Legislative Update: Governor’s Supplemental Budget, Street Impact/Improvement Fees & Historic Tax Credit

March 22, 2023

The legislature is through its first committee deadlines and putting together its budget in the next few weeks. Our team has been working hard on several items, but we wanted to provide a quick update for you on a variety of issues. If you have any questions, our team would love to hear from you.

Governor’s Supplemental Budget

Governor Walz released his supplemental budget following the February forecast. The supplemental budget increased funding for law enforcement grants, higher education, and local government aid. It is a 28% increase in spending this biennium and an additional 14% in spending next biennium (called “the tails”). While the governor’s budget does include the historic tax credit we support and does not increase the state general levy, it also includes a capital gains tax increase – which would add 2-4% on top of existing ordinary income tax rates, potentially topping out at 13.85%.

Review the governor’s supplemental budget »

Street Impact/Improvement Fees

The House Transportation Committee planned to hold a hearing on two bills that would allow municipalities to increase street impact fees that we have opposed for decades. Fortunately, HF1183, authored by Rep. Steve Elkins (DFL-Bloomington), was pulled from the agenda after significant opposition. Unfortunately, the committee pushed on and heard HF1402, which would allow for significant development fees on new development. I testified in opposition on behalf of NAIOP, and the bill is not moving yet in the Senate. Read an article from Finance & Commerce on this topic.

Historic Tax Credit

The Senate Tax Committee held a hearing on restoring the historic rehabilitation tax credit. A big thanks to Dan Collison, Sherman Associates, for testifying on behalf of NAIOP in support of the bill. The bill, authored by Senate Majority Leader Kari Dziedzic (DFL-Minneapolis), has vast bi-partisan support and will be a major priority for the Senate and governor going into budget conversations. However, we have heard there are concerns from Tax Chair, Rep. Aisha Gomez (DFL-Minneapolis). Your involvement by reaching out to her can still make a difference in moving this legislation forward.

Adult Changing Rooms

The Senate Labor Committee held its final hearing on the adult changing room bill, SF 999. This bill would require buildings to include adult-sized changing facilities on each floor where a restroom is accessible to the public. NAIOP has opposed this bill and I have testified raising concerns. Unfortunately, other business associations have remained on the sideline with the exception of the National Federation of Independent Business (NFIB). The bill is on the floor and unfortunately is likely to become law. The bill gives the Commissioner of Labor the authority to change the law through rule making, so for now it is very open-ended on how this will affect new or retrofitted buildings, restaurants, offices and any other restrooms open to the public.

Other Issues Traveling Through the Legislature

  • Free breakfast and lunch for all students—signed by Governor Walz on March 17.
  • Ranked choice voting statewide—passed through committee in the House and the Senate. FairVote Minnesota has been advocating using internal corporate communications to contact other employees and employers to support.
  • Metropolitan Council Reform—a recent audit exposed the Metropolitan Council’s mismanagement of SWLRT and lack of transparency and communication throughout the construction process. Proposed bills include changing from the governor appointing Met Council members to an election process. Separate from this reform, a recent story from the Minneapolis/St. Paul Business Journal highlights the big challenges facing large municipal transit systems.
  • Bonding bill failed in the Senate.
  • Multifamily Housing eNews »
  • Omnibus policy bills have also been making their way through the legislative process.

We anticipate spending category targets will be decided soon and finance bills should be done by their break April 4th. As budget bills are put together, we will create a bill tracker document.

As the legislative session continues, we will continue to reach out and provide key updates. We thank you for your support and contacting your legislators about important issues facing our industry. Please do not hesitate to reach out to me to share your thoughts on any legislative issues.

If you have any questions or concerns, please reach out—your Penny Per Square Foot Fund dollars have been hard at work for you!

Roz Peterson, Public Policy Director
roz@naiopmn.org | (612) 708-5281