International Falls voters will be asked on the Nov. 6 general election ballot if they support implementation of a 1 percent local sales and use tax on taxable items sold within the city to pay for city infrastructure needs.
A second public information meeting about the proposed local sales and use tax is scheduled for 7 p.m. Tuesday in council chambers at the Falls Municipal Building.
Voters in the city will be asked Nov. 6 to answer "yes" or "no" to the question: Shall the city of International Falls, Minnesota be authorized to impose a sales and use tax of 1 percent to finance transportation and public infrastructure projects?
A local sales tax spreads the burden of infrastructure costs across the users of the streets, including residents who live outside the city and visitors to the area. Implementation could alleviate the need to increase the amount property taxes collected from city property owners to pay for the city's infrastructure needs.
The International Falls City Council approved a resolution to put the question to a vote of the city's residents, which also includes a clause that allows the city to sell bonds should voters approve the sales tax.
Voter approval must also be followed by approval of implementation of the tax and its intended uses by the Minnesota Legislature.
By including the bond sale clause in the approved resolution, the city would not be required to seek voter approval for bond sales to pay for the infrastructure needs. A bond sale would be paid back with money generated from the sales tax, estimated to collect $803,149 annually.
Should the Legislature approve implementation, the Minnesota Department of Revenue would begin working with businesses in the city to develop a plan for collection. The state would collect the tax and pay the money to the city every quarter, and would charge the city a fee for doing so.
The earliest the tax could be implemented is Oct. 1, 2019, or Jan. 1, 2020, depending on how long the state needs to do its work for collection.
The council approved a resolution based on the following engineer estimates of the costs for the following infrastructure needs:
...”for all or part of the capital, design and engineering, financing and administrative costs of the projects, with the projects to include various street improvement projects that are estimated to cost $7.4 million; U.S. Highway 53 reconstruction project with an estimated local share of costs of $1.22 million; water system projects and exceed $7.1 million and sanitary sewer system upgrades that total up to $12 million.”
The facts
The following information has been distributed by city officials about the local sales and use tax.
The city's capital improvement plan for the next 15 years includes $7.19 million for streets, $7.46 million for the city water system, and $2.8 million for the sanitary sewer system, totaling $17.5 million
Sales and use taxes are already collected in 42 counties and 32 cities in Minnesota. Councilors noted that going out of town to purchase taxable items means local people may be paying another community's local sales tax and helping that community to fund its needs.
Cities seeking voter approval Nov. 6 are International Falls, Blue Earth, Grand Rapids, and Blackduck.
Should the city, without implementing a 1 percent sales and use tax, levy $800,000 in property taxes each year to pay for infrastructure improvements, a $100,000 home market value would equal a $196 increase in property taxes for the year.
The money generated by the tax may only be used on: Streets, curb and gutter, sidewalks and trails, streetlights, sanitary sewer mains, stormwater drainage and ditches, water towers, and local costs for the U.S. Highway 53 reconstruction.
The tax cannot be used for any other purposes. Everything that is exempt from Minnesota's sales tax - food, clothing, medicine - would also be exempt from the local sales tax.
Examples of items exempt from state and the proposed local sales and use tax include:
- vehicles
- cigarettes
- residential heating fuels
- feminine hygiene products
- baby products
- food stamps
- caskets
- manufactured homes
The city provided examples of the impact on the proposed local sales and use tax on purchases:
- Dinner at a restaurant in the city. The meal costs $12. The additional local sales tax is 12 cents.
- A new fishing rod and reel costs $70. The additional sales tax is 70 cents.
- A Littlefork resident buys a new window for their house for $850. The additional sales tax is $8.50.
- A summer resident buys two gallons of paint for $79. The local sales tax is $4.95.
- Anglers heading to Canada have pizza and beer at a local restaurant at a cost of $72.50. Additional tax is 72 cents.
