Minnesota's fiscal disparities programs

The Twin Cities area fiscal disparities program as initiated in 1971 as a program of commercial-industrial tax-base sharing within the Twin Cities metropolitan area. The map above shows the various development areas within the seven-county region as they existed in the early 1970s. In 1995, a parallel program was established on the Iron Range of northeastern Minnesota.

The Twin Cities area fiscal disparities program shares 40 percent of the growth in the commercial-industrial (C/I) "property tax capacity" (adjusted tax base) of Anoka, Carver, Dakota, Hennepin, Ramsey, Scott, and Washington counties. The fund must be spent on activities that benefit the metro area as a whole. Approved uses include infrastructure improvements such as airports, highways, streets, and roads, cultural and recreational uses. Municipalities must file a report with the Department of Revenue showing that expenditures for approved uses equal or exceed the fiscal disparities distribution of the municipality. If a municipality fails to comply with the reporting or expenditure requirements, the following year's fiscal disparities distribution to the municipality would be withheld.

The program not only reduces fiscal disparities among municipalities within the region, but it also encourages infrastructure investments by "internalizing" the positive externalities associated with these improvements.