1. BUDGETING AFTER LEVY CONSOLIDATION AND OTHER LEGISLATIVE CHANGES Jim Brownlee, CPA

2. BUDGETING AFTER LEVY CONSOLIDATION  In 2014 Governor Dalrymple created task force to propose tax reform  Task force proposes to consolidate 24 levies into a single general operations levy.  Legislature passes Senate Bill 2144 that incorporated most of task force recommendations  Senate Bill 2144 passes  Bill is effective for taxable years beginning after December 31, 2014

3. BUDGETING AFTER LEVY CONSOLIDATION  General Fund Levy is limited to 105 mills  Cities that have a combined levy after consolidation of over 105 mills must reduce the overage by 25% each year starting in taxable year 2017 until the mill rate is 105 mills (taxable year 2020 so a 5 years implementation timeframe)  Additional levies to the 105 mill general fund  Emergency for snow removal, natural disaster and other Emergency 2.5 mills fund size not to exceed $5 per capita or amount produced by 5 mills.

4. BUDGETING AFTER LEVY CONSOLIDATION  Airport – 4 mills based on certified by airport authority  Share of special assessments – no cap  Deficiency or expected deficiency of special assessments – no cap  Public Library Service – 4 mills or as increased by a 60% majority vote of the electors (no state aid if you decrease average for past three years)  Cemetery – 2 mills  Public Recreation System – 6 mills If the electors approved a public recreation system, the city may provide up to the equivalent of 2.5 mills of funding from it’s general fund.

5. BUDGETING AFTER LEVY CONSOLIDATION  If a voter approved recreation levy was approved before January 1, 2015 it remains in effect for up to 10 taxable years.  Principal and interest on bonds issued for public buildings – no cap  Principal and interest on General Obligation bonds – no cap taxes levied for retirement of bonds issued before January 1, 2015 under NDCC section 40-57-19 (MIDA Financing) continues until bonds are retired after which time the authority is repealed.  Capital Improvements – 10 mills with majority vote or 20 mills with a 60% vote.

6. BUDGETING AFTER LEVY CONSOLIDATION  A voter approved capital improvement levy may not be effective for more than 10 taxable years.  Programs for Older Persons – 2 mills Upon a majority vote of qualified electors.  Fire department Building or Equipment Reserve – 5 mills this levy was repealed by SB 2144 However if a voter approved levy was authorized prior to January 1, 2015 it remains in effect for up to ten years. After that time the authority is repealed and must be consolidated with the capital improvements levy.

7. BUDGETING AFTER LEVY CONSOLIDATION  Aid for Public Transportation System – 5 mills Upon majority vote of qualified electors.  Discontinuance of Employee’s or Police Pension plans – no cap as outlined in NDCC 40-46-25  Police Station and Correctional Facility Fund – 2 mills This was repealed by SB 2144 however if a voter approved levy was authorized prior to January 1, 2015 it remains in effect for up to ten taxable years and the authority is repealed and consolidated with the capital improvement levy.  Judgement or settlement of a claim – 5 mills or 10 mills liability insurance policy in force.

8. BUDGETING AFTER LEVY CONSOLIDATION  Judgements for Property Condemned for Special Improvements – no cap  Airport Authority Deficiency in principle and interest on bonds – no cap  Municipal Arts Council – 5 mills upon vote of electors  Animal Shelter -.5 mills repealed by SB 2144 however if a voter approved levy was authorized prior to January 1, 2015 it remain in effect for up to ten taxable years then authority is repealed and consolidated with general fund levy.  Job Development Authority – 4 mills follow provisions of NDCC 40-57.4-04

9. BUDGETING AFTER LEVY CONSOLIDATION  Lease of Court, Correction or Law Enforcement Facility's – 10 mills Repealed by SB 2144 however if a levy for a lease was approved prior to January 1, 2015 the levy may continue until the end of the lease and after that must be discontinued and the balance in the fund transferred to the general fund.

10. BUDGETING AFTER LEVY CONSOLIDATION  Section 103 of Senate Bill 2144 -Transition. The treasurer of each county, city, township or other political subdivision maintaining a special fund for which levy authority is eliminated by this act, by the end of the fiscal year for which deposit of revenue from the levy authority is terminated by this Act, shall satisfy any obligations of that fund, transfer the remaining balance to the general fund of the political subdivision, and close out the special fund.

11. BUDGETING AFTER LEVY CONSOLIDATION  Given that SB 2144 removes the legal authority to levy for specific purposes GASB Statement 54 also requires that these special revenue funds that accounted for those specific levies must also be closed. GABB 54 only allows for special revenue funds that have revenues that are legally restricted for specific purposed. As this no longer applies to any fund that was set up to account for a specific revenue source such as social security or advertising these funds can no longer be used.

12. BUDGETING AFTER LEVY CONSOLIDATION  Options for cities to implement SB 2144 are they can close out all other levies and combine into general fund. As long as the total of the general fund is less than 105 mills this will work out well.  Close out the levies that are no longer allowed.  Either method the expenditure line items for those closed out funds must be added to the general fund budget.  This may require the recoding of the payroll program if it is an automated payroll system.

13. BUDGETING AFTER LEVY CONSOLIDATION  Other bills passed by Legislature in 2015.  House bill 1194 amends NDCC 21-03-02 to allow cities to receive a loan from a bank or credit union and to add section 21-13.  Provisions of the bill state that: 1. A political subdivision may have no more than five hundred thousand dollars in outstanding principal on bank or credit union loans at any one time. 2. A political subdivision bank or credit union loan must be paid in full within five years from the date of the loan obligation. 3. The loan documents must describe the revenues from which the loan is anticipated to be paid and may require the political subdivision to establish a separate fund for the repayment of the loan, including interest, on or before the due date. 4. Collateral for a loan may consist only of property that is purchased with loan proceeds.

14. BUDGETING AFTER LEVY CONSOLIDATION  House bill 1340 amends NDCC 40-22-18: Special Assessments Protests  If the governing body finds protests to contain the manes of the owners of a majority of the area of the property included within the improvement district, the protests shall be a bar against proceeding with any special assessment for the improvement project. However, the protests do not bar proceeding with the improvement project described in the plans and specifications if the governing body funds the project with other funds other than special assessments.  If the governing body finds the protests to contain the names of the owners of a majority of any separate property area included within the district, such protests shall be a bar against proceeding with special assessments to be assessed in whole or in part upon property within such area, but shall not bar against other areas within the district, unless such protests represent a majority of the area of the entire district. If the protests represent a majority of the area of the entire district, such protests bar any special assessment for the improvement district.

15. BUDGETING AFTER LEVY CONSOLIDATION  Senate Bill 2217 relating to filing financial report of ending balances of each fund held by appointed boards.  Bill applies to unelected boards such as Libraries, Airport Authorities, Job Development Authorities, Health Districts and other boars.  Bill states that in the year for which the levy is sought, an board or authority that is not a city or county governing body, and which is seeking approval of a property tax levy of a city or county governing body, must file with the auditor of each participating city or county at a time and in a format prescribed by the auditors, a financial report for the proceeding calendar year showing the ending balances of each fund held by the unelected board or authority.

16. BUDGETING AFTER LEVY CONSOLIDATION  Senate bill 2217 also created section 57-15-30.2 that states:  The governing body of any county, city, township, school district, park district, recreation service district, rural fire district, rural ambulance service district, soil conservation district, conservancy district, water authority, or any other taxing entity authorized to levy property taxes or have property taxes levied on its behalf, in the year for which the levy will apply, must file with the county auditor of each county in which the taxing district is located, at a time and in a format prescribed by the county auditor, a financial report for the preceding calendar year showing the ending balances of each fund or account held by the taxing entity during the year.

17. BUDGETING AFTER LEVY CONSOLIDATION  House Bill 1057 – notice to property owners of an assessment increase  Bill creates sect 57-02-53 of NDCC that states in part:  1.a. When any assessor has increased the true and full valuation of any lot or tract of land and improvements to an amount that is an increase of three thousand dollars or more and ten percent or more from the amount of the previous year’s assessment, the assessor shall deliver written notice of the amount of increase and the amount of the previous years assessment to the property owner at the expense of the assessment district for which the assessor is employed. Delivery of written notice to a property owner under this subdivision must be complete at least fifteen days before the meeting of the local board of equalization.

18. BUDGETING AFTER LEVY CONSOLIDATION  1.b. If written notice by the assessor was not required under subsection a and action by the township, city, or county board of equalization or order of the state board of equalization has increased the true and full valuation of any lot or tract of land and improvements to an amount that results in a cumulative increase of three thousand dollars or more and ten percent or more from the amount of the previous years assessment, written notice must be delivered to the property owner. The written notice under this subsection must be mailed or delivered at the expense township, city or county that made the assessment increase or the township, city or county that was ordered to make the increase by the state board of equalization. Delivery of the written notice to a property owner under this subdivision must be completed within fifteen days after the meeting of the township, city or county board of equalization that made or ordered the assessment increase and within thirty days after the meeting of that state board of equalization, if the state board of equalization ordered the assessment increase.

19. BUDGETING AFTER LEVY CONSOLIDATION  3. The assessor shall provide an electronic or printed list including the name and address of the addressee of each assessment increase notice required under subdivision a of subsection 1 and the officer responsible for providing notice under subdivision b of subsection 1 shall provide an electronic or printed list including the name and address of the addressee of each assessment increase notice required under subdivision b of subsection 1 to each city, county, school district, or city park in which the subject property is located, but a copy does not have to be provided to any such taxing district that levied a property tax levy of less than one hundred thousand dollars for the prior year.

20. BUDGETING AFTER LEVY CONSOLIDATION  House bill 1443 relating to the creation of the infrastructure revolving loan fund.  Creates section 6-09-49 of NDCC.  Section 1.1: The infrastructure revolving loan fund is a special fund in state treasury from which the Bank of North Dakota shall provide loans to political subdivision for essential infrastructure projects. The Bank shall administer the infrastructure revolving loan fund. The maximum term of a loan made under this section is thirty years. A loan made from the fund under this section must have an interest rate not to exceed two percent per year.  Section 1.2: The Bank shall establish priorities for making loans from the infrastructure revolving loan fund. Loan funds must be used to address the needs of the community by providing critical infrastructure funding. Except as expressly provided under this section, a political subdivision may not use infrastructure revolving loan funds for capital construction. In addition to eligiable infrastructure needs established by the Bank, eligible infrastructure needs may include new water treatment plants, new wastewater treatment plants,

21. BUDGETING AFTER LEVY CONSOLIDATION  New sewer lines and water lines; and new storm water and transportation infrastructure, including curb and gutter construction.  Section 1.3 in part: In processing subdivision loan applications under this section, the Bank shall calculate the maximum loan amount for which a qualified applicant may qualify, not to exceed fifteen million dollars per loan. The Bank shall consider the applicant’s ability to repay the loan when processing the application and shall issue loans only to applicants that provide reasonable assurance of sufficient future income to repay the loan.  Section 2; If a political subdivision receives funds distributed by the state treasurer under subsection 1 or 4 of section 1 or by the department of transportation under subsection 1 of section 2 of Senate Bill No. 2103 (surge funding) as approved by the sixty-fourth legislative assembly, it is the intent of the sixty-fourth legislative assembly that political subdivisions be ineligible to receive a loan under the infrastructure revolving loan fund until July 1, 2017 