8.3. SR 09-15-2003MEMORANDUM
Item ~ 8.3.
TO:
Mayor and City Council
FROM:
Pat Klaers, City Administrator
DATE:
September 15, 2003
SUBJECT: Department of Revenue Local Sales Tax Study
Attached for your information is a page from the September 3, 2003 League of Cities - Cities
Bulletin that discusses the Department of Revenue local sales tax study that is taking place. Over the
years, the City Council has discussed the possibility of requesting special legislation that would allow
Elk River to consider this possibility. The reasoning is that a sales tax referendum may be more
appropriate than a property tax referendum for something like a community center or a YMCA
facility that serves a larger region than just Elk River; therefore, monies to help fund the facility
come from a larger area than just Elk River. Our discussion regarding this approach was mainly
around the time when nme municipalities received authorization to pursue a local sales tax in the
1998 legislative session.
I think that the city comment on this issue. I would like to send a letter to the Department of
Revenue indicating the Elk River City Council support for retaining the local sales tax option as a
way to fund specific projects over a specific period of time, or until a specific amount of money has
been generated. (I don't think anyone believes that a local sales tax option is acceptable on an
ongoing basis for operating expenses.) A local sales tax may also be appropriate to help fund such
things as transportation improvements that would benefit an area larger than just the city. Examples
that come to mind are a County Road 33 project from Highway 169 to our eastern city limits or a
Main Street/Highway 169 interchange project. To eliminate local sales tax as an option for
municipalities does not seem appropriate, especially when looking at the fact that the voters would
have to approve the issue.
S:\COUNCIL\Pat\2003\localsalestax.doc
Seeking Input
Dept. of Revenue taking public testimony on local sales taxes
Jennifer O'Rourke
The Dept. of P,.evenue has finalized
the hearing details for three meetings
to be held in September to take public
testimony on local sales taxes. The
department is conducting a study and
is seeking public input, including
input from city officials.
If you need further information
about the meetings, contact Kathy
Yzermans, MN Dept. of Revenue, at
(651) 297-4160; or Jennifer O'Rourke,
LMC, at (651) 281-1261 orjorourke~
lmnc. org.
Dates & Locations:
· Sept. 16~Brainerd
11 a.m.-1 p.m.
Brainerd Public Library, 416 Sonth
5th Street (Parking available in
lower part of lot.)
· Sept. 17--Rochester
1 l. a.m.-1 p.m.
Rochester Public Library Auditorium,
101 2nd Street SE (Parking available
in the attached ramp. Entrance on
south side of building.)
· Sept. 18~St. Paul
8:30-1.0:30 a.m.
Dept. of P,.evenue, 600 North
1Kobert Street, Skjegstad Room,
2nd floor (Parking available in
meters in lot at front of building.)
The 2003 Legislature requested
that the Dept. of Revenue conduct
the study. During the last legislative
session, several cities brought for~vard
legislative requests for local sales taxes
or special sales taxes, but none of th.ese
were approved.
Local Sales Tax Study
The following summary was included
in the LMC 2003 Law Summaries
publication:
Section 19 (of first special session
HF 7*/Chapter 21) directs the
cotnmissioner of revenue to conduct a
study of local sales taxes in Minnesota.
The department's study must report on:
· Currently authorized local sales taxes
and the proposed uses of revenues
from local sales taxes recently
proposed but not yet enacted.
· The local approval requirements
for local sales taxes.
· The permitted dm'ation of local sales
taxes and ~vhether the full duration
authorized in law was necessary to
provide sufficient revenues for the
authorized projects.
· Whether the authorized uses of
local sales taxes are regional in
nature or limited in benefit to the
imposing jurisdiction.
· The estimated portion of revenue
raised from residents ofthejurisctiction,
Minnesota residents living outside
the jurisdiction, and non- Minnesota
residents.
· The ability of jurisdictions to raise
revenues by other means, including
the local property tax compared to
other similar jurisdictions.
· How-jurisdictions without local
sales taxes fund similar projects.
· Compatibility of local sales taxes ,vith
the streamlined sales tax project.
The study, due by Feb. 1,2004,
must make recommendations on:
· The appropriate role of local sales
taxes in the state and local revenue
system.
· Whether local sales taxes should be
limited to jurisdictions that do not
have the capacity to raise revenues
through other sources.
· Criteria to be used iu evaluating
local sales tax proposals such as
projects of regional significance,
projects requiring capital expenditure,
or projects in jurisdictions without
adequate fiscal capacity.
· The feasibility of authorizing the
commissioner of revenue to approve
or deny applications from local
jurisdictions seeking to impose a
local sales tax. ~-
/Visit the League N
on the Web:
www. lmnc.org
for alt the tatest information about how your city
can participate and benefit from LMC and LMCIT
services, resources, and training opportunities.
September3, 2003 L-./?}~,- (2i'~[~3 ~0~,([¢~',~ Page 7