Commentary: Local option sales tax - just what is this?

Red Wing residents are being asked to determine whether a local option sales tax is a good idea. On Nov. 6, the general election ballot will include a question asking voters to decide whether an additional half-cent sales tax should be collected. A greater than 50 percent “yes” vote of the voters who vote would approve the referendum question.

The sales tax, if authorized by a majority vote, must also be approved by the Minnesota Legislature. If the referendum question is approved, the city would request support for legislative approval from our local state representative and senator.

The earliest the tax could be collected depends on the legislative action, but could potentially be as early as the fourth quarter of 2013. If the local voters approve the sales tax, but the Legislature fails to take action, the issue could be taken up at a subsequent legislative session.

A local option sales tax is an optional tax generated by adding a half cent to the current sales tax rate. The current rate is 6.875 percent; the additional half-cent would bring the rate to 7.375 percent. The half-cent sales tax is collected on all sales that currently pay a sales tax. There is a surcharge collected on auto sales that is limited to $20 instead of a half-cent sales tax addition.

All local businesses would collect the additional sales tax in the same process that the sales tax is currently collected. The extra tax is remitted back to the city from the state.

State law limits the use of the local option sales tax revenues to capital items that have regional significance. Regional significance means that the infrastructure must be used by a larger population than just local residents.

The City Council took action in August to place the question on the ballot to allow voters to make a decision on whether to pursue the local option sales tax.

The resolution identified the following capital projects: riverfront revitalization, downtown revitalization and Senior Center/Pottery Museum in the Pottery District.

Below is a brief description of each project:

Riverfront revitalization - The proposed Riverfront Revitalization Project is intended to implement several elements of the overall plan to better utilize the riverfront. They are — a multi-purpose trail along the riverfront linking Bay Point Park, to Levee Park, and to Barn Bluff; transient boat dockage near Bay Point Park and Levee Park; reconstruct the small boat harbor wall near Bay Point Park; Reconstruct Levee Road; construct a new marina/concessionaire’s building.

Most of the projects have been discussed for years as ways of enhancing the tourism market in Red Wing and to provide additional amenities for Red Wing and regional boaters. The capital investments leverage state and federal tax dollars and utilize partnerships.

Downtown revitalization – The proposed downtown improvements include two major initiatives. The first is a partnership with the Minnesota Department of Transportation that is focused on renewing Main Street in downtown Red Wing and making improvements that address the need for safer and easier pedestrian access. The project covers a 10-block corridor on Highway 61 (Main Street) in downtown Red Wing from Potter Street to Old West Main Street and includes street overlay, pedestrian safety improvements; and additional improvements for pedestrians such as highway medians, curb bump outs, street lighting, and a new HAWK (High Intensity Activated Crosswalk) signal.

The second downtown project involves renovation of the Sheldon Theatre. It has been 25 years since the Sheldon Theatre last underwent a major building restoration. Renovations will include: HVAC upgrade/replacement, tuck-pointing, flooring replacement, office and space reconfigurations, and accessibility improvement to public restrooms.

Senior Center/Pottery Museum in the Pottery District —

The Red Wing Seniors Inc. and the Red Wing Collectors Society Foundation propose a partnership with the city to acquire and develop the Red Wing Pottery Place Annex into a new Senior Center and Red Wing Pottery Museum. This reinvestment is intended to be a catalyst to making the site, once again, a major regional draw to Red Wing.

The local option sales tax dollars would be used to acquire the site. The city would lease the site back until the property is paid off. At that time, the site would be given to the Red Wing Area Senior and the Red Wing Collectors Society and their non-profit organizations would own and operate.

Why should you care?

Residents have several issues to consider before deciding how to vote on the referendum question. The most obvious is the additional tax.

Most residents will be hesitant to voluntarily authorize another tax. The half-cent sales tax is estimated to cost the average resident of Red Wing $41 per year. Another way to look at it is that the impact would be 50 cents for every $100 purchase.

It is estimated that one-third of the sales tax revenue will be generated from nonresidents who will then help pay for the capital projects that serve the regional population. This is an estimate based on a Red Wing and Goodhue County Retail Trade Analysis completed by the University of Minnesota Extension office.

Some have suggested that the additional tax will change shopping habits. History has shown that other regional centers that have implemented the additional tax see a short-term change in shopping habits, but soon shopping patterns return to customary. One question you may ask yourself is whether local option sales tax in other communities has affected your shopping patterns.

Communities that have elected to implement a local option sales tax have taken the proceeds and made investments in infrastructure. In Red Wing the projects were recommended by the Local Option Sales Tax Committee made up of local civic and business leaders. The committee felt the projects would provide strategic investments by revitalizing key areas of the community.

Residents of Red Wing now must make a decision on whether the sales tax mechanism is the right way to make major capital investments and if the projects identified are the right projects.

The city has provided information through the city newsletter, an informational publication mailed to the home, and through radio discussions.

But it’s equally important for resident to discuss the issue with local businesses, friends and neighbors. The local option sales tax is an important community decision. I encourage everyone to gather information and weigh the pros and cons and make the decision that is right for you.

Kay Kuhlmann

Council Administrator

City of Red Wing

Tags: opinion, commentaries