Minnesota looks at traffic utility fee
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Minnesota looks at traffic utility fee

The Minnesota General Assembly is considering a proposal from Governor Jesse Ventura (800-657-3717) to alleviate municipalities dependance on state monies. Among the options being considered is a traffic utility fee that would allow cities and townships to levy a tax on businesses based on the estimated number of vehicle trips the property generates.

The bill offers very few specifics and has not been passed by either house of the Assembly. The proposal does not outline guidelines for the trip calculation or set a limit on the size of the fee, leaving that to the local government. The bill does set out criteria that municipalities must meet to be able to impose a traffic utility fee: 1) the city must pass an ordinance by a two-thirds vote of its city council; 2) the city must have a five-year master plan in place and 3) revenues from the fee may only be used for specific projects listed in the master plan.

Governor Ventura has stated that he would like to reduce the property tax burden in Minnesota by shifting some of those fees to sales taxes. His proposals, that he refers to as the "big plan" includes over 100 items changing the streams of tax revenue. What his proposals will mean to real estate developers are not exactly clear.

"A general shift to sales taxes will help development," said Ken Henk of Paster & Associates Development (651-646-7901). "I am sure there are a lot of compromises to be made."

The state of Minnesota has a 6.5% property tax which is competitive in the region but is always passed down in higher rents. The property tax has long been a thorn in developer’s side.

"If that tax disappears and this traffic fee replaces it, fine, but it is unclear to what extent this part of the overall will revamp property tax," Henk said. "Any developer would be opposed to anything that adds extra fees to land that would then be passed down to tenants."

The ICSC state director for the Dakotas and Minnesota is Joeph M. Nicchetta of General Growth Properties (952-525-2163). The government relations committee chair is Joseph L. Nunez of Target Corporation (612-304-0941).