Levy Limits

Levy limits included in final omnibus tax bill

In the final hours of the 2008 session, legislative leaders and the governor managed to reach a compromise on the omnibus tax bill (Chapter 366). Unfortunately, legislators could not convince the governor to cut levy limits altogether, but he did agree to a more lenient version of the limits.

The final bill calls for cities with populations over 2,500 to be subject to levy limits for the next three years. The levy limit for 2009 will allow for up to a 3.9 percent inflationary increase based on the city’s previous year’s levy, plus local government aid (LGA). Going forward, the levy limit will allow for the 3.9 percent increase over the previous year’s adjusted levy limit base, which includes any unused levy authority from the previous year.

The limits will also allow for growth equal to one-half of the percent increase in households within each city and one-half of the percent increase in taxable market value as a result of new construction of commercial and industrial property within each city. The Senate strongly opposed levy limits, especially those of a three-year duration. The governor reportedly would not compromise on the three-year duration but did agree to changes that apply levy limits to levy plus aid and to a broad list of “special levies.”

Special levies

The levy limits will allow for the traditional “special levies,” which are levies that are outside of the levy limit. In addition, the bill will add several new special levies for unreimbursed expenses related to the I-35W bridge collapse, non-Public Employees Retirement Association (PERA) pension contribution increases, levies related to foreclosure expenses, and certain increased levies related to new public safety wages and benefits. In addition, the levy limit law will provide cities with increased levy authority in future years if local government aid or market value homestead credit programs are reduced through a governor's unallotment.

The most frequently used special levies are:

  • Levies for bonds and most certificates of indebtedness,
  • Voter approved levies,
  • Levies to pay for federal or state matching requirements,
  • Levies for natural disaster recovery,
  • Levies for property tax abatements,
  • Levies for increases in PERA employer contributions,
  • Levies to repay a federal or state loan for a transportation or capital project,
  • Levy increases to fund police and firefighter relief associations,
  • Levies related to foreclosure costs
  • Levies for increased police and firefighter wage and benefit costs.

There are a total of 22 defined special levies. For a complete list, see Chapter 366 of the 2008 session laws.