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m5845 BC-MN-XGR-SessionCountd 05-15 0685

No deal yet on property tax relief or spending cuts

By MARTIGA LOHN

Associated Press Writer

ST. PAUL (AP) — Budget talks between the Democrats who control the Legislature and Republican Gov. Tim Pawlenty broke off late Wednesday without a deal.

Negotiations to close a $935 million budget gap and give homeowners relief from rising property taxes were set to pick up Thursday morning, as the 2008 session slips away. The Legislature faces a mandatory Monday deadline to finish its business.

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The main sticking points are how to structure a limit on local property tax increases and how much money to put into municipal aid and homeowner property tax assistance programs. The two sides are also divided on about $100 million worth of spending cuts and revenue to cover the deficit.

Wednesday’s talks ended for the night after Democrats proposed capping property tax increases at 5.5 percent, combined with some direct help to homeowners and aid to cities and counties. House Speaker Margaret Anderson Kelliher called the offer "a real attempt to find the point of compromise," but Pawlenty spokesman Brian McClung was unimpressed.

"That does not go nearly far enough," McClung said of the DFL’s proposed property tax cap.

Pawlenty has sought to limit property tax increases to 3 percent a year, although Kelliher said he has been willing to discuss limits as high as 3.9 percent. She said she took it as a good sign that the governor accepted the DFL offer and scheduled a next round of talks.

"We were not kicked out of the office," Kelliher said.

She added: "The governor needs some time to think about what his next move is in response to this and wants to be thoughtful about this. I think there is plenty of time to be able to finish our work here and complete the session over the weekend."

Democrats also offered a $103 million list of program cuts, fee hikes, reserves and a hospital payment shift to address the last part of the deficit still separating the two sides. McClung said many items on the list were "problematic."

The two sides also discussed military tax breaks and extra aid for schools.

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Kelliher suggested the possibility of override votes later this week if Pawlenty rejects an education spending package and legislation barring the implementation of federal Real ID regulations requiring government-approved ID cards. Both bills passed both houses of the Legislature by veto-proof margins.

"We’d like to have options at this point," she said Wednesday evening.

A proposal to facilitate a $2.1 billion Mall of America expansion provided another challenge for political leaders after mall officials warned that they could delay or scale back the project if the terms aren’t reworked before lawmakers close their session.

Kelliher said late Wednesday that legislators were reworking the plan, although most of the main elements won’t change.

Earlier, Pawlenty said he wasn’t sure whether an acceptable package could be put together in the final few days of the session.

The mall’s owners balked at a proposal that would generate $370 million in public aid for the project through taxes imposed on retail sales, restaurant tabs and lodging bills in the city of Bloomington. The plan doesn’t allow the mall to divert money from a regional property tax pool as its owners wanted.

The project is expected to spark 7,000 construction jobs and just as many permanent positions when completed. The mall would grow by 5.6 million square feet to accommodate new store, hotel, restaurant, theater and office space.

Kurt Hagen, vice president for development for Triple Five Corp., the mall’s owner, said relying solely on city-generated taxes adds too much uncertainty. City leaders would have to sign off on the taxes, but might be reluctant to do so if the burden is solely on them, Hagen said.

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Martiga Lohn can be reached at mlohn(at)ap.org.

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