nation," she said. "It looks like services are next." Sherman said the voice of the minority suggests that issues need to be given a second look by governing officials. If more than a third of the people don't want something, I think we should rethink it," he said. "I think that's fair." 2/26/98 J 7 11:45:46 AM The Case for Constitutional Tax Limitation AMERICANS F 0 POLICY B O T A Page 1 of 13 X R E F O R RIE Growth, Prosperity, and Honest Government. The Case for Constitutional Tax Limitation James H. Perry[*] TABLE OF CONTENTS INTRODUCTION I REQUIRING A TWO THIRDS MAJORITY OF CONGRESS A Requiring a Two -Thirds Majority of Congress for All Tax Increases is the Best Method for Limiting Tax Increases. B Two Alternative Ways to Implement a Supermajority. 1. Parlimentary point of order. 2. Adoption of legislation requiring tow -thirds support of all tax increases. C. The Tax Limitation Amendment D. Two -Thirds is Superior to Other Percentages. 1. Two-thirds is the percentage used throughout the constitution. 2. Many states mandate a supermajority vote of at least tow thirds for an increase in taxes. 3. Two-thirds is a higher standard. II THE IMPORTANCE OF TAX LIMITATION UNDER THE SUPERMAJQRITY PLAN A Without Supermajority Politicians Are Biased in Favor of Tax Increases. III. TAX LIMITATION PROMOTES GROWTH IV. TAX LIMITATION IS GOOD GOVERNMENT POLICY V. TAX LIMITATION IS GOOD ECONOMIC POLICY A. Growing Government Equals Growing Taxes B. Too Much Government Spending Harms the Economy C. Increases GNP D. Tax Increases Lead to Less Government Revenue 2/26/98 A v 11:18:14 AM The Case for Constitutional Tax Limitation Page 2 of 13 VI A TWO-THIRDS SUPERMAJORITY REOUIREMENT FITS WITH THE SPIRIT OF THE CONSTITUTION A The Constitution Allows For Supermajority Voting B The Founding Fathers Embraced the Idea of Two-thirds Supermajority Votes on Important Policies. - C Congress Historically Utilizes Supermajority Voting Requirements. 1. The first 100 years. 2. Twentieth Century. a. The House of Representatives. b. The Senate. VII REQUIRING A SUPERMAJORITV IS AN IDEA EMBRACED AROUND THE WORLD. CONCLUSION Appendix A Appendix B INTRODUCTION Senator Jon Kyl (R -AZ) and Representatives Joe Barton (R -TX) and John Shadegg (R -AZ) have introduced in the United States Congress a Tax Limitation Amendment (hereinafter TLA") to the U.S. Constitution, requiring a two-thirds supermajority for any new tax or increases in existing taxes. [1] On April 15th, 1996 the House TLA, in its first attempt at adoption, received 243 favorable votes. L2] Speaker of the House Newt Gingrich (R -GA) has promised another vote on the House TLA for April 15, 1997. Senator Kyl's and Represeritative Shadegg's effort to secure constitutional tax limitation for U.S. taxpayers is a natural outgrowth of their prior efforts to amend the Arizona State Constitution to require a two-thirds vote of the state legislature for any tax increases. I. Requiring a Two Thirds Majority of Congress for all Tax Increases Is the Best Method for Limiting Tax Increases A. Supermajority Voting is the Best Way to Stop Tax Increases Under the current rules, previous Congresses have been incapable of restraining their taxing and spending. The empirical evidence is compelling. The United States runs a chronic budget deficit because Congress spends too much, not because it taxes too little. During the post-war era, while total government revenues as a share of Gross Domestic Product deviated little from approximately 19 percent, spending has risen continuously, averaging 18 percent in the 1950s, 19 percent in the 1960s, 21 percent in the 1970s, to a range of 22% to 25% over the last ten years. L3] Congress has historically managed to avoid spending cuts and increased tax revenue by some maneuver to provide political cover. For instance, in both 1990 and 1993 Congress voted to 2/26/98 o2.9 11:18:18 AM The Case for Constitutional Tax Limitation Page 3 of 13 raise taxes in the guise of omnibus budget laws that were described as deficit reduction acts. 4] In the 1970s government tax receipts grew rapidly as inflation pushed workers into higher tax brackets and Congress did little to interfere. Workers were earning more money that was worth less when adjusted for inflation. The tax code, however, did not take this into effect. Instead, it taxed Americans as if they were earning wages at pre -inflation levels. The few reductions in tax rates during this time did little to compensate for inflation. Additionally, dependent child and personal exemptions were not increased. Consequently, workers were earning less but were being taxed at a higher rate. In effect, American taxpayers had their taxes increased without Congress making any overt decision and thus without assuming any direct responsibility for the fact of increased taxes. [5] Because Congress is unable to make small spending cuts it is forced to raise revenue by enacting targeted tax increases. Often, these piecemeal tax increases are the most damaging. Examples of their damaging effects are numerous. The eroding value of the dependent child exemption hurt families by subtly taking more income which would better be used for family purposes. Increases in the capital gains tax and lengthening of the depreciation of structures in the Tax Reform Act of 1986 destroyed real estate values and substantially contributed to the severity of the savings and loan collapse in the late 1980s — a collapse that cost US taxpayers hundreds of billions of dollars. Finally, the luxury tax implemented under the Omnibus Budget Reconciliation Act of 1990 destroyed the yacht building industry in the U.S. [6] B. Two Alternative Ways to Implement a Supermajority 1. Parliamentary Point of Order There are several mechanisms which Congress may use to require a supermajority vote for the passage of tax increases. One way is the adoption of a parliamentary point of order. Under such rule, any member of Congress would be entitled to raise a point of order with the Speaker of the House or President of the Senate when a bill or amendment is believed to raise taxes. Provided the bill was interpreted by the parliamentarian as raising taxes, the point of order would lie, requiring a supermajority to approve the legislation. The adoption of a rule allowing a point of order is exactly what the House of Representatives did on the very first day of the 104th Congress when it adopted, by a vote of 279 to 152, House Rule XXI with its requirement that federal income tax rate increases shall not be "considered as passed" unless agreed to by three-fifths (sixty percent) of the Members voting. [7] This rule, however, does not provide permanent tax limitation. Such a rule can be adopted or repealed by majority vote at the start of each new Congress. [8] Consequently, point of order tax limitation will be subject to the vagaries of the Congressional balance of power. As power shifts between the parties during elections or, even during a session due to special elections and party switchers, there is a danger that point of order tax limitation would easily be overturned. Further, under House rules, a rule triggering a special point of order can be waived whenever political considerations favor increasing government revenues. [9] Taxpayers will be protected from these temporary political passions by the TLA because a constitutional amendment requires the same difficult measures for repeal as it does for adoption — passage by two-thirds of both the House and the Senate, and then ratification by three-fourths of the states. 2. Adoption of Legislation Requiring Two -Thirds Support of all Tax Increases Congress could, if it choose to do so, pass legislation that requires a two-thirds vote for adoption of tax increases. However, in previous cases where Congress has required that certain measures be adopted by supermajority vote, it has circumvented such requirements in 2/26/98 30 11:18:20 AM The Case for Constitutional Tax Limitation Page 4 of 13 order to avoid an actual vote. This is usually accomplished by hiding the tax increase measure in a comprehensive piece of legislation. In both the 1990 Omnibus Budget Reconciliation Act OBRA 1990) and the 1993 Omnibus Budget Reconciliation Act (OBRA 1993) tax increases were tucked into a wider package of deficit reduction provisions. Consequently, members of Congress were able to raise taxes by claiming they were actually voting for popular deficit reduction. Additionally, closed rules limit the opportunities of representatives to amend a given bill. Their use allows members of Congress to claim to favor policies and profess that they were unable to vote for them because the rule did not allow them to amend the bill. These deceptive voting practices severely injure the functioning of representative democracy. Voters find it difficult to make informed judgments about what their representatives are actually doing. Informed judgments that are the heart of the periodic electoral review that the Founding Fathers had in mind when they provided for the direct election of House members by the people. The widespread use of hidden procedures by members of Congress strongly suggests that Members perceive they have something to hide. Legislative supermajority tax limitation carries with it the same problems as a rule triggering a point of order. With each new Congress, or even in a sitting Congress with special elections or party switchers, the tax limitation law would once again be subject to repeal. Consequently, legislative tax limitation offers no permanent protection for the taxpayer. On the other hand, a constitutional requirement that any tax increase be put to a simple straight up -or -down, yes or no, supermajority vote is easier to enforce due to the transparency of the process. Members of Congress will be unable to maneuver around the constitutional requirements simply to provide themselves with political cover. C. The Tax Limitation Amendment The Tax Limitation Amendment was introduced in the House of Representatives by Representatives Joe Barton (R -TX), John Shadegg (R -AZ) and in the Senate by Senator Jon Kyl (R -AZ). [10] The Main provisions of the TLA states that "[a]ny bill to levy a new tax or increase 'the rate or base of any tax may pass only by a two-thirds majority of the whole number of each House of Congress."11 ] 4, D.Two-Thirds is superior to other percentages. Requiring an affirmative vote of two-thirds of all Members of Congress is superior to other proportions, such as three-fifths. 1. Two -Thirds is the Percentage Used Throughout the Constitution A requirement of two-thirds is consistent with constitutional supermajority voting requirements. In ten instances the Constitution mandates supermajority voting requirements. 12] Each of these requirements reflects the thoughtful deliberation by the Framers and Amenders of the Constitution. Each serves a purpose and each illustrates the capacity of the Constitution's architects to impose such requirements on Congress where they were deemed necessary or useful. When it was appropriate in the political environment of the 1780s to prescribe a specific numerical voting requirement, the Constitution supplied one. The Constitution is a living document, adaptable to modern problems. It is clear that if the Framers 2/26/98 J/ 11:18:20 AM The Case for Constitutional Tax Limitation Page 5 of 13 of the Constitution had been faced with runaway deficits and massive government in the absence of a compelling national emergency, they would have required a supermajority for tax increases. In the present environment of high taxes and the need for either sharp cuts in government spending or increases in revenue, politicians in Washington, D.C., cannot be trusted to protect the pocketbooks of Americans without a requirement that there be broad support for any tax increase. 2. Many States Mandate A Supermajority Vote of at Least Two Thirds For an Increase in Taxes States around the country have been forced to reform their budgeting and tax policies due to their own deficit spending. Many states have been successful in trimming their deficits without raising taxes. [13] The method used by the most successful states, in conjunction with state balanced budget laws or amendments, has been supermajority tax limitation laws and spending limitation laws. One third of all Americans live in a state with supermajority constitutional tax limitation. In most of the states with supermajority requirements the idea of requiring a greater than fifty percent vote of the legislature to increase taxes grew out of the tax revolt movement and the initiative process. [14] These states offer a successful model for the Federal Government's budget and tax reform efforts. A requirement of at two-thirds is the percentage used in most of the states requiring supermajority approval of tax increases. [15] Two-thirds is the percentage used in most of the supermajority initiatives which were on the 1996 ballot and those likely to be on the 1998 ballot. [16] Eighteen states in 1995 and 1996 introduced legislation that proposed supermajority requirements for tax increases. [i 7] 3. Two -Thirds is a Higher Standard Two-thirds is a much higher standard which affords superior protection. It would require 290 votes in the House and 67 in the Senate. Consequently, any tax measure that musters the required two-thirds vote will obviously enjoy wide -support from all political parties, and among the people generally. [18] Four of the last five major tax increases were passed with less than a two-thirds supermajority. [19] These new taxes added $666 billion to the tax bill of the American taxpayer. II. The Importance of Tax Limitation Under the Supermajority Plan A. Without Supermajority Politicians are Biased In Favor of Tax Increases Presidents for years have stated that one of their preeminent goals was to balance the federal budget. [L20] Unfortunately, this noble sentiment ran into one Congress after another that was addicted to deficit spending in order to appease their special-interest constituencies and effectively buy their way to re-election. Most responsible politicians now agree that the U.S. must balance its budget. However, there are countless plans for doing so. Many plans put forward by those "formerly" addicted to deficit spending propose increased federal revenues. In their view, the simplest way to increase federal revenues is to increase taxes. Whether it is an upward revision of tax brackets, user fees, elimination of deductions or increased investments," the bottom line is that many in Congress believe they cannot balance the 2/26/98 3A 11:18:20 AM The Case for Constitutional Tax Limitation Page 6 of 13 federal budget without resorting to tax increases. In fact, while a member of Congress in 1992, former White House Chief of Staff Leon Panetta testified in favor of a balanced budget act which mandated automatic tax increases! 21 ] There is no correlation between increased taxes and lower deficits. The fiscal history of the U.S. illustrates this point. In fact, data suggests that an increase in taxes of $1.00 actually leads to $1.59 of new spending. [22] Throughout the history of the U.S. the tendency of Congress to spend additional taxes instead of using them to reduce deficits has continually increased. In the first decades of the nation, tax increases were associated with declines in the federal deficit. In the Twentieth Century, increases in taxes have resulted in higher deficits. [23] Much of the increase in deficits and tax increases can be associated with the political advantages associated with new spending. When politicians allocate government resources, they seek the highest political return. [24] There is a bias in favor of tax increases to pay for government -delivered benefits that go to relatively few people. These people come together as special interests to effectively lobby Congress. Taxes, on the other hand, are spread among many millions of people across the country who find it very difficult to band together as an effective interest group. 25] Without constitutional tax limitation, methods such as Leon Panetta's automatic tax increases would likely gain widespread support from special interest groups. Many politicians opposed to the TLA maintain that the solution to runaway spending is not to amend the Constitution, but to simply enact balanced budget legislation. This is impractical. Using this approach to deficit reduction many of these same lawmakers voted for record tax increases in 1990 and 1993, [26] effectively eliminating any tax relief enjoyed in the 1986 tax reform legislation. The result: the deficit, which was $152 billion and falling when President Ronald Reagan left office in 1989, is projected to rise every year into the foreseeable future. 27] With a balanced budget law or amendment without a supermajority requirement there will be a bias towards increasing taxes as a means of complying with the law. Raising taxes presently only requires a simple majority vote. Weak amendments which require a supermajority to run a deficit, but only a simple majority to raise taxes make it easier to raise tax rates than to borrow. In effect they create a tax trap. If you require a supermajority vote for borrowing money and increasing the debt ceiling you must require the same mechanism for increasing taxes. You can hear the politicians now saying how they didn't want to do it, but the Constitution made them raise your taxes. [28] Instead of reflexively raising taxes to comply with the law, Congress should be compelled to reduce spending as a means of balancing the budget. + III. Tax Limitation Promotes Growth Available data show that the concept of requiring supermajority vote helps in the battle to lower taxes. Twelve states presently have some form of supermajority requirement for tax increases. [29] Nine of those twelve states require a supermajority of at least two-thirds. [30] In ten of those twelve states, taxes as a proportion of personal income have actually declined two percent. [31] In states without a supermajority requirement taxes as a proportion of personal income have risen two percent. Thus, there is a difference of four percent in tax burdens in those states with supermajority tax limitation requirements. [32] What has 2/26/98 3'? 11:18:20 AM The Case for Constitutional Tax Limitation Page 7 of 13 happened in supermajority states is that lawmakers are required to reach broad consensus before enacting tax increases. The supermajority forces state lawmakers to seriously consider spending priorities before automatically resorting to tax increases, and makes them more accountable to their taxpaying constituents. [33] Not only do supermajority requirements lead to lower tax burdens at the state level, they have resulted in a reduction in overall state government spending. In states that require supermajority approval for tax increases, spending has increased by two percent versus an increase of nine percent in states without the requirement. A differential of seven percent equals significant reductions in government spending and taxation. [34] IV. Tax Limitation Is Good Government Policy For over fifty years, concentrated and vocal interest groups have been able to secure costly benefits for themselves that are paid for by the widely -scattered majority of taxpayers. Due to its far-flung nature, the taxpaying majority is legislatively ineffective in stopping the grants of federal government largess. A constitutional amendment mandating a two-thirds affirmative vote of Congress to increase taxes or eliminate deductions will improve the legislative process by making the passage of these expensive benefits harder to support. Requiring an affirmative Congressional vote for an increase of the tax burden will provide a "bright -line" test that all federal legislators must take before they can raise the tax burden of the U.S. people. When specialized interest groups seek a government benefit they will have to persuade a much larger group of legislators to support their handout. Legislators who represent the taxpayers who will pay the bill will have an easier time defending their positions and stopping the continued excess taxation of the American people. No longer will they be able to go home to their states and districts and say that they were compelled to raise taxes because the increase was attached to some monumentally important bill which required passage. Nor will they be able to claim that the Constitution mandated a tax increase. The excuse that "my hands were tied" will no longer be acceptable. All members of Congress will have to live, govern, and run for reelection on their voting record regarding tax increases - - voting records for all to see and to compare: 2/26/98 V. Tax Limitation is Good Economic Policy A. Growing Government Equals Growing Taxes For many years it was widely accepted that economic and societal ills could be cured by increasing the role of government. Increasing the size of government was thought to lead to higher levels of prosperity. Throughout the Twentieth Century the size of government spending relative to Gross National Product (GNP) has continually increased. Government spending has increased from ten percent of GNP during World War I to almost forty percent in the 1990s. [35] Total government spending per capita (using 1990 dollars) has also rapidly increased from $331 per American in 1900 to over $8,000 today. [36] Per household, spending has grown from $1,651 in 1900 to over $23,000 today (in 1990 dollars) [37] These figures clearly show that government grew larger in both absolute and relative terms. While the size of government was increasing relative to GNP, the tax burden felt by Americans rose at a similar pace. The marginal tax rate increased from one percent on income over $300,000 in 1913 (1993 dollars) to almost forty percent on incomes over $250,000 in 3l/ 11:18:21 AM The Case for Constitutional Tax Limitation Page 8 of 13 1995. During the interim years between 1913 and 1995 the top tax rate has fluctuated wildly. However, over time it has increased. [38] The ever increasing tax burden took more and more of American wages. The individual share of federal taxation has increased from taking one of every twelve dollars earned in 1890 to one of every three dollars earned in 1990. During the same period per capita federal taxes rose from $110 to $4,000. [39] While the tax burden greatly increased as government spending grew to take more and more of the nation's wealth, increased taxes to finance growth actually lead to even higher government spending. It has been estimated that $1.00 of new taxes generates $1.59 of new spending. [40] + B. Too Much Government Spending Harms the Economy All government spending extracts wealth from the private sector by either taxing or borrowing. The larger government becomes with its increased spending the more severe the taxing and borrowing. High borrowing crowds out private investment, thereby reducing production, capital formation, and economic growth. High tax rates reduce the incentive to work, save, and invest. Since the mid-1970s scholarly study has been done on the appropriate size of government for the United States and the rest of the world. There is now overwhelming evidence that government taxing and spending is beyond an optimal point. Social welfare and economic growth would be maximized if government revenue was one-quarter or less of gross national product (GNP), in contrast with its present level of more than one-third of GNP. [41 ] Beyond this point any resources consumed by the government impose more costs on the economy than the benefits they provide. [42] Conversely, for every $1 of federal spending growth curtailed, the private sector will expand by $1.38 in the same year. 43] Over seven years economic output would be $2.45 larger for each dollar of federal spending restraint. [44] If the tax burden had been at the optimal rate since World War II economic growth would have averaged about two percent higher per year and the average American family would have about twice as much real income as it actually has today. [45] + C. Increased GNP From the time that government spending and its companion high tax rates exceeded the optimal point, more and more American resources have been devoted to less productive uses. The U.S. economy has sacrificed $2 of income for every $1 of tax paid to finance government spending beyond the optimal level. [46] If the U.S. had been spending at its optimal rate, between fifteen and twenty-five percent of GNP since the end of World War II, real GNP in 1989 (in 1993 dollars) would have been $13.6 trillion instead of $6.2 trillion. [47] The average American family would have twice as much real income as it has today. [48] + D. Tax Increases Lead to Less Government Revenue Perversely, tax increases also lead to a reduction in the tax revenue collected by the Treasury and stifle economic growth. Adam Smith remarked that tariff rates beyond a certain level became self-defeating because they reduced imports and tariff revenue. The Economic Recovery and Tax Act of 1981, which sharply cut income tax rates, boosted actual tax collections by stimulating economic growth. Revenues soared from $517 billion in 1980 to over $1 trillion by the end of the decade. 49] The possibility exists that if taxes were to be raised in the future to support increased government spending, or to allegedly eliminate the deficit, they would strangle government revenues and actually increase the United States' debt 2/26/98 J%r 11:18:22 AM The Case for Constitutional Tax Limitation problems. Page 9 of 13 Between 1949 and 1989 federal, state, and local governments collected a total of $43.5 trillion in taxes (1993 dollars). [50] However, if the tax rate had been limited to 22.9 percent of GNP, governments would have collected a total of $55.1 trillion.51 ] At this rate governments would have had enough revenue to fund all spending programs enacted without any public debt! [52] Higher tax rates also discourage work, production, savings and investment. Consequently, there is ultimately less economic activity to tax. The 1993 Clinton tax increase caused taxpayers to reduce their taxable incomes by nearly $25 billion. [53] Taxpayers reduced their taxable income by saving less, investing less and creating fewer jobs. Constitutional tax limitation will force government spending to fall and protect taxpayers from ever-increasing tax rates. The alternative is unacceptable; increased government borrowing and an ever growing public debt. With a balanced budget amendment the government will be forced to set spending levels in accordance with its actual revenues. By constitutionally mandating that any increase in taxes must receive the supermajority support of Congress, it will be more difficult to raise taxes to fuel higher government spending. Consequently, over time, the level of government spending will fall to its optimal level. This will result in increased growth in both personal incomes and government revenues as the economy expands. t VI. A Two -Thirds Supermajority Requirement to Raise Federal Taxes Fits With The Spirit of the Constitution A. The Constitution Allows for Supermajority Voting There is nothing in the United States Constitution which requires that legislation be passed by a simple majority vote of Congress. The Presentment Clause states that e]very bill shall have passed the House of Representatives and the Senate before it becomes a Law, be presented to the President of the United States.... 54] The Presentment Clause does not specify a proportion necessary for passage. All bills passed" does not mean passed by a majority of a quorum of each House. Consequently, arguments that the TLA violates the Constitution by mandating a requirement that legislation be passed by any ration other than a majority of a quorum vote are without merit. 55] From the early days of the Republic to the present, supermajority voting requirements have been deemed constitutional. Supermajority requirements are found in the following sections of the Constitution: Article I, section 3, clause 6 onviction in impeachment ials Article I, section 5, clause 2 xpu Sion o a Member oICongresss Article 1, section ,cause Override a presidential veto Article II, section 1, clause 3 uorum o two-thirds ot te states to elect the President 2/26/98 34 11:18:22 AM The Case for Constitutional Tax Limitation Page 10 of 13 rtic e , section ,cause Consent to a treaty Article V roposmg constitutional amendments Article VII tate rataication ot the original Constitution[56] Quorum of two -t it sot e Amendment XII states to elect the President d the Vice President To remove disability o Amendment XIV those who have engaged in insurrection en ment XXV section 4 lFresidentialisa i ity The Framers' decision not to impose additional constitutional supermajority requirements does not mean that they opposed extending the concept. It simply means that at the time of ratification they did not see a need for other supermajority requirements. However, they did recognize that circumstances change and that the Constitution would need to be flexible to change with the passage of time. Consequently, they provided a mechanism to amend the Constitution—an amendment mechanism that itself requires two supermajority voting requirements: two-thirds Congressional adoption of the proposed amendment and then approval by three-fourths of the states for ratification. 57] Finally, a supermajority requirement for increasing the U.S. tax burden is not unprecedented. The Sixteenth Amendment to the Constitution, which provides for the income tax, had to be approved by a vote of two-thirds of Congress and three-fourths of the states. It is only logical that we should extend this protection to increases of the tax burden that are far in excess of the small burden first imposed in 1913. [58] B. The Founding Fathers Embraced the Idea of Two -Thirds Supermajority Votes on Important Policies The method for deciding fundamental issues facing the U.S. government was one of the most important topics addressed by the Founding Fathers while drafting the U.S. Constitution. In the Federalist Papers, Alexander Hamilton, James Madison and John Jay argued that rule by a simple majority vote was tantamount to mob rule. They argued that the Constitution was to prevent transitory passions from determining the outcome of crucial decisions for the country. James Madison, a vocal supporter of majority rule, argued that the greatest threat to liberty in a republic came from unrestrained majority rule. ] Alexander Hamilton argued for the checking of simple majorities through the use of the President's veto power. [60] Hamilton recognized that two-thirds majorities to override a veto might prevent the enactment of good laws, but responded that any injury inflicted by defeating a few good laws would be compensated by the advantage of preventing a number of bad laws. [61 ] Hamilton also believed that to prevent tax abuse, direct taxes required explicit constitutional constraints. [62] In the view of the Founding Fathers fundamental decisions should be made by special majorities of at least two-thirds of the legislature. They specifically pointed to such fundamental areas as treaty ratification, and constitutional amendment ratification. They felt that even in these deliberative bodies a narrow majority of Congress might easily be put together for adopting an ill -thought out decision which would have lasting and harmful consequences. In their view, a supermajority would reduce this danger. The Framers of the 2/26/98 3 *7 11:18:23 AM The Case for Constitutional Tax Limitation Page 11 of 13 Constitution believed that the existence of a two-thirds supermajority for a proposal showed strong evidence of the long-term merits of the issue in contention. The Founding Fathers also recognized the special and important area of tax law and subjected it to extraordinary procedures. [63] Procedures that in the tenor of the times were deemed sufficient to protect the taxpayers of the U.S. from unjust taxation. This was especially true in light of the fact that a deadly revolution had just recently been fought to protect the nation from unjust taxation. Today the tenor of the times has changed. It is simply not sufficient protection from excessive taxation that all tax bills must first come from the House. In running up a $5 trillion debt and subjecting citizens to crushing tax burdens the Congress has clearly shown it is not capable of protecting the interests of the American people without constitutional help. The present debt level of the U.S. and its high tax rates would not be accepted by our Founding Fathers. When they wrote the Constitution they did not foresee that the law of the land would one day permit Congress to spend as much money as it wished, irrespective of revenues. They would look with abject horror at the debt level of this country and cry for a change. In light of the events surrounding the Revolution and the adoption of the Constitution—repressive and heavy tax burdens imposed from far-off London—there is no doubt that the Framers would support a measure to protect U.S. taxpayers from repressive and heavy tax burdens imposed from far -removed Washington, D.C. The simplest and fairest way to do so is to adopt the TLA and its requirement that all increases in the tax burden be subject to a supermajority vote by both houses of Congress on a straight yea or nay vote. + C. Congress Historically Utilizes Supermajority Voting Requirements. 1. The First 100 Years Mandating supermajority approval of legislation is a tradition dating back more than 150 years, to the Seventeenth Congress. As the number of Members in the House increased and political parties appeared, passage of even the simplest legislation became more difficult. It thus became necessary for the House to have some means by which to bypass the regular order of business. In 1822 a rule was passed that no House rule could be suspended without a two-thirds vote of the members present. In 1828 the suspension rule was amended to require a vote of two-thirds of the Members actually voting. 2. The Twentieth Century a. The House of Representatives In the modern era, supermajority voting requirements continue to be used in both the House and Senate. As with the suspension rule from the 1820s, other House rules have incorporated supermajority voting requirements, many of which remain in effect today. For example, the Rules Committee is responsible for controlling the flow of legislation, proposing the terms of debate and setting the time on general debate and the procedure for amendments. Typically floor consideration of a Rules Committee report may not occur until the day after the report is issued. However, House rules enable two thirds of the Members to approve considering a report from the Rules Committee on the same day it is presented to the House. If the House rejects the Committee's rule, absent a supermajority vote to consider a second rule on the same day the second rule was reported, consideration of a bill will be delayed. 2/26/98 3 S 11:18:24 AM The Case for Constitutional Tax Limitation Page 12 of 13 Under the Calendar Wednesday Rule, each Wednesday of the week is set aside to allow bills to be considered on the House floor that have been reported out of committee but blocked by the Rules Committee. Although House rules prohibit the Rules Committee from setting aside Calendar Wednesday, other rules allow the Calendar Wednesday procedure to be dispensed with at any time by a two-thirds vote. Further rules require a two-thirds vote to continue considering a measure that is carried over from a previous Calendar Wednesday without reaching a vote on final passage. Finally, on the first day of the 104th Congress, the House passed House Rule XXI that requires supermajority approval of all bills which increase taxes. 64] b. The Senate Senate rules require a two-thirds vote for suspension of the rules and for the fixing of time for considering a subject. The Senate requires a three-fifths vote of all Senators to end debate or to increase the time available under cloture. Further, Senate rules require a two-thirds vote to indefinitely postpone a treaty. Finally, budget procedures require that three-fifths of the full Senate must agree to waive balanced budget provisions or points of order in order to consider amendments which would violate the budget approved by Congress. VII. Requiring A Supermajority to Pass Important Legislation Is An Idea Embraced Around the World Leading democratic nations and statesmen have rejected simple majority votes as a means of adopting laws that fundamentally affect their nations. [L5] These supermajority requirements take the form of either legislative or popular referendums. Benjamin Disraeli in the United Kingdom believed that the use of a simple majority for altering the character of the nation was an immoral exercise of power. He theorized that simple majorities that lead to slender margins of passage suggest only a temporary majority in favor of a policy. Making decisions on such temporary majorities leads to decisions which are likely to be reversed. This leads to instability and is damaging to democratic politics. Echoing the views of Hamilton, Madison and Jay, is Disraeli's view that the clearer the majority, the more likely that the proposed policy is correct. Charles De Gaulle in France also favored supermajority referendum approval for important state issues. He believed that a simple majority did not build public support. He felt that to be successful you needed to convince the undecided and those who were mildly opposed to a proposal that they should support and accept the decision as being fairly made. De Gaulle believed that narrow majorities had the opposite effect. Simple majorities created embittered opposition. The opposition is reinforced in the idea that the decision was unfair and that with resistance their opponents' victory will only be momentary. Those whose position is lost will resist the government in its attempts to implement the decision and divide the country on the issue. Therefore, a simple majority was viewed as making unity impossible. In the end this division would go a long way toward bringing about the failure of the policy. A clear supermajority, on the other hand, would reduce these risks and help bring about the successful implementation of the passed proposal. Conclusion 2/26/98 39 11:18:24 AM The Case for Constitutional Tax Limitation Page 13 of 13 Politicians who have accumulated a debt of $5 trillion over slightly more than thirty years cannot now simply be trusted to abandon their profligate spending habits in the face of a possible balanced budget law. Without some way to prevent politicians from simply raising taxes to meet the requirements of any balanced budget law, the American people will suffer from ever-increasing tax burdens. The best way to prevent our representatives in Washington from raising our taxes is to adopt the Tax Limitation Amendment and its requirement of an affirmative supermajority vote of both chambers of Congress for any rise in the tax burden. The Tax Limitation Amendment is good policy. In those states that require legislative supermajorities to increase the tax burden the method has proved to be an effective tool for lowering both tax burdens and government spending. The Tax Limitation Amendment is constitutional. There are numerous supermajority voting requirements mandated by the Constitution. The U.S. was founded in part on the basis of freedom from oppressive taxes. In light of the present federal policy of taxing to finance runaway spending, the Founding Fathers would support extending supermajority voting to any increases in the citizens' tax burden. Finally, requiring supermajority approval of important government policies is a concept that has been accepted by statesmen around the world. + 2/26/98 End Notes I Appendix I Main Page I Join ATR 40 11:18:25 AM SUPERMAJORITY TAX LIMITATIONS AT THE STATE LE... Page 1 of 1 SUPERMAJORITY TAX LIMITATIONS o AT THE STATE LEVEL States around the country have been forced to reform their budgeting and tax policies due to their deficit spending. Many states have been successful in trimming their deficits without raising taxes. The method used by the most successful states has been supermajority tax limitation laws and spending limitation laws. One third of all Americans live in a state withe supermajority constitutional tax limitations. In most of the states supermajority requirements, the idea of requiring a greater than fifty percent vote of the legislature to increase taxes grew out of the tax revolt movement and the initiative process. These states offer a successful model for the Federal Government's budget and tax reform efforts. The following states have supermajority tax limitation requirements: State Requirement Year Enacted AppliesTo Arizona elecied 1992 All taxes Arkansas— elected taxes since 1934 except sales tax. California— elected Property taxes Colorado elected taxes Delaware elected7 1980 Revenue increases o rid a e ecte anges intthe corporate income tax rate Louisiana— elected taxes Mississippi elected - taxes Oklahoma elected taxes South a of elected or increasing tax base and existing tax rate ATR Home I Join ATR ] 2/26/98 %/ / 11:16:06 AM NEWS: Supermajority vote not taxing to lawmakers Supermajority to lawmakers vote not taxing A new two-thirds vote requirement to approve tax increases was not a factor in the 1997 legislative session. BV Sean Whaley Donrey Capital Bureau CARSON CITY -- Fears of increased vote trading resulting from a mandate that requires tax increases be approved by two-thirds of the 63 -member Legislature were not realized in the 1997 session, lawmakers and others agree. There was plenty of vote trading as the session wound to a close July 7, but the supermajority required for tax increases was not a factor, they said. A divided Legislature, with Democrats running the Assembly and the Republicans running the Senate, was the main reason. The two-thirds majority required for tax and fee increases became a requirement with voter approval in 1996 of an initiative placed on the ballot by former Assemblyman Jim Gibbons. Gibbons, now a Republican member of Congress, gathered signatures to place the measure on the ballot after failing to get legislative approval of his idea in 1993. Until this session, only a simple majority was required to raise taxes. The change gave Democratic and Republican minorities more voting power. Before, only 22 votes in the 42 -member Assembly and 11 in the 21 -member Senate were needed to raise taxes. With the change, 28 members of the Assembly and 14 members of the Senate have to approve tax increases. In the reverse, it meant only eight Senators or 15 members of the Assembly could hold up a tax increase and trade their votes for pet projects. I don't think it made much difference at all," said Senate Minority Leader Dina Titus, D -Las Vegas. "We didn't consider raising any major taxes." Carole Vilardo, president of the Nevada Taxpayers Association, agrees the two-thirds vote requirement did not play a major role in its first trial. The issues where it might have come into Page 1 of 3 2/26/98 410Z 11:31:24 AM NEWS: Supermajority vote not taxing to lawmakers play were so big, such as infrastructure and school construction, that it was the normal negotiating process, not the two-thirds vote," she said. "I'm not personally aware of the two-thirds vote being used as a negotiating tool." Assemblyman David Goldwater, D -Las Vegas, chairman of the Infrastructure Committee, said the two-thirds requirement was in the back of everyone's mind during bill hearings and negotiations but did not play a big role. It was never brought up publicly, not to my recollection," he said. "But it was understood." Only 35 bills out of the 1,167 introduced during the 1997 Legislature required a two-thirds vote, lessening the potential impact of the constitutional amendment. Many of those that did pass were noncontroversial and received near unanimous support, such as measures approving new fees for special license plates. There were a few exceptions. One issue in which it could have become a factor was Assembly Bill 353, authorizing several different tax increases to pay for school construction. What started as a bill to help Clark County's school overcrowding problems was expanded through negotiation to help other districts. Rural lawmakers objected to a provision in the bill requiring a separate oversight committee to keep track of construction spending. The bill was changed to delete the requirement in rural communities. But Senate Taxation Chairman Mike McGinness, R -Fallon, said the compromise was the result of normal discussions among lawmakers to craft a bill that would receive the maximum support. The two-thirds vote issue was never raised in discussions, he said. The bill passed in both houses without a single no vote. Another was a proposal to use room taxes raised at the stateline casinos at Lake Tahoe in Douglas County for tourism promotion. The bill, which took away money from other programs in the county, required a two-thirds vote and was opposed by Sen. Lawrence Jacobsen, R -Minden, the area's representative. The bill received only 12 votes when it came to the Senate floor, but the measure was reconsidered and passed the second time by a vote of 16-5. Sen. Mark James, R -Las Vegas, one of those who voted no the first time and then changed his Page 2 of 3 2/26/98 '/3 11:31:31 AM NEWS: Supermajority vote not taxing to lawmakers 2/26/98 mind, said his first vote was a mistake. James said he did not realize it was a bill the Tahoe area residents wanted. I didn't get anything for changing my vote," he said. "I didn't see the two-thirds vote used to extract any concessions." The bill authorizing county commissions to raise the sales tax a quarter cent to pay for infrastructure passed by only 14 votes in the Senate, but a legislative lawyer had ruled the two-thirds rule did not apply because the measure was enabling and required approval either from the county commission or voters. Even so, Titus said there was pressure to get 14 votes for the measure because of concerns it would be challenged in court otherwise. Vilardo said several questions about when the supermajority was required came up during the session. A bill to clarify the intent passed the Senate but did not make it out of the Assembly, she said. Titus said another reason the two-thirds issue did not come into play was because no firm coalitions emerged during the session. There were floating coalitions pitting the Assembly against the Senate, Democrats versus Republicans and urban versus rural," she said. It also may have been a non -issue because of its newness, Titus said. It has the potential to be a big factor," she said. Few taxes approved in recent legislative sessions would have been affected by the two-thirds requirement. One major exception was the business tax passed by the Legislature in 1991 that now brings in about $70 million a year. The tax passed by 27 votes in the Assembly and 13 votes in the Senate, which would have been one vote shy in each house under the new rule. Give us your FEEDBACK on this or any story. Fill out our Online Readers' Poll hLews] Sorts] [Business] [Lifestyles] [Neon] [Opinion] [in -dept Columnists] [Help/About] [Archive] [Community Link] Current Edition] Classifieds] [Real Estate] [TV] [Weather] EMAIL] [SEARCH] [HOME] [INDEX] Brought to you by the Las Vegas Review -Journal. Nevada's largest daily newspaper. For comment or questions, please email Webmaster raftri.coni 1997 Las Vegas Review -Journal - Sunday, August 17 1997 03:00 Page 3 of 3 11:31:31 AM Reducing school bond supermajority rule debated Reducing school bond supermajority rule debated By Associated Press Page 1 of 2 BOISE_ Some of Idaho's leaders are warming to the idea of reducing the vote needed to pass a school bond, although tax advocates say the current process works. State Rep. Donna Boe, D -Pocatello, wants to lower the two-thirds majority vote, 66.67 percent, required to adopt a bond to 60 percent. Gov. Phil Batt is concerned about the need for more classrooms. He is reluctant to do anything with the supermajority. But at the same time, he doesn't like schools deteriorating," said Lindsay Nothern, Batt's press secretary. House Speaker Mike Simpson, who a few years ago would not even consider the change, said it has merit. It's harder to build a school building in Idaho than anywhere else in the country," the Blackfoot Republican said, adding any plans must include state assistance for building public schools to ease the burden on property tax payers. Idaho is not whittling away at its $700 million backlog in school improvements very quickly, and winning a supermajority in a bond election is not getting any easier. Fourteen bonds totaling 5128.1 million failed in Idaho in the past two years after they received more than a 60 percent majority, but not two-thirds. The supermajority is required by the state constitution. Changing it would require approval of two-thirds of the Legislature and a statewide vote. Reducing the supermajority is not the only idea being considered to make it easier for school districts to build or improve their facilities. Idaho schools Superintendent Anne Fox opposes dropping the two-thirds requirement, but supports a half -cent sales tax hike. We're dealing with the issue of eouity in the tax base_" Rhonda Edmiston. Fox's WashingtonPost.com: End Supermajority Rules,... Page 1 of 2 Pop ill washin ton ost.cem 1 home page I site Index i search I help I Return to Maryland End Supermajority Rules, Montgomery Election Results. Groups Urge Return to the Regional Results Guide. By Manuel Perez -Rivas Washington Post Staff Writer Return to the Maryland Tuesday, October 29, 1996; Page B05 Elections Guide. A diverse coalition of government officials, political groups, public employee unions and civic activists gathered in Rockville yesterday to urge voters to support Question D on next Tuesday's ballot in Montgomery County. Question D would eliminate a provision that requires the nine -member County Council to have at least seven votes to exceed spending limits it sets several months before the county budget is finalized each spring. Instead, a simple majority of five votes would be needed to approve a budget exceeding those limits. In addition, the number of council members needed to adopt an operating budget that grows at a rate higher than the area's inflation rate would be reduced from six to five. Supporters argued that passage would allow a more democratic process for establishing budget priorities. They said the present supermajority system, which dates to 1990, can be "held hostage" by a few council members with different priorities from the majority. What supermajority means is tyranny of the minority," said council member Derick Berlage (D -Silver Spring). "Any three members of the nine -member council have the ability to bring the budget process to a standstill." Board of Education President Ana Sol Gutierrez (3rd District) said schools in particular have felt the impact of the WashingtonPost.com: End Supermajority Rules,... Page 2 of 2 spending and that backers chiefly are interested in higher spending. The citizens put these restrictions onto the charter, and there's a reason for it. I believe it has been a brake -- that's B -R -A -K -E -- on this council," said council member Nancy Dacek (R -Up County). "What we have here are groups sponsoring it who are anxious for more spending." Robert R. Denny, who helped lead the 1990 tax revolt that saw passage of the county's supermajority requirements, also dismissed the argument that a simple majority rule is more democratic, noting that supermajority restrictions exist at all levels of government. "By removing the supermajority rules, you're setting [officials] up to be irresponsible," he said. Copyright 1996 The Washington Post Company Back to the ton washingtonpost.c®m I home page I site Index I search I help I 2/26/98 4Y I 11:35:16 AM Why A Supermajority Would Protect Taxpayers -... Page 1 of 3 WHY A SUPERMAJORITY WOULD PROTECT TAXPAYERS Daniel J. Mitchell McKenna Senior Fellow in Political Economy The Heritage Foundation FYI No. 93 March 29, 1996 Table 1: How Supermajority States Compare in Gross State Product and Per Capita Tax Revenue On April 15th, the House of Representatives will vote on a Constitutional Amendment requiring a two-thirds supermajority for Congress to raise taxes. In favor of the amendment are those who believe that lawmakers will be more fiscally responsible and the economy will grow faster if it becomes more difficult for Congress to raise taxes. On the other side are those who believe restricting tax increases would interfere with the majority's ability to determine economic policy. To be fair, opponents are correct. The proposed amendment would restrict the rights of the majority. But that is precisely the point. Just as the First Amendment is supposed to prohibit the majority from passing laws to infringe upon the rights of free speech and the Second Amendment is supposed to prohibit the majority from passing laws to infringe on the right to keep and bear arms, the supermajority amendment is designed to place limits on the power of the majority to take money from the minority. More specifically, taxpayers are presumed to have a right to their earnings and that only tax increases with very broad support -- as measured by the ability to attract a two-thirds supermajority -- are permissible. There is little doubt that a supermajority will make it harder for politicians to take more money from taxpayers. That is why lawmakers who believe taxes should be higher oppose it. Had a supermajority been in place, some major tax increases from recent years would not have become law. Consider: The record tax increase pushed through Congress in 1993 by President Clinton was approved by 51-50 in the Senate and 218-216 in the House. Since a single vote -switch in either body would have killed the legislation, a supermajority requirement easily would have saved the economy from the largest tax increase in American history. The large tax increase signed into law in 1990 by President Bush was approved by 54-45 in the Senate and 228-200 in the House. Had a supermajority been required, this ill-fated measure would have fallen 12 votes short in the Senate and 58 votes shy in the House. Other major tax increases in recent years, including the tax hikes of 1982, 1984, and 1987, also would have been blocked by a supermajority provision. Needless to say, these tax increases might never even have come up for a vote had supermajority approval been required. Or at the very least, supporters of the tax increases would have had to reduce the size of the hikes and probably make much-needed reforms to spending programs to attract the needed votes. This helps explain why the lawmakers who oppose this in Congress are those who traditionally favor raising taxes -- they fear the supermajority would restrict them. A supermajority requirement would not, of course, block all tax increases. The 1983 Social Security bailout legislation, for instance, imposed a huge tax increase on workers and allowed incumbents at the time to avoid taking needed steps to fix a fundamentally broken system. That legislation did receive more than two-thirds support in both chambers of Congress. Likewise, it is clear that Congress would be able to increase spending, whether financed by taxes or debt, if there 2/26/98 % 9 11:35:57 AM Why A Supermajority Would Protect Taxpayers -... Page 2 of 3 was a genuine national emergency. A supermajority requirement during World War I1, for instance, would not have impeded the conduct of fiscal policy. Nonetheless, some critics say that such a requirement would be disruptive, or even disastrous, if it were imposed on Congress. But seven states worked under such a limit for at least 15 years and there is no indication that it has caused any problem. Significantly, not a single state has repealed the provision. Moreover, the seven states which have lived for quite some time under some form of supermajority -- Arkansas, California, Delaware, Florida, Louisiana, Mississippi, and South Dakota have been joined recently by Arizona, Oklahoma, and Colorado. Nevada and Ohio may soon join the list. Ultimately, the debate over the supermajority boils down to a fight about the size of government and the effect of taxes on economic performance. Proponents of smaller government want to use the balanced budget amendment and the supermajority together to slowly shrink the size and power of the federal government. Further, they want to put a brake on higher taxes, which undermine the goals of fiscal responsibility and economic performance. For instance: Higher taxes typically are followed by bigger deficits. Tax increases in 1982, 1983, 1984, 1987, 1990, and 1993 have not balanced the budget. Indeed, current CBO projections show the deficit climbing to more than $300 billion within ten years if current policies are left in place. Higher taxes are associated with higher spending. A 1991 study by the Joint Economic Committee showed that every dollar of higher taxes is associated with more than $1.59 of new spending.I Tax increases are virtually guaranteed to trigger new spending if there is a balanced budget requirement since any new revenues simply allow politicians to satisfy the balanced budget requirement at a higher level of spending. Higher taxes hurt the economy. Lower taxes in the 1920s, 1960s, and 1980s helped trigger economic booms. Higher taxes in the 1930s, 1970s, and 1990s, by contrast, are associated with very mediocre economic performances. The evidence linking taxes and economic performance is powerful. Numerous studies show that nations with low taxes grow faster than countries with high taxes and also that countries can improve their performance by reducing taxes on productive economic behavior.2 Similar studies show taxes have the same effect in and among states.3 Higher taxes do not collect the promised revenues. Fewer jobs means fewer taxpayers. Lower profits means lower tax collections. Falling incomes mean falling tax revenues. Understanding these simple relationships helps explain why individual income tax revenues have fallen as a percent of GDP since Ronald Reagan left office even though Americans have suffered through two major tax increases. A supermajority rule is a necessary component of any strategy to shrink the size and power of the federal government, and to limit the power of Congress to tax. High taxes hurt the economy. Not only are five supermajority states below the national average in growth of taxes, but also five are above the national average in overall economic growth (see Table 1). This may be why more and more states have adopted the rule. There is every reason to believe it would have a positive effect on fiscal policy in Washington. Requiring supermajority votes to raise taxes ensures that politicians cannot continue to spend other people's money and evade fiscal responsibility by imposing a higher tax bill on the nation. A wide range of economic studies demonstrates that states will be better off if they keep their tax burdens low. Curbing taxes limits the growth of government and boosts economic performance. By making it harder to raise taxes, supermajority rule would have a desirable effect on the nation's 2/26/98 449 11:35:58 AM Why A Supermajority Would Protect Taxpayers -... Page 3 of 3 fiscal policy and overall economic performance. To be sure, a supermajority does not guarantee sound economic policy. The record tax increase approved in California several years ago, for instance, happened in spite of a two-thirds supermajority requirement. And many states without supermajorities, such as Tennessee and Nevada, have scored well in most categories of economic performance (this may be due to these states not having an income tax). When all factors are examined, however, there is no escaping the logical relationship between supermajorities and superior state performance. America would be well served if this lesson were applied to the federal budget. Endnotes: 1. Richard Vedder, Lowell Gallaway, and Christopher Frenze, "Taxes and Deficits: New Evidence," Joint Economic Committee Staff Report, October 31, 1991. 2. For an extensive list of studies, see Daniel J. Mitchell, "Jobs, Growth, Freedom, and Fairness: Why America Needs a Flat Tax," Heritage Foundation Backgrounder No. 1035, May 25, 1995. 3. For a comprehensive analysis of state evidence, see Richard K. Vedder, "State and Local Taxation and Economic Growth: Lessons for Federal Tax Reform," Joint Economic Committee Staff Report, December 1995. f l our daH tt, Policy Review • What's New • Links • job Bank Publications Library • Events • Search • Resource Bank News & Commentary • join • Listsery • Internships Heritage 25: Leadership for Arnerica 2/26/98 SD 11:35:58 AM States With Supermajorities - 4/10/97 Page 1 of 5 10, 1997 DO STATES WITH SUPERMAJORITIES HAVE SMALLER TAX INCREASES OR FASTER ECONOMIC GROWTH THAN OTHER STATES? by Iris J. Lav and Nicholas Johnson The Heritage Foundation contends that states in which a supermajority vote of the legislature is required to raise taxes have experienced faster economic growth and fewer tax increases than other states. A March 1996 Heritage report looks at the seven states that have had supermajority requirements in place for a number of years — Arkansas, California, Delaware, Florida, Louisiana, Mississippi, and South Dakota — and finds that five of the seven states experienced slower than average growth in tax revenue. It also finds that five of the seven states (but not the same five states) experienced faster economic growth than the average state. The Heritage report suggests a causal link between supermajority limits, lower taxes, and faster economic growth, saying "...there is no escaping the logical relationship between supermajorities and superior state performance."1 This simplistic analysis is flawed in a number of ways. It relies on only one among a number of possible measures of economic growth. It considers only state -level tax changes rather than changes in total state and local revenues, despite the capacity of states to shift costs and responsibilities to local governments. And it compares 1980, a year in which the economy was turning down into a mild recession, with 1992, a year at the beginning of an economic recovery. If one chooses more appropriate data series to measure revenues and economic growth and adjusts the time periods to represent similar points in the business cycle, conclusions opposite to those Heritage has presented may be drawn. The fact that different analytical choices lead to different results should serve as a caution that no supportable conclusions can be drawn from the type of simplistic analysis Heritage has conducted. By some measures, supermajority states have had lower economic growth and more tax increases than other states. For example: Five of the seven states with supermajority requirements experienced lower -than -average economic growth measured by change in per capita personal income between 1979 and 1989, two years at similar points in the business cycle. Four of the seven supermajority states had lower -than -average economic growth measured by change in Gross State Product from 1979 to 1989. Six of the seven states with supermajority requirements had higher -than -average growth of state and local revenues as a percent of residents' incomes from 1979 to 1989. 2/26/98 11:39:15 AM States With Supermajorities - 4/10/97 Page 2 of 5 Five of the seven states had higher -than -average increases in state and local taxes per capita from 1984 to 1993, two other years falling at similar points in the business cycle. The factors affecting state economic growth are far more complex than proponents of supermajority requirements typically acknowledge. Such factors include the interplay of state resource endowments, labor force skills, location, and level of public investment and state services, among others. A far more sophisticated analysis would be required to discern any effect supermajority requirements might or might not have on state tax burdens or state economies. Heritage's Choices of Data May Skew Results In preparing its report, the Heritage Foundation made choices that may have skewed the results of its analysis. The questionable choices include the time periods analyzed, the measure of state economic growth, and the measure of tax burden. The Heritage report compares state economic growth and changes in taxes from 1980 to 1992, which are years that represent two different points in the "business cycle." In 1980, the economy turned down from the peak of an economic expansion into a mild recession; in 1992 the economy was beginning its upswing from the deep 1990-91 recession. State tax policy and state economic growth each are very sensitive to the business cycle, and different state economies react differently to economic downturns and upswings. An accurate picture of state changes requires comparing two years at similar points in the business cycle. Heritage chose Gross State Product (GSP) as its measure of state economic growth; GSP measures the total output of all industries within a state. A different measure, personal income, is more often used to gauge state economic activity. Personal income measures the total income of state residents, including income from out-of-state sources. Personal income per capita measures the economic well-being of an average resident, which may best reflect the goal of state economic policy. Similarly, Heritage chose to consider only taxes levied at the state level. Yet when state taxes are constrained, state legislatures may meet their responsibilities for providing services by shifting new responsibilities to local governments or by cutting local aid. Either course of action can lead local governments to raise their taxes. Because of these potential shifts, a measure that includes both state and local taxes should be considered. An additional shortcoming of the state tax series Heritage uses is that it excludes many tax -like "fees." A more comprehensive measure, state and local revenues, includes revenue sources such as fees and lottery proceeds that may be substituted for revenues from taxes. Lastly, the Heritage study measures tax burden by calculating the amount of tax revenue per resident. Many analysts find it more appropriate to measure taxes as a percentage of residents' incomes. Because differing wage levels in different states affect both residents' incomes and the cost of providing government services, measuring taxes as a percentage of income provides a more meaningful comparison of tax levels and changes in tax burden over time. Ir2 2/26/98 11:39:18 AM States With Supermajorities - 4/10/97 Alternative Time Periods and Measurements Yield Results Different from the Heritage Results Page 3 of 5 Results quite different from those presented in the Heritage report may be obtained by an analysis that matches up similar points in the business cycle and considers a variety of measurements of economic activity and revenues. Depending on the choice of time frame and methodology, such comparisons may actually show that supermajority requirements are associated with increased taxes and slower economic growth. Table 1 compares the economic growth of the seven supermajority states relative to average growth in all states. Three different measures of growth and two different recent time periods beginning and ending at similar points in the business cycle are considered. Taken together, these measures show no clear connection between supermajority requirements and economic growth. (See appendix tables for detailed comparisons.) By most measures, the supermajority states split almost down the middle (4-3 or 3-4) about half experienced stronger economic growth than the national average, while the other half had weaker growth. By one method of measuring economic growth — change in per -capita personal income from 1979 to 1989 — only two of the supermajority states outperformed the national economy; the other five had lower economic growth than the average state. Table 1 Portion of Supermajority States with Stronger -than -average Economic Growth Similar results may be found with respect to levels of revenue increases. Table 2 shows revenue increases in the supermajority states using broader measures of state and local taxes and revenues over the two time periods. The picture that emerges is decidedly mixed. In only one of the supermajority states did state and local revenue as a percentage of personal income rise less rapidly than in the average state from 1979 to 1989. In the other six supermajority states, the growth of state and local revenue as a percent of personal income was higher than in the average state. Fewer than half the supermajority states showed lower -than -average growth in state and local taxes between 1984 and 1993, measured either as taxes per capita or taxes as a percentage of residents' incomes. Table 2 Portion of Supermajority States with Tax Increases Lower than the National Average 2/26/98 5`'? 11:39:18 AM 1979 to 1989 1984 to 1993 Gross State Product 3 of 7 not available Personal Income 3 of 7 4 of 7 7e—rsonal Income Per Capita 2 of 7 4 of 7 Source: CenteT on u qet an o icy Priorities. Based on datarom Bureau Analysis, with population adjustments from the Bureau of the Census. of Economic Similar results may be found with respect to levels of revenue increases. Table 2 shows revenue increases in the supermajority states using broader measures of state and local taxes and revenues over the two time periods. The picture that emerges is decidedly mixed. In only one of the supermajority states did state and local revenue as a percentage of personal income rise less rapidly than in the average state from 1979 to 1989. In the other six supermajority states, the growth of state and local revenue as a percent of personal income was higher than in the average state. Fewer than half the supermajority states showed lower -than -average growth in state and local taxes between 1984 and 1993, measured either as taxes per capita or taxes as a percentage of residents' incomes. Table 2 Portion of Supermajority States with Tax Increases Lower than the National Average 2/26/98 5`'? 11:39:18 AM States With Supermajorities - 4/10/97 Page 4 of 5 Trends Do Not Prove Causation Even if tables 1 and 2 presented clearer trends among the seven supermajority states, it would be not be correct to conclude that supermajority requirements were a factor in the economic growth or in the tax decisions in those states. Other factors, such as regional economic variations or changes in political power, are much more likely to affect state economic performance and government finances. A far more sophisticated analysis than either the Heritage study or the analysis presented above would be required to conclude that supermajority requirements have had any substantial effect either on state tax burdens or on state economies. End Notes 1. Daniel J. Mitchell, "Why a Supermajority Would Protect Taxpayers," The Heritage Foundation, March 29, 1996. Appendix Table A-1 Economic growth in states that required supermajorities to raise taxes. Change 1979 to 1989 1984 to 1993 Change in Personal Income Per Capita tate an local taxes tate and localtate own -source revenue and State and local local taxes own -source revenue Taxes per capita 5 of 77 to 1993 2 of 7 b 0 Taxes as a percent of income 4 of 7 1 of 7 3 of 7 4 of 7 ource: enter on u qet an Policy Priorities. ase on ata rom ureau o t e ensus, with income adjustments from the Bureau of Economic Analysis. Trends Do Not Prove Causation Even if tables 1 and 2 presented clearer trends among the seven supermajority states, it would be not be correct to conclude that supermajority requirements were a factor in the economic growth or in the tax decisions in those states. Other factors, such as regional economic variations or changes in political power, are much more likely to affect state economic performance and government finances. A far more sophisticated analysis than either the Heritage study or the analysis presented above would be required to conclude that supermajority requirements have had any substantial effect either on state tax burdens or on state economies. End Notes 1. Daniel J. Mitchell, "Why a Supermajority Would Protect Taxpayers," The Heritage Foundation, March 29, 1996. Appendix Table A-1 Economic growth in states that required supermajorities to raise taxes. Change in Gross State Product Change in Personal Income Change in Personal Income Per Capita 1979 to 19 1979 to 1984 1989 to 1993 1979 to 1984 1989 to 1993 Arkansas o 0 0 California o 0 0 e aware o 0 0 on a o 0 0 ouisiana o o 0 0 Mississippi o 0 0 0 South a ota o 0 0 0 Average o 0 0 0 Number o supermajority states with economic growth above average 1 3 1 3 1 4 1 2 1 4 ee notes at end ot appendix. Table A-2 Changes in state and local government taxes and revenue per capita in states that required supermajorities to raise taxes. 1979 to 1989 1984 to 2/26/98 11:39:18 AM States With Supermajorities - 4/10/97 Page 5 of 5 Table A-3 Changes in state and local taxes as percent of personal income in states that required supermajorities to raise taxes. State and Local Taxes State and Local Own -Source Revenue State and Local Taxes State and Local Own -Source Revenue Arkansas o tate and Localtate Own -Source Revenue and Local Taxes State and Local Own -Source Revenue C -57i Forniia o o 0 77. Delaware o 0 0 0 Florida o 0 0 0 Louisiana o 0 o o Mississippi o 0 0 South a ota o 0 0 0 Average o 0 0 o Number o supermajority states with tax or revenue growth below average o 0 6 0 ee notes at end ot appendix. 3 Table A-3 Changes in state and local taxes as percent of personal income in states that required supermajorities to raise taxes. Notes: Gross State Product not available for years after 1992. In cases where the state average equalled the national average, the change was computed to additional decimal places to find the correct comparison. U.S. average excludes Alaska and the District of Columbia, whose revenue systems are significantly different from those of other states. All data are for fiscal years except Gross State Product. Sources: U.S. Bureau of Economic Analysis, U.S. Census Bureau. Center on Budget and Policy Priorities. aiit'F 6m&:a K JL##L"LfY}'i J..S,.i.-„ ~,.fiN.N k F +11i.:r i.s•ts1I1Y.L':d u'a'k ++ '. Background Information I Board of Directors Publication Library I Center Staff I Search this site Job Opportunities I Internship Information I Top Level c z b i .Y ..wi'!L'. .wWiCY,ar lP.sRL1{wLiAR .`.i.#"Sr" C:,i im"y'='*..«K`T iid•",sVLi1Q.e`.6a:v*'Y::Cd t _ 2/26/98 11:39:22 AM 1979 to 1989 1984 to 1993 State an Local Taxes tate and Localtate Own -Source Revenue and Local Taxes State and Local Own -Source Revenue Arkansas o 0 0 77. California o 0 0 0 Delaware 1% 0 0 0 Florida o 0 o o Louisiana o 0 0 0 Mississippi o 0 0 0 South a ota o o a o Average o 0 6 0 Number of supermajority states with tax or revenue growth below average 3 ee notes at end of appendix. Notes: Gross State Product not available for years after 1992. In cases where the state average equalled the national average, the change was computed to additional decimal places to find the correct comparison. U.S. average excludes Alaska and the District of Columbia, whose revenue systems are significantly different from those of other states. All data are for fiscal years except Gross State Product. Sources: U.S. Bureau of Economic Analysis, U.S. Census Bureau. Center on Budget and Policy Priorities. aiit'F 6m&:a K JL##L"LfY}'i J..S,.i.-„ ~,.fiN.N k F +11i.:r i.s•ts1I1Y.L':du'a'k ++ '. Background Information I Board of Directors Publication Library I Center Staff I Search this site Job Opportunities I Internship Information I Top Level c z b i .Y ..wi'!L'. .wWiCY,ar lP.sRL1{wLiAR .`.i.#"Sr" C:,i im"y'='*..«K`T iid•",sVLi1Q.e`.6a:v*'Y::Cd t _ 2/26/98 11:39:22 AM TAMING LEVIATHAN: ARE TAX AND SPENDING LIMITS... Page 1 of 28 Policy Analysis No. 213 July 25, 1994 TAMING LEVIATHAN: ARE TAX AND SPENDING LIMITS THE ANSWER? by Dean Stansel Dean Stansel is a fiscal policy analyst at the Cato Insti tute. Executive Summary After a decade of dormancy, the tax revolt is back. Fed up with rapidly rising state budgets, Americans are increas- ingly taking matters into their own hands, voting into law limits on the ability of state lawmakers to tax and spend. In the past two years, five states approved such populist measures. This year voters in as many as six states will have the opportunity to vote on some type of tax limitation initiative. The opposition to tax and expenditure limitations (TELs) is enormous. Opponents charge that restraining the growth of taxes and spending is impossible without doing things like taking cops off the beat and firefighters out of the fire- house. Other critics make precisely the opposite complaint about TELs, charging that TELs are ineffective and do not limit the growth of taxes and spending as promised. This study demonstrates that properly designed TELs can and do limit the growth of state taxes and spending. For example, the growth rate of per capita state spending in TEL states fell from 0.8 percentage points above the U.S. average in the five years preceding TEL enactment to 2.9 percentage points below the U.S. average in the five years after TEL enactment. Unfortunately, many TELs are designed in a way that minimizes their effectiveness. This study examines that issue and provides a detailed description of how an effective TEL should be designed. If the citizens of a state wish to limit the growth of Leviathan, they should not abandon TELs; instead, they should ensure that the TELs are properly constructed. Introduction The grassroots tax revolt, which began in the stagfla- 2/26/98 ' 4:33:57 PM TAMING LEVIATHAN: ARE TAX AND SPENDING LIMITS... Page 2 of 28 tionary years of the late 1970s, is brewing again. Though the misery index is not what it was in the days of Proposi- tion 13, there is a rising sentiment among voters that state government has grown too large. That sentiment is grounded in reality: since 1980 total state spending has climbed by 60 percent (after adjusting for inflation).(1) The movement for tax and expenditure limitations (TELs) is growing in much the same way the term -limits movement is. In 1991 two states --Connecticut and North Carolina --enacted TELs for the first time, and two other states --Colorado and Louisiana --modified their TELs. Since then five states have enacted measures to restrain the growth of taxes and spend- ing.(2) In March 1992 Oklahomans passed a constitutional amendment requiring all tax increases to pass both houses of the state legislature with a three-fourths majority or be approved by a majority of the voters. In November 1992 voters in Colorado passed Amendment 1, the Taxpayer Bill of Rights. That measure requires that any increase in taxes --state or local --be approved by the voters. It also limits spending growth to that necessary to keep pace with population growth and inflation. Also in November 1992 voters in Connecticut passed a constitutional amendment limiting spending growth to the rate of growth of personal income or inflation, whichever is greater. In 1992 an overwhelming 72 percent of Arizona voters approved a constitutional amendment requiring a two- thirds majority in the legislature for any increase in taxes or fees. Finally, voters in Washington State approved a con- stitutional amendment in November 1993 that limits state spending growth to the rate of population growth plus inflation and requires voter approval of any tax increases that would exceed that limit. All told, 23 states now have TELs. In addition, this year on election day in November, voters in as many as six states will have the chance to vote on some type of tax limitation initiative.(3) (Table A.1 in the appendix summa- rizes each of the prospective ballot initiatives.) Although many critics have claimed that TELs are not an effective means of restraining the growth of taxes and spending, this study presents new evidence refuting those contentions. It finds that TELs, when designed properly, can be and have been an effective tool for restraining the growth of both taxes and spending. r7 2/26/98 4:34:02 PM TAMING LEVIATHAN: ARE TAX AND SPENDING LIMITS... The five-year growth rate of per capita state spend- ing in TEL states fell from 0.8 percentage points above the U.S. average in the five years before TEL enactment to 2.9 percentage points below the U.S. average in the five years after enactment. Per capita spending in TEL states fell from 6.4 percent above the U.S. average in the year of TEL enactment to only 1.7 percent above the U.S. average in 1992. If the level of per capita spending in TEL states had not declined, the state spending burden per family of four in those states would have been, on average, $450 more in 1992 than it was. Similar declines in the growth and level of spending in TEL states were found when those states were compared with non -TEL -states, and an examination of state taxes and state and local spending shows the same pattern of change. In sum, TELs appear to have imposed restraint on the growth of state budgets and taxes. Why TELs Are Needed The expansion of government over the past several decades has been enormous. Since 1950 the real growth of government spending at all levels has outpaced population growth by a margin of almost eight to one. As a result, the per capita burden of government exploded upward by 254 percent, even after adjusting for inflation.(4) Though real government spending at all levels surged by 480 percent from 1950 to 1990, real state government spend- ing rose even faster, by 534 percent.(5) Over the last two decades that burden has been growing even larger.(6) As Figure 1 shows, from 1970 to 1980, real state spending grew more than two and a half times faster than population. More recently, from 1980 to 1990, real state spending grew over Figure 1 State Spending Growth vs. Population Growth Years Population Growth 1970-80 ills 1980-90 109. Spending Growth 28% 42% Page 3 of 28 2/26/98 5-9 4:34:02 PM TAMING LEVIATHAN: ARE TAX AND SPENDING LIMITS... Page 4 of 28 Graph Omitted) four times faster than the number of those it serves. Since 1980 many state budgets have nearly doubled in size, even after adjusting for inflation. State taxes have climbed at a similar pace. Growing evidence indicates that voters do not want government to be as large as it has become. Exit polls on election day in November 1992 indicated that, given a choice between lower taxes and more government services, 55 percent of voters preferred to keep taxes down, even if that meant fewer government services, while only 36 percent said the opposite. One year later in a similar poll in New Jersey, an even higher 60 percent of voters said they would prefer lower taxes and fewer services, compared to just 33 percent who said the opposite.(7) It is in part such hostility to government that is driving the tax revolt. Not trusting politicians to restrain budget growth and rising tax bur- dens, Americans are increasingly taking matters into their own hands, voting into law strict limits on the ability of their state governments to tax and spend. History of the Tax Revolt In June 1978 voters in California, fed up with skyrock- eting property taxes, overwhelmingly passed Proposition 13. Hatched by anti -tax crusader Howard Jarvis, Proposition 13 rolled back local property taxes to 1 percent of assessed valuation, limited assessment increases to the lower of 2 percent or the annual inflation rate, required two-thirds voter approval for new local taxes, and required two-thirds approval of the legislature to raise existing or impose new taxes. The passage of Proposition 13 led to a push for numer- ous similar measures in other states. Between 1978 and 1980, 43 states adopted new limitations on local property taxes or new property tax relief plans. Emboldened by their success, the tax revolters took aim at state taxes as well. Between 1978 and 1982, 15 states reduced their general income tax rates, 10 indexed their personal income tax systems, 7 eliminated their gift taxes, and 6 repealed their inheritance taxes.(8) In addition, explicit limits on spending were imposed. In 1976 New Jersey passed the first state TEL, and by 1982 TELs had been enacted in 20 states.(9) Though TEL enactment slowed along with the fervor of the tax revolt during the prosperous 1980s --only two additional states enacted TELs from 1983 to 1990 --voter frustration is now reversing that trend. 2/26/98 . 40" I 4:34:02 PM TAMING LEVIATHAN: ARE TAX AND SPENDING LIMITS... Page 5 of 28 What Other Studies Have Found Many studies have contended that TELs do not effective- ly restrain the growth of government. For instance, Daphne Kenyon and Karen Benker examined the change in expenditures relative to personal income for TEL versus non -TEL states over the period 1978-83. They found that in some years TEL states saw slower spending growth than non -TEL states, while in other years TEL states saw faster spending growth than non -TEL states. Though Kenyon and Benker say that there is some evidence that TELs may have moderated spending in some states, they conclude that "for most states, TELs have not been a constraint on growth in taxing or spending." (10) Marcia Howard examined both state tax collections and state general fund expenditures as a share of personal income over the period 1980-87. She found that, while state taxes grew faster than personal income in TEL states, taxes outpaced income growth by slightly more in non -TEL states. Further, Howard found that state general fund expenditures as a share of personal income actually fell in TEL states, from 5.5 percent in 1979 to 5.41 percent in 1987, lower than spending in non -TEL states. She nevertheless concluded that, because the differences were small, there was an absence of strong evidence that tax and expenditure limita- tions have been successful."(11) Dale Bails examined the change in five components of per capita state spending and revenue over the period 1981- 85, the."post-tax revolt years." He found that each of the measures grew more slowly in TEL states than in non -TEL states. For instance, per capita total general revenues rose 30 percent in TEL states compared to 36 percent in non -TEL states. However, Bails also found that the average annual growth of spending or revenue (the one to which the TEL applies) from the year of enactment to 1985 was lower than such growth over the period 1970 to the year of enact- ment in only one-third of the TEL states. Bails thus con- cluded that states' TELs "resulted in virtually no success in limiting growth in their budgets."(12) James Cox and David Lowery examined the change in state spending and revenue relative to personal income in three TEL states, Michigan, South Carolina, and Tennessee. Each of those states was paired with a non -TEL state in its region. The authors found that TELs did not have a statis- tically discernible effect on the growth of government. Cox and Lowery concluded that "by and large, the behavior of the cap states has been similar to that of noncap states." (13) Each of those studies identifies specific factors that limit the effectiveness of TELs, many of which are related to the faulty design of individual TELs. Since TELs are often designed by politicians --the very people whose behav- ior TELs are intended to restrain --it should come as no 2/26/98 60 4:34:02 PM TAMING LEVIATHAN: ARE TAX AND SPENDING LIMITS... Page 6 of 28 surprise that they frequently are worded in a way that makes their restraints as weak and easily circumvented as possi- ble. Despite their recognition that faulty design is often the root of the problem, most studies that find TELs to be ineffective do not recommend strengthening them by eliminat- ing their flaws. Instead, the studies conclude that TELs should be abandoned. In contrast, there have been several studies that have found TELs to be effective. Stephen Moore examined a vari- ety of fiscal discipline mechanisms and found that average state spending as a share of income in TEL states fell from 4 percent higher than the average for non -TEL states in 1979 to 10 percent lower than the average for non -TEL states by 1987.(14) Barry Poulson found that the impact of TELs on state spending during their first four years of existence was negative for all [TEL] states and significant for seven of those states.... The implication is that for these seven states the absence of the TEL would have resulted in signif- icantly greater increases in government expenditures in the short run." (15) So while there is some dispute as to whether TELs are effective at restraining the growth of government, even the staunchest TEL advocates will admit that TELs have not worked as well as proponents would have liked. There is broad agreement, however, on the importance of the design of TELs to their effectiveness. Methodology This study focuses primarily on the performance of TELs as a whole, with a few minor exceptions noted below. In later sections, the performance of well-designed and poorly designed TELs is compared. To measure the effectiveness of TELs in restraining government growth, this study examines how the growth rates and levels of taxes and spending in states with TELs changed after the TELs were enacted.(16) To adjust for the effect of population changes, per capita figures were used. Of the 23 states with TELs, 21 had enacted them by 1986. While no state enacted a TEL for the first time between 1986 and 1990, two states, Connecticut and North Carolina, have done so since 1990. Those two states are excluded because there is not yet sufficient data to ade- quately examine the effect of their TELs. In addition, Rhode Island and Nevada are excluded because their TELs are nonbinding, applying only to the governor's recommended budget. Finally, Alaska is also excluded because of pecu- 2/26/98 p / 4:34:02 PM TAMING LEVIATHAN: ARE TAX AND SPENDING LIMITS... liarities in its budgetary structure that make comparisons with other states problematic.(17) Unless otherwise noted, TEL -state average" herein refers to the 18 states with binding TELs that were enacted by 1986.(18) Table 1 lists those states and the years of initial TEL enactment. Table A.2 gives the growth rate of spending in each of the 18 TEL states over the five years immediately preceding and the five years immediately following enactment of the TEL. The number of percentage points by which each TEL state's spending growth rate differs from the U.S. average growth rate over those periods is then calculated.(19) Table 1 States with Binding TELs State Year of Adoption Arizona 1978 California 1979 Colorado 1977 Delaware 1980 Hawaii 1978 Idaho 1980 Louisiana 1979 Massachusetts 1986 Michigan 1978 Missouri 1980 Montana 1981 Oklahoma 1985 Oregon 1979 South Carolina 1980 Tennessee 1978 Texas 1978 Utah 1979 Washington 1979 Page 7 of 28 2/26/98 6 02 4:34:02 PM TAMING LEVIATHAN: ARE TAX AND SPENDING LIMITS... Page 8 of 28 A TEL -state average is then found for the percentage points by which the five-year growth rates differ from the U.S. average. That average summarizes how the growth rate of spending in TEL states changed relative to the growth rate of the U.S. average after enactment of a TEL. The same methodology is used to compare TEL -state spending growth to the non -TEL -state average and to calcu- late and compare per capita state taxes and per capita state and local spending.(20) The results of those calculations for TEL states as a group are summarized below, and a complete list can be found in Tables A.3 -A.6 in the appendix.(21) State Spending Most TELs are limits on spending. So the most direct way to evaluate the effectiveness of TELs is by examining their impact on state expenditures. If a TEL is effective, it should lower the growth rate of state spending. The average growth rate of per capita state spending in TEL states changed, relative to the U.S. average, in the follow- ing respects after TEL enactment. The five-year growth rate of per capita state spend- ing in TEL states fell from 0.8 percentage points above the U.S. average before TEL enactment to 2.9 percentage points below the U.S. average after TEL enactment Figure 2). The growth rate of per capita state spending in TEL states from the year of enactment through 1992, as opposed to just five years after enactment, fell even lower, to 12.1 percentage points below the U.S. aver- age. The five-year real growth rate of per capita state spending in TEL states fell from 7.1 percent before TEL enactment to 1.8 percent after TEL enactment. If the real growth rate of per capita state spending in TEL states had not slowed, the state spending burden per family of four would have been, on average, $400 higher in those states five years after TEL enactment and $450 higher in 1992 than it was with the lower rate of spending growth. Figure 2 Growth Rate of per Capita State Spending Relative to U.S. Ave- erage for the Five Years Immediately Preceeding and the Five Years Immediately Following TEL Enactment U.S. Average = 0 2/26/98 6.3 4:34:03 PM TAMING LEVIATHAN: ARE TAX AND SPENDING LIMITS... Page 9 of 28 Five -Year increase in spending before TEL Enactment = 0.8% Five -Year increase in spending after TEL Enactment = -2.9% Graph Omitted) Figure 3 Per Capita State Spending Relative to U.S. Average, Year of TEL Enactment and 1992 Percentage Above Year of Enactment 6.4% 19921.7% Graph Omitted) In addition to the growth rate's falling (relative to the U.S. average), the average level of per capita state spending in TEL states fell from 6.4 percent above the U.S. average in the year of enactment to 1.7 percent above the U.S. average in 1992 (Figure 3). State Taxes Though most TELs apply to spending --of the 18 TELs examined here, only 5 apply directly to taxes or revenue --an effective TEL should slow the growth of state taxes as well. The average growth rate of per capita state taxes in TEL states changed in the following ways after TEL enactment. The five-year growth rate of per capita state taxes in TEL states fell from 5.5 percentage points above the non -TEL -state average before TEL enactment to 12.5 percentage points below the non -TEL -state average after TEL enactment (Figure 4). The growth rate of per capita state taxes in TEL states from the year of enactment through 1992, as opposed to just five years after enactment, fell even lower, to 13.2 percentage points below the non -TEL - state average. Figure 4 Growth Rate of per Capita State Taxes Relative to the Non -TEL - State Average for the Five Years Immediately Preceding and the Five Years Immediately Following TEL Enactment U.S. Average = 0 Five -Year increase in taxes before TEL Enactment = 5.5% 2/26/98 G0 4:34:03 PM TAMING LEVIATHAN: ARE TAX AND SPENDING LIMITS... Page 10 of 28 Five -Year increase in taxes after TEL Enactment = -12.5% Graph Omitted) The five-year real growth rate of per capita state taxes in TEL states was 11.9 percent before TEL enact- ment. State taxes then fell by 2.8 percent over the five years after TEL enactment. If real per capita tax growth in TEL states had not been reversed --that is, if real per capita taxes had risen 11.9 percent instead of declining 2.8 percent over the five years following TEL enactment --a family of four in one of the TEL states would have had to face, on average, a state tax burden that was $650 higher five years after TEL enactment than they faced with the lower growth rate of taxes. As Figure 5 shows, as a result of the slower growth of state taxes, the level of taxes in TEL states fell in rela- tion to taxes in the rest of the country after TEL enact- ment. Average per capita state taxes in TEL states fell from 8.8 percent above the non -TEL -state average in the year that TELs were enacted to 0.2 percent below it five years later. So in each case in which the growth rates of spending and taxes in TEL states were compared to the U.S. and the Figure 5 Per Capita State Taxes Relative to the Non -TEL -State Average, Year of TEL Enactment and Five Years Later Year of Enactment 8.8% (Above Non -TEL Average) Five Years Later -0.2% (Below Non -TEL Average) Graph Omitted) non -TEL -state averages, TELs appeared to have been effective in slowing the growth of state government --although probably not as effective as their supporters had wished. State and Local Spending Many TEL critics claim that the real impact of TELs is not in restraining the overall tax and spending burden but in shifting it to local governments. That would presumably defeat the purpose of the TEL. While some TELs include a provision prohibiting the state government from shifting costs to local governments without providing the funding to 2/26/98 bs 4:34:03 PM TAMING LEVIATHAN: ARE TAX AND SPENDING LIMITS... Page 11 of 28 cover those costs, most do not. Thus, some cost shifting is to be expected. Incidentally, if the only impact of TELs were to shift government responsibility --for both financing and decision- making --to the local level, TELs might still be worthwhile. Since local politicians are closer to the people, they are more accountable and less likely to be able to get away with excessive spending. Also, moving spending to the local level more closely links the costs of public services to the beneficiaries. In fact, many studies have found that decen- tralized governments provide public services more efficient- ly than do centralized governments.(22) Nevertheless, if the purpose of TELs is to limit the burden of government, then cost shifting may mean that those measures are less successful than their proponents intended. For example, if costs are fully shifted to local governments i.e., local spending growth rises as much as state spending growth falls), then the total state and local tax burden in TEL states will not have fallen. And if that were the case, though state spending growth would have fallen, it would be misleading to conclude that the burden of government had been reduced. One way to check for such cost shifting is to substi- tute per capita state and local spending for per capita state spending and perform the same tests that were used earlier. If a decline in state spending growth leads to a proportional rise in local spending growth, then combined state and local spending growth should not decline. Indeed, both the growth and the level of state and local spending in TEL states did decline, relative to those of the rest of the nation, though not as dramatically as state -level spending. The five-year growth rate of per capita state and local spending in TEL states fell from 2.3 percentage points above the U.S. average before TEL enactment to 1.2 percentage points below the U.S. average after TEL enactment (Figure 6). The growth rate of per capita state and local spend- ing in TEL states from the year of enactment through 1991, as opposed to just five years after enactment, fell even lower, to 10.2 percentage points below the U.S. average.(23) The five-year real growth rate of per capita state and local spending in TEL states fell from 6.1 percent before TEL enactment to 2.4 percent after TEL enact- ment. Figure 7 shows that, like the growth rate, the level of state and local spending in TEL states fell (relative to the rest of the nation) after TEL enactment. Average per capita 2/26/98 64 4:34:03 PM TAMING LEVIATHAN: ARE TAX AND SPENDING LIMITS... Page 12 of 28 state and local spending in TEL states fell from 0.1 percent below the U.S. average in the year that TELs were enacted to 4.4 percent below it in 1991. Thus, in addition to the burden of state government's falling after TEL enactment, the overall burden of state and local government fell. Figure 6 Growth Rate of per Captia State and Local Spending Relative to U.S. Average for the Five Years Immediately Preceeding and the Five Years Immediately Following TEL Enactment U.S. Average = 0 Five-year increase in spending before TEL Enactment = 2.3% Five-year increase in spending after TEL Enactment = -1.2% Graph Omitted) Figure 7 Per Capita State and Local Spending Relative to U.S. Average, Year of Enactment and 1991 Year of Enactment -0.1% (Below U.S. Average) 1991 -4.4% (Below U.S. Average) Graph Omitted) The data suggest that, as expected, some cost shifting to local governments has, indeed, occurred. However, the data also show that in addition to restraining the growth of state government, as indicated earlier, TELs have been effective at restraining the growth of the overall burden of state and local government. TELs: Why Some Succeed and Others Fail Some TELs are more effective than others in restraining the growth rate of taxes and spending. In fact, some of the TELs included in this analysis were conclusively ineffec- tive --most notably, those of Louisiana, Montana, and South Carolina (see Table A.2). The reasons some TELs succeed and others fail can be found in their design. There are several criteria on which TELs may vary that can play a role in their ultimate effectiveness. (24) (Table 2 examines each of the 18 binding TELs included in this study on five of those factors.) The major issues in determining the effectiveness of TELs are discussed in the following subsections. 2/26/98 to 7 4:34:03 PM TAMING LEVIATHAN: ARE TAX AND SPENDING LIMITS... Page 13 of 28 Did the TEL Originate with the Voters or in the Legislature? Where a TEL originates and who approves it differ from state to state. Whether a TEL originates with the voters or in the legislature can make a significant difference in its ultimate effectiveness. TELs that originate in the legisla- ture, since they are written by politicians --the very people whose behavior they are intended to restrain --tend to be more vague, less restrictive, and more easily circumvented. In contrast, those originating with the voters usually have more teeth. Of the 18 TELs examined, 11 originated with the legislature and only 5 with the voters. The other two were initiated by constitutional convention. (See Table 2 for a state -by -state listing of who originated and who approved the 18 TELs examined herein.) It should be noted here, however, that in 24 states citizens have no means by which to put an initiative or referendum on the ballot.(25) Such measures must be initiated by the legislature. Thus in those states, TELs that origi- nate with the voters are not an option, although through a legislative referendum voters can at least have the oppor- tunity to vote on a legislature -originated TEL. (Of some hope for those in noninitiative and referendum states is Table 2 [Omitted] that, in the three states where TELs were initiated by the legislature but approved by the voters, spending growth did fall somewhat relative to the U.S. average.) Although severely handicapped, tax activists in noninitiative states can pressure their legislators to come up with a sound, well-designed TEL, in addition to pressing for a constitu- tional change granting citizens the right to put initiatives and referendums on the ballot.(26) Finally, who approves the TEL is also important. Of the 18 TELs examined, 8 were approved by the legislature and 10 by the voters. Thus, while 3 of the 11 legislature - originated TELs were sent to the voters for approval, 8 never faced voter scrutiny, since they both originated in and were approved by the legislature. Only five TELs were both initiated and approved by the voters. The same methodology used in the earlier sections reveals that in the five states where TELs were initiated and approved by the voters, spending growth slowed, relative to the U.S. average, while in the eight states where they were both initiated and approved by the legislature, spend- ing growth actually rose, relative to the U.S. average. The remaining five TELs were not initiated and approved by the same people but by some combination of groups including the voters, the legislature, and constitutional conven- 2/26/98 t0 8 4:34:03 PM TAMING LEVIATHAN: ARE TAX AND SPENDING LIMITS... Page 14 of 28 tions.) The five-year growth rate of per capita state spending in voter -initiated and voter -approved TEL states fell from 6.5 percentage points above the U.S. average before TEL enactment to 2.2 percentage points above the U.S. average after TEL enactment, a fall of 4.3 percentage points. In contrast, the five-year growth rate of spending in states where TELs were both initiated and approved by the legisla- ture rose from 2.1 percentage points below the U.S. average before TEL enactment to 0.5 percentage points below the U.S. average after TEL enactment, an increase of 1.6 percentage points. These findings support Poulson's theory that TELs initiated by the legislature "could actually erode the budget constraint resulting in an increase in the growth of state government."(27) The ideal TEL would originate with and be approved by the voters, where possible, rather than the legislature. Is the TEL Constitutional or Statutory? In addition to origin and approval, whether a TEL is statutory or constitutional is important. Constitutional TELs are difficult to change. On the other hand, statutory TELs leave open the possibility that the legislature will change the definition of the item limited --often by exclud- ing certain areas of spending or revenue --or weaken the restrictiveness of the limit itself whenever legislators see fit. Thus, constitutional TELs are thought to be more effective than statutory TELs. Of the 18 TELs examined herein, 10 are constitutional and 8 are statutory. (See Table 2 for a state -by -state list.) Again, the same methodology gives results that indicate that spending growth in the 10 constitutional -TEL states fell, relative to the U.S. average, more so than in the 8 statutory -TEL states. The five-year growth rate of per capita state spending in constitutional -TEL states fell from 0.8 percentage points below the U.S. average before TEL enactment to 5.6 percent- age points below the U.S. average after TEL enactment, a fall of 4.8 percentage points. In contrast, the five-year growth rate of spending in statutory -TEL states fell from 2.9 percentage points above the U.S. average before TEL enactment to 0.6 percentage points above the U.S. average after TEL enactment, a fall of only 2.3 percentage points. The ideal TEL would be constitutional rather than statutory. How Much of the Budget Is Being Limited? 2/26/98 69 4:34:03 PM TAMING LEVIATHAN: ARE TAX AND SPENDING LIMITS... Page 15 of 28 Even the most stringent TELs do not pertain to the entire budget. Most apply solely to the general fund. Since, on average, about 44 percent of state -appropriated funds are outside the general fund, a substantial portion of the budget is left uncapped.(28) In fact, in some states the uncapped portion of the budget can be as large as 71 per- cent.(29) Often exempted are expenditures of special funds such as those earmarked for highways, education, and capital construction. Among the frequently exempted revenue items are federal aid, insurance trust funds, user fees, and earmarked funds. Six of the 18 TELs examined here apply to state tax revenue.(30) Thus, those TELs do nothing to restrict the growth of nontax revenue --charges, user fees, and the like. Predictably, from 1980 to 1991, charges and miscellaneous general revenue rose as a share of total general revenue from 13.8 percent to 17.7 percent.(31) The ideal TEL would apply a cap to 100 percent of the budget rather than to only certain categories. Does the TEL Cap Spending or Revenue? Whether a TEL applies to spending or revenue can also make a difference in its effectiveness. Of the 18 TELs examined here, 9 apply to spending (4 to appropriations and 5 to general -fund appropriations), and 9 apply to revenue in one way or another (3 to revenue, 2 to tax revenue, and 4 to appropriations of tax revenue). Each fiscal year, states must estimate their revenues for the coming year, in part on the basis of forecasts of how the state's economy will perform. Those economic fore- casts, and hence the revenue estimates, are often quite inaccurate. Further, politicians can manipulate the econom- ic forecasts in an effort to get around their TELs' restric- tions. Therefore, the use of revenue estimates as the base for a TEL is not ideal. Those pitfalls can largely be avoided, however, by applying the TEL to spending, since the spending numbers for the coming fiscal year are far more certain. The ideal TEL would cap spending rather than revenue or taxes. What Is the Limit? Another important factor is the definition of the limit itself. Most TELs--including 14 of the 18 TELs examined here --restrict state spending growth to the growth in state personal income. A few, however, use other limits such as population growth, inflation, or a fixed rate of growth. 2/26/98 70 4:34:03 PM TAMING LEVIATHAN: ARE TAX AND SPENDING LIMITS... Page 16 of 28 See Table 2 for more details.) Many argue that, of the wide variety of limits in use, those that restrict the growth of government to the rate of growth of personal income are the most appropriate since they prohibit the government from growing faster than the private economy. The fact that an overwhelming majority of TELs are so structured highlights the degree to which this argument has been accepted. However, the evidence suggests that linking spending to population growth plus inflation is much more restrictive. To illustrate the different effects of those two types of limits --personal income linked versus population linked -- Figure 8 shows the record of the 1980s. Throughout most of the 1980s the economy was booming, thus personal income rose at abnormally high rates, 30 percent in real terms from 1980 to 1990. In those prosperous times, government revenues were pouring in, allowing spending to skyrocket as well. Real state spending shot up by 42 percent from 1980 to 1990. Meanwhile, the U.S. population grew at only a modest rate of 10 percent.(32) Thus, a TEL limiting spending growth to the growth rate of personal income would have resulted in a slower rate of state spending growth over the last decade than occurred (30 percent compared to 42 percent). However, a TEL limiting the growth of state spending to the growth rate of popula- tion plus inflation would have provided a far stricter limit on real state spending growth, holding it to only 10 percent from 1980 to 1990, less than one-fourth the 42 percent rate at which it actually grew and one-third the rate at which a personal income -linked TEL would have allowed spending to Figure 8 Growth in Population, Real Personal Income, and Real State Spending, 1980-90 1980-90 Growth Population 10% Real Personal Income 30% Real State Spending 42% Graph Omitted) grow. Thus, TELs limiting spending growth to the growth rate of population plus inflation are far preferable if the goal is to tame spending. In fact, one of the reasons many studies have found TELs ineffective is that so many TELs are linked to personal income growth --which is hardly a restrictive limit. Since 2/26/98 / 4:34:03 PM TAMING LEVIATHAN: ARE TAX AND SPENDING LIMITS... Page 17 of 28 most TELs were in place by 1982, the evidence on spending growth since TEL enactment comes largely from the period of the 1980s when rapid growth of income accommodated the surge in spending. For example, South Carolina has a personal income - linked TEL. The five-year growth rate of spending in South Carolina rose from 18.7 percentage points below the U.S. average before TEL enactment to 3.0 percentage points above the U.S. average after TEL enactment. By contrast, the five-year growth rate of spending in California, which has a population- and inflation -linked TEL, fell from 9.4 percent- age points above the U.S. average before TEL enactment to 5.9 percentage points below the U.S. average after TEL enactment. The ideal TEL would limit the growth of spending to the growth rate of the population plus inflation rather than to the growth of personal income. Can the TEL's Restrictions Be Circumvented? How easily politicians can get around the limits of a TEL is an important factor in determining how successful that TEL will be at restraining the growth of government. At the very least, the TEL should be binding. In two cases the limit applies only to the governor's recommended budget and thus has virtually no teeth. (Nevada and Rhode Island have such nonbinding TELs, so as mentioned earlier, they were not included as TEL states in this study.) Of the other TELs, only Oklahoma's does not provide some mechanism by which the legislature can waive the re- strictions of the TEL. Nine of the 18 TELs examined here first require the declaration of an "emergency." However, no state has specified what constitutes an emergency.(33) Of the 18, 6 require only a majority vote to waive their TELs; 1 requires three-fifths approval; 9 require two-thirds ap- proval; 1 requires two-thirds approval plus compensating reductions over the following three years; and 1 has no waiver provisions. (See Table 2 for more details.) The ideal TEL would require voter approval for its provisions to be circumvented. Does the TEL Allow Cost Shifting to Local Governments? Since the goal of a TEL is to restrict the growth of government, if state governments adhere to their TELs by shifting costs to local governments, the overall size of government will not have been restrained. In an effort to foil such attempts to ignore the true intent of TELs, 5 of the 18 TEL states examined here have adopted TELs that prohibit state governments from imposing unfunded mandates 2/26/98 7.2— 4:34:03 PM TAMING LEVIATHAN: ARE TAX AND SPENDING LIMITS... Page 18 of 28 on local governments.(34) Since localized government is preferable to centralized government, a prohibition of unfunded mandates, which by itself could prohibit such decentralization, may not be desirable. To address that, four of the five TELs that prohibit unfunded mandates do allow for transfer of respon- sibility --for both program financing and decisionmaking--to local governments. In those cases, the state spending limit is then adjusted downward. Since most TELs do not apply to local governments, such decentralization could, through a disproportionate expansion in local government spending, lead to an increase in the overall level of state and local government spending. To prevent such expansion, TELs should apply to local govern- ments as well. Colorado's Taxpayer Bill of Rights, passed in 1992, is a recent example of a TEL that applies to both state and local governments. Several of the prospective 1994 ballot measures do so as well. The ideal TEL would apply to both state and local governments. And it would allow for transfer of responsi- bility to local governments and provide for the appropriate adjustments in each jurisdiction's limit. Does the TEL Require Additional Action to Be Implemented? The manner in which a TEL is to be implemented is also of considerable importance. If the legislature must take additional action to make the TEL operative, it can create a major roadblock in the path toward fiscal restraint. Unfor- tunately, in several instances that has been the case. For example, in Connecticut, as part of the 1991 deal to enact a new state income tax, Gov. Lowell Weicker agreed to a statutory TEL limiting the growth in general budget expenditures to the percentage increase in personal income or inflation (whichever was higher). A similar measure was passed as a constitutional amendment in 1992. However, the measure required that the general assembly define "general budget expenditures," "increase in personal income," and increase in inflation." The legislature has thus far refused to define those terms, and the state's attorney general has ruled that until they do, the TEL is inopera- tive. Therefore, because of poorly designed implementation provisions, a TEL that voters approved by a four -to -one margin remains impotent.(35) The ideal TEL would require no additional action by the legislature for implementation. 2/26/98 13 4:34:03 PM TAMING LEVIATHAN: ARE TAX AND SPENDING LIMITS... Page 19 of 28 How Is the TEL Enforced? Finally, enforceability plays a major role in determin- ing the effectiveness of fiscal discipline mechanisms. If a TEL is not adhered to, it ceases to be useful. Thus, a TEL should clearly articulate what is to take place should the government violate the dictates of the TEL. Unfortunately, that is rarely the case. As a result, several states have simply ignored their TELs. A case in point is Texas, where a constitutional TEL was passed by an overwhelming 84 percent majority in 1978. The TEL was adhered to in the first biennium to which it applied, but it has been ignored ever since.(36) While the Texas constitution is fairly clear on the precise course to be taken in the case of a violation of budgetary laws such as this one, the specific wording of the TEL itself does not mention enforcement mechanisms. In part as a result of that, the Texas Public Policy Foundation reports that "the Texas Reform Act is probably being violated at almost every level of the budget process," leading the legislature's biennial appropriations to exceed their limit by as much as 1.5 billion.(37) To avoid that sort of enforceability problem, the text of a TEL should clearly state that taxpayers have legal standing to sue to enforce the TEL's provisions.(38) In addi- tion, TELs should require injunctive relief to prevent the illegal collection of taxes or appropriation of expenditures while suit is pending. Missouri's Hancock II, an initiative seeking 1994 ballot status, is an example of a TEL that contains such provisions.(39) The ideal TEL should give taxpayers standing to sue to enforce its provisions and require injunctive relief to prohibit any illegal taxes or spending while such suits are pending. The Ideal TEL The ideal TEL should have the following characteris- tics.(40) 1. It should originate with and be approved by the voters, where possible, rather than the legislature. 2. It should be constitutional rather than statutory. 3. It should apply a cap to 100 percent of the budget rather than to only certain categories. 4. It should cap spending rather than revenue or taxes. 5. It should limit the growth of spending to the growth rate of population plus inflation rather than to the 2/26/98 ,91 4:34:03 PM TAMING LEVIATHAN: ARE TAX AND SPENDING LIMITS... Page 20 of 28 growth of personal income. 6. It should require voter approval for its provisions to be circumvented. 7. It should apply to both state and local governments. And it should allow for transfer of responsibility to local governments and provide for the appropriate adjustments in each jurisdiction's limit. 8. It should not require additional action by the legislature for implementation. 9. It should give taxpayers standing to sue to enforce its provisions and require injunctive relief to prohib- it any illegal taxes or spending while suit is pending. Do TELs Have a Useful Life Span? It is often argued that TELs are less effective over the long run than they are when first implemented. Part of the reason for that is that many TELs are statutory and can be amended by the legislature at any time. Thus, since TELs are often weakened over time --through exclusions of addi- tional areas of spending or revenue to which the limit applies or through outright alterations of the limit it- self --it is expected that their effectiveness will decline as well. Examination of the 15 binding TELs in place by 1980 indicates that spending growth is indeed restrained more over the first five years after TEL enactment than over the second five years.(41) The real growth rate of per capita state spending in the 15 states with binding TELs in place by 1980 was 3.5 percentage points below the U.S. average from 1980 to 1985 (6.3 percent vs. 9.8 percent) but 0.4 percentage points above the U.S. average from 1985 to 1990 16.7 percent vs. 16.3 percent). California --where a constitutional TEL was enacted in 1979 --is one example of a state whose TEL has substantially lost effectiveness over time, as more and more spending has been moved outside the purview of the limit. For example, Proposition 98, passed in 1988, required that a large por- tion of the state budget go to education, in effect crowding out spending on other things such as streets, highways, sewers, and police protection. The resulting demands for more spending on those areas were then often met with spe- cific earmarked local taxes, thus increasing the overall burden of state and local government. Further, Proposition 99 increased the cigarette tax but excluded that revenue from the general fund, designating it instead for grants to health organizations, thus exempting it from the TEL's cap.(42) As a result, despite the presence of a constitution- al TEL, state spending in California continued to rise 2/26/98 4:34:03 PM TAMING LEVIATHAN: ARE TAX AND SPENDING LIMITS... Page 21 of 28 dramatically throughout the 1980s. The erosion of TEL effectiveness over time can be linked in part to the culture of spending in state capitals, in which politicians will do whatever it takes to avoid having their spending powers restrained. However, it can also be traced to poor design. A major loophole in every existing TEL is the lack of a cap applying to the entire budget. For instance, California's TEL applied only to "appro- priations of state tax revenue." Others apply only to state general fund appropriations." As a result, govern- ment can be and has been expanded in such states, despite the presence of a TEL, by increasing nontax revenue (e.g., charges and user fees) and excluding certain categories of spending from the general fund. That loophole is probably the single biggest contributor to the limited effectiveness of TELs, especially over time. Perhaps the most important factor in preventing the erosion of the effectiveness of a TEL is making sure that the language of the TEL clearly states that the cap applies to "100 percent of state expenditures." Inclusion of that language and the other characteristics of the ideal TEL outlined in the preceding section would go a long way toward ensuring that TELs do indeed have a long useful life span. Other Measures of Fiscal Restraint Well-designed TELs can impose significant fiscal re- straint on a state's budgetary process. However, other useful measures exist as well. Two such measures are super - majority requirements and voter approval requirements for increasing existing taxes or imposing new taxes. Table 3 is a list of the states that have at least one of those three including TELs) measures of fiscal restraint. Supermajority Requirements for New or Increased Taxes By requiring more than a simple majority (usually a two-thirds majority) to raise existing taxes or impose new ones, supermajority requirements force legislators to reach a broader consensus on the necessity for higher taxes and the wisdom of the spending those taxes will fund.(43) A more sound fiscal policy is the likely result. Nine states have such requirements, two of which were enacted in 1992. In 1994 voters in two states --Montana and Nevada --may have the opportunity to pull the lever in support of supermajority requirements. (44) Voter Approval Requirements for 2/26/98 (o 4:34:03 PM TAMING LEVIATHAN: ARE TAX AND SPENDING LIMITS... Page 22 of 28 New or Increased Taxes Another fairly new fiscal discipline measure requires voter approval to increase existing taxes or impose new ones. In March 1992 Oklahoma kicked off this popular and populist movement by passing a constitutional amendment that requires voter approval of any tax hike that does not pass each house of the legislature by at least a three-fourths vote. Colorado went even further in November 1992 with passage of the Taxpayer Bill of Rights, a constitutional amendment that requires voter approval of any increase in Table 3 [Omitted] state or local taxes. In 1994 there may be as many as five state ballot initiatives that would require voter approval for new or increased taxes.(45) Voter approval requirements (VARs) have the further appeal of reconnecting the voters with their governments. Politicians who wish to raise taxes now have to convince only their fellow legislators of the wisdom of such a move. With a VAR, however, would-be tax -hiking politicians would have to take their case to the people. They would be forced to convincingly explain to their constituents why the money is needed and where it will be spent. That is rarely easy. Of course, VARs are not without their weaknesses. For example, since most VARs merely restrict the growth of tax rates, they would do nothing to prohibit the growth of nontax revenue.(46) As mentioned earlier, charges, fees, and miscellaneous general revenues have been growing as a share of total general revenue. Thus, the restrictions of most VARs could be circumvented by continuing to increase those types of revenues. Still, measures that require voter approval for in- creasing existing taxes or imposing new ones provide a powerful method to restrain the growth of state government. Further, VARs are very popular with voters. A recent na- tional poll found that 66 percent of Americans favor requir- ing tax increases to be approved by a majority vote of the people.(47) The popular appeal of VARs makes it probable that they will follow the path of the term -limits movement. That is, they will most likely pass by wide margins everywhere they are on the ballot in 1994 and be adopted by many more states in the years to come. Conclusion TELs, as we know them, are no silver bullet. Even their staunchest supporters will admit that TELs have not slowed the growth of taxes and spending as much as their 2/26/98 77 4:34:03 PM TAMING LEVIATHAN: ARE TAX AND SPENDING LIMITS... Page 23 of 28 advocates would have liked. Some TELs, in fact, have been clearly ineffective. However, the ineffective TELs tend to be the ones that are plagued by specific elements of poor design. For example, they are usually statutory rather than constitutional and thus are designed by the very politicians whose behavior they are intended to restrain. As a result, the cap frequently excludes large areas of the budget, and the TEL is often written in a manner that makes circumvent- ing or even changing its limit quite easy. Nevertheless, as this study has shown, TELS--despite their substantial flaws --can work. They can slow the rate of growth of taxes and spending, relative to the rest of the nation, and they can do so without shifting massive costs to local governments. In addition, though all existing TELs have notable flaws that limit their effectiveness, the better designed TELs are much more effective than are those that are designed poorly. Furthermore, TELs with the fea- tures of the ideal TEL described herein would have an even greater impact. This fall voters in as many as six states will have the opportunity to pass some type of tax limitation measure. People opposed to TELs--career politicians, lobbyists, and others --will go to great lengths to scare voters into think- ing TELs are damaging. The evidence presented here suggests just the opposite. By restraining the ability of politi- cians to continue to allow taxes and spending to grow un- checked, TELs can finally provide the beleaguered taxpayer some much-needed relief from the crushing burden of state taxes. Appendix: Detailed Tables The tables in this appendix provide more detailed information on TELs. Tables A.3 through A.6 give the re- sults of four different measures of changes in taxing and spending. Tables A.1 - A.6 Omitted Notes 1) U.S. Department of Commerce, Bureau of the Census, State Government Finances, 1980 and 1992 editions. 2) Several of the measures --the ones that require either a supermajority in the legislature or a majority of the voters to approve new or increased taxes --are not, strictly speak ing, TELs. Herein, TELs refers to measures that limit the growth of revenue or expenditures by a specific formula 2/26/98 4:34:03 PM TAMING LEVIATHAN: ARE TAX AND SPENDING LIMITS... Page 24 of 28 usually involving the growth of personal income or popula tion). 3) According to Americans for Tax Reform, information is correct as of July 11, 1994. Those states in which signa tures are being gathered to put some form of tax limitation measure on the 1994 ballot are Florida, Missouri, Montana, Nevada, North Dakota, and Oregon. At this writing, the Oregon and Nevada initiatives have already achieved ballot status. (Note that three of those statesMissouri, Mon tana, and Oregonalready have TELs in place.) 4) U.S. Advisory Commission on Intergovernmental Relations, Significant Features of Fiscal Federalism (Washington: ACIR, 1993), vol. 2, pp. 5354; U.S. Department of Commerce, Bureau of the Census, Historical Statistics of the United States, Colonial Times to 1970, part 2, pp. 111920, 1130; and Office of Management and Budget, Economic Report of the President, February 1994, p. 305. 5) U.S. Advisory Commission on Intergovernmental Relations, vol. 2, p. 82. 6) For more details on the recent growth of state govern ment, see Stephen Moore, "State Spending Splurge: The Real Story behind the Fiscal Crisis in State Government," Cato Institute Policy Analysis no. 152, May 23, 1991. 7) Paul Gigot, "Voters to Bill: Do You Want to Be Flor ioed?" Wall Street Journal, November 5, 1993, p. A8. 8) Terry Schwadron and Paul Richter, California and the American Tax Revolt: Proposition 13 Five Years Later (Berke ley: University of California Press, 1984), p. 6. 9) Information on the existence of TELs in specific states came from U.S. Advisory Commission on Intergovernmental Relations, 1986, 1991, 1992, 1993, vol. 1. 10) Daphne Kenyon and Karen Benker, "Fiscal Discipline: Lessons from the State Experience," National Tax Journal 37, no. 3 (September 1984): 438. 11) Marcia Howard, "State Tax and Expenditure Limitations: There Is No Story," Public Budgeting and Finance, Summer 1989, p. 87. 12) Dale Bails, "The Effectiveness of TaxExpenditure Limi tations: A Reevaluation," American Journal of Economics and Sociology 49, no. 2 (April 1990): 223. 13) James Cox and David Lowery, "The Impact of the Tax Revolt Era: State Fiscal Caps," Social Science Quarterly 71, no. 3 (September 1990): 507. 14) Stephen Moore, "What the States Can Teach Congress about 2/26/98 4:34:03 PM TAMING LEVIATHAN: ARE TAX AND SPENDING LIMITS... Page 25 of 28 Balancing the Budget," Heritage Foundation Backgrounder no. 751, February 1990, p. 10. 15) Barry Poulson, "The Rules of the Game: Designing a State Fiscal Constitution," in The Crisis in America's State Budgets: A Blueprint for Budget Reform, ed. John Berthoud and Samuel Brunelli (Washington: American Legislative Ex change Council, 1993), p. 133. 16) Information on TELs is from U.S. Advisory Commission on Intergovernmental Relations, 1986, 1991, 1992, 1993, vol. 1. The state tax and spending figures are from U.S. Department of Commerce, Bureau of the Census, State Government Financ es, various editions. The state and local spending figures are from U.S. Department of Commerce, Bureau of the Census, Government Finances, various editions. 17) Alaska gets a disproportionate share of its revenue from severance taxes, mostly on oil sold to nonAlaskans (22 percent of general revenue in 1992). The amount of revenue from those taxes fluctuates highly; thus, in comparison with other states, Alaska's overall levels of taxes and spending fluctuate highly as well. For instance, from 1986 to 1991 per capita state taxes in Alaska went down (in nominal terms) by 9 percent, while the U.S. average rose 30 percent. Including those numbers would skew the TEL -state group average significantly downward (thus making a stronger case for the effectiveness of TELs). Figures from Alaska are excluded from all "nonTEL-state" group averages as well. 18) Although New Jersey enacted a TEL in 1976, it was by law temporary, expiring in 1983. Thus, New Jersey is not in cluded as a TEL state, nor is it included as a nonTEL state for any of the years during which its TEL was in effect 1976 to 1983). 19) Since this involves comparisons between growth rates over the same period of analysis, nominal dollars are used. 20) "NonTEL states" refers to the group of states (differ ent for each year of enactment) that did not have a binding TEL in place for any portion of the relevant period of analysis. Note that nonTEL states thus include both Rhode Island and Nevada (states with nonbinding TELs) but, as mentioned earlier, not Alaska. 2 1) More detailed tables for all calculations for all states similar to Table A.2), as opposed to just TEL -state average figures (as in Tables A.3 -A.6), can be obtained from the author. 22) A list of some of those studies can be found in Sam Staley, "Bigger Is Not Better: The Virtues of Decentralized Local Government," Cato Institute Policy Analysis no. 166, January 21, 1992. See also Stephen Moore and Dean Stansel, The Myth of America's Underfunded Cities," Cato Institute 2/26/98 810 4:34:03 PM TAMING LEVIATHAN: ARE TAX AND SPENDING LIMITS... Page 26 of 28 Policy Analysis no. 188, February 22, 1993. 23) The most recent year for which state and local spending data are available is 1991. 24) For a l Opoint checklist for evaluating the potential effectiveness of individual TELs, see Poulson, p. 10. For a more detailed contemporary discussion of the expected diffi culties in implementing effective TELs due to their design, see Naomi Caiden, "Problems in Implementing Government Expenditure Limitations, appendix C in Aaron Wildaysky, How to Limit Government Spending (Berkeley: University of Cali fornia Press, 1980), pp. 14362. 25) Patrick McGuigan, "The Conservative Activist's Primer on Direct Democracy," in Making Government Work: A Conserva tive Agenda for the States, ed. Tex Lezar (San Antonio: Texas Public Policy Foundation, 1992), p. 402. 26) The National Referendum Movement, a newly formed group in Memphis, Tennessee, headed by Barbara Vincent, is seeking to obtain the right to initiative, referendum, and recall in states that do not have it by working with grassroots organ izations in those states to petition the courts to put initiative, referendum, and recall on the ballot. 27) Poulson, p. 35. See also Barry Poulson and Jay Kaplan, A Rent -Seeking Model of TELs," Public Choice 79 (1994): 117-34. 28) "Tax and Expenditure Limits," in The Source Book of American State Legislation 199394, A Question of Disci pline: A Guide to Fiscal Responsibility, ed. Samuel Brunelli and John Berthoud (Washington: American Legislative Exchange Council), p. 32. 29) Howard, pp. 87-88. 30) Note that four of those six apply specifically to "ap propriations of state tax revenue." 3 1) U.S. Advisory Commission on Intergovernmental Relations, 1993, vol. 2, p. 71. 32) U.S. Advisory Commission on Intergovernmental Relations, 1993, vol. 2, pp. 24, 53; and Office of Management and Bud get, p. 305. 33) Dale Bails, "A Critique on the Effectiveness of Tax Expenditure Limitations," Public Choice 38, no. 2 (1982): 12938. 34) Those states are California, Michigan, Missouri, Tennes see, and Washington. 35) See Jeffrey Christensen, "Weicker's World," National 2/26/98 I 4:34:03 PM TAMING LEVIATHAN: ARE TAX AND SPENDING LIMITS... Page 27 of 28 Review, January 24, 1994, p. 26; and Theodore Olson, "A TaxandSpend Legislature Ignores the Voters," Wall Street Journal, November 24, 1993, p. A 17. 36) Michael Weiss, "The Texas Tax Relief Act after 12 Years: Adoption, Implementation, and Enforcement," Texas Public Policy Foundation, San Antonio, August 1991, p. 4. 37) Ibid., pp. 11, 5. 38) According to Weiss, "Currently, every state except New Mexico permits [taxpayer suits]" (p. 18n. 73). For a fuller discussion of the matter, see ibid., pp. 810. 39) Hancock II is an attempt to eliminate some of the loop holes of the original Hancock amendment, passed in 1980, which gave taxpayers standing to sue but did not require injunctive relief. 40) For a sample tax and expenditure limitation act designed by the American Legislative Exchange Council (ALEC), see Tax and Expenditure Limits," pp. 3740. ALEC's model TEL does exclude certain areas of spending; nevertheless, it generally shares the spirit of the recommendations made herein. Furthermore, it spells out in detail what the text of a TEL should look like, which could prove useful to grassroots organizers seeking to put a TEL initiative on the ballot in their state. 41) Those 15 states are Arizona, California, Colorado, Delaware, Hawaii, Idaho, Louisiana, Michigan, Missouri, Oregon, South Carolina, Tennessee, Texas, Utah, and Washing ton. 42) Steven Hayward, "Conditions Are Building for Another Tax Revolt," Los Angeles Daily News, October 24, 1993, pp. 3132. 43) Ironically, on the federal level Congress has adopted a supermajority rule for cutting taxes but only a simple majority rule for raising taxes. However, there is now a proposal by Rep. Jim Saxton (R-N.J.) in Congress to require a three-fifths vote to raise taxes. 44) Americans for Tax Reform. 45) Ibid. The five initiatives would be in Florida, Missou ri, Montana, North Dakota, and Oregon. 46) Some of the VARs seeking ballot status in 1994 would specifically require voter approval for increased or new taxes or fees." 47) Kevin Merida, "Americans Want a Direct Say in Political DecisionMaking, Pollsters Find," Washington Post, April 20, 1994, p. A19. WJPA i 2/26/98 4:34:03 PM TAMING LEVIATHAN: ARE TAX AND SPENDING LIMITS... Page 28 of 28 Published by the Cato Institute, Policy Analysis is a regular series evaluating government policies and offer- ing proposals for reform. Nothing in Policy Analysis should be construed as necessarily reflecting the views of the Cato Institute or as an attempt to aid or hinder the passage of any bill before Congress. Contact the Cato Institute for reprint permission. Printed copies of Policy Analysis are $4.00 each 2.00 in bulk). 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