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ULCT negotiates sliding scale for municipal fund balances in SP97 after strong advocacy
Summary
After a weekend flurry of calls and meetings, ULCT secured a third substitute on SP97 that avoids immediate, drastic cuts to municipal reserves; the compromise phases city general‑fund reserve limits down over five years via a sliding scale tied to city size and leaves towns at current allowances.
ULCT staff provided a long briefing on SP97, explaining how a second substitute had threatened to link municipal fund balance caps to property tax revenue in a way that would have dramatically reduced allowable reserves for some towns and cities.
Staff described member advocacy on Friday as decisive: within hours of a problematic second substitute, league officers and staff met with Senate leadership to explain the consequences for small towns and several municipalities that would have seen allowable reserves collapse under the prior draft. That outreach prompted a redraft (the third substitute) that staff characterized as a compromise the league could accept.
Under the third substitute, towns remain at 100% of general‑fund fund balance. Cities would have a five‑year runway to scale down from current law (35%) to a sliding scale: 30% for cities with general funds under $25 million, 28% for $25–49 million, and 25% for cities with $50 million or more, with a compliance phase reaching July 1, 2031. The substitute removes proposed interest‑earnings and property‑tax caps that had concerned league members.
Staff recommended moving the LPC position from opposed on the second substitute to neutral on the third substitute, while continuing to press for fixes to timing and calculation issues — including questions about whether the percentages are calculated on a single year or a multi‑year average and how later revenue reconciliations (B&C funds, sales tax, bond receipts) will interact with certified tax rate histories.
Members raised implementation concerns (timing of valuation notices, interplay with certified tax rates, capital fund accounting) and urged continued negotiation and statutory clarifications. ULCT staff asked members to accept the neutral recommendation for now and continue to provide local data to inform interim fixes.
