Crow Wing County: Board approves sales tax increase
When those making purchases in Crow Wing County this upcoming April 1 notice an increase in costs, it won't be because of an April Fools' joke.
In a 4-1 vote, the Crow Wing County Board on Tuesday, Dec. 15, approved a countywide half-cent sales tax, the revenues from which will fund county road and bridge improvements. Just two weeks after approving the final property tax levy for 2016, the board also began making reductions to the 2017 levy by passing an amendment - proposed by Commissioner Paul Thiede - cutting the entire $1.2 million levy-funded construction portion of the highway department's budget.
The board joins a growing number of greater Minnesota county boards approving a sales tax following the passage of a 2013 state law allowing local governments to collect sales taxes to fund transportation needs without a voter referendum. Cass County also approved the tax earlier this month.
The projected annual revenue of $4.18 million will serve to chip away at a $4.36 million funding gap Crow Wing County experiences each year in the highway department, reported county engineer Tim Bray. That gap, Bray said, leads to the annual maintenance deferment of nearly 160 miles of paved county roads, and 15 percent of those roads are in poor or very poor condition according to internal measures.
With the $1.2 million reduction to the highway department's budget now scheduled for 2017, the department will still face a shortfall of about $1.4 million annually in funding compared to the needs of the system, Bray's calculations show.
The resolution passed by the board imposes a sunset of Dec. 31, 2025, on the sales tax - meaning commissioners serving at that time will need to reconsider whether to continue collecting the tax.
One element included in the resolution appeared to be a nod to the Brainerd Lakes Chamber of Commerce's suggestion of capping the tax at a collected dollar amount rather than a time limit. The added language will automatically discontinue the tax once the list of associated highway improvement projects - a list required by state law to allow for local government passage of a tax - is completed. Completion of this list could come sooner than 10 years from now if the sales tax garners revenue faster than anticipated, Thiede said.
"If more money comes in, and we complete that project list, it will click off automatically," Thiede said. "We don't know what inflation is going to do in the years ahead."
If the opposite happened and the list of projects remained unfinished at the end of 10 years, Commissioner Rosemary Franzen suggested an amendment to require the issue go before Crow Wing County voters before allowing extension of the sales tax.
"If we do this this time, I want to make sure that the voters have the say before this becomes an endless tax, which is what people are afraid of," Franzen said.
Thiede and Commissioner Rachel Reabe Nystrom disagreed with Franzen's suggestion.
"I don't think we could tie a 2025 board to doing that," Thiede said. "I think you make a great point, but I don't think it really serves our purpose to have that."
Nystrom said it's likely the commissioners serving today will not be seated at the table in 10 years.
"Trying to tie the hands of people who are going to be serving and making these decisions in 2025, I would not like that," Nystrom said. "And I know you, Commissioner Franzen, you wouldn't like anybody to tell you from boards past, what you're going to do."
Nystrom went on to say she feels the sales tax is the "most equitable solution" to the county's road problem and that the state Legislature is not "coming on a white horse with the money."
"Each of us (commissioners) drive a county road. ... As a resident of Crow Wing County, I'm willing to pay for it, but I want my friends and relatives who are visiting me to pay as well," Nystrom said.
Commissioner Doug Houge said he was initially opposed to a sales tax but has since changed his mind.
"It did become more of a user tax, and a great opportunity to keep our road systems up to speed and advance some of these projects that are much needed," Houge said.
A study conducted earlier by the University of Minnesota Extension office found 51.3 percent of the revenue received from the sales tax would come from spending by guests to Crow Wing County.
Houge added another element to consider in planning for potentially shutting off the tax in the future is the elimination of the county's debt payments expected by 2020. This will free up another $5 million currently collected from property taxes to pay down the county's debt acquired from building the new county jail and judicial center, Houge said, and could be applied toward transportation needs as well.
"I'm hopeful that whoever is sitting on this board is able to turn this thing off before 2025," Houge said. "We could definitely utilize some of that debt money for the road projects."
Franzen said she was glad Houge mentioned the impending debt elimination.
"I think that might be an opportunity, but I don't want to tie us to that just in case," Franzen said. "I think that would be a good time to revisit this and make further decisions."
Chairman Paul Koering reiterated his opposition to the sales tax, a view that's remained consistent since the board first discussed the issue outside of the transportation committee in September.
"It seems like in society, we want everything and we want it now," Koering said. "The thing is that somebody has to pay for it. ... I personally think that we're taxed pretty darn good right now."
Koering was the lone opposition vote to the motion proposed by Houge and seconded by Thiede to pass the resolution, including Thiede's amendment cutting the construction budget in 2017.
The sales tax will apply to all traditional taxable transactions under Minnesota law. Motor vehicles registered for road use, boat trailers and camper trailers are exempt from the tax. The tax will apply to car leases, car rentals, boats and all-terrain vehicles. When combined with the half-cent tax already in place in Brainerd and Baxter, these two cities will now each have one of the highest sales taxes of all cities in the state at 7.875 percent.