Politics and Government

Cities, counties head back to Capitol, sales tax wish lists in hand

The Minnesota Capitol is blanketed with a fresh coating of snow
Minnesota cities are hoping their projects are a priority in the next Legislative session.
Andrew Krueger | MPR News

When it comes to sports, Rochester has a space problem — there's just not enough of it to accommodate everyone who wants to play them in this growing community of 120,000 people. 

"We have some facilities, but we also have a lot of need,” said Heather Corcoran, legislative affairs and policy director for the city. 

The city wants to build a new, $65 million recreation center to meet that demand, intended to serve the entire region. Initial plans include indoor soccer pitches and pickleball courts, but those plans are still under development. 

Rochester wants to pay for it by extending its long-standing half-cent sales tax. Doing so would raise $205 million over about 16 years, and help pay for road and housing improvements, too. 

Otherwise, the city's sales tax expires in 2024. 

But those plans are on hold — at least until the Legislature gives Rochester permission to move ahead. Like every other city in Minnesota, Rochester can't extend or increase its sales tax without legislative approval — usually a few lines in a massive tax bill — but the Legislature failed to pass one in the last session. 

So, like many cities in the same situation, Rochester is going back with its requests this spring. 

"We worked through the committee process, got bipartisan, bicameral support for what we're trying to do,” said Corcoran. “It got included in the tax agreement. But that whole tax agreement and tax bill essentially did not make it across the finish line. So here we are, again."

Non-controversial projects

Rochester's projects were among more than 20 requests caught up in the quirky way Minnesota does sales tax, said League of Minnesota Cities Government Relations Director Gary Carlson. 

Minnesota law prevents cities from imposing a sales or income tax. 

"As a result, cities and counties must go to the voters or go to the Legislature and then go to the voters if they want to seek a local sales tax for a capital project,” he said. 

Generally, the projects themselves aren't controversial — they're just held up in the bigger debate over taxes and spending, he said. 

Case in point: Last Nov., 21 sales tax funded projects approved in a 2021 tax bill were on local ballots. Voters supported 18 of them, including upgrades to the Cloquet ice arena and a new child care center in Warren.

Using the sales tax to pay for projects that have public benefits is appealing because it doesn't put the tax burden only on property owners. Meanwhile, he says Local Government Aid — another source of funding from the state — is shrinking, Carlson said. 

"(The sales taxes) are required to be for projects that do have some benefit that basically spills over beyond the citizenry proper, because in most of these cases, the sales tax is paid by people not just living within the city, but people that shop and recreate within that community,” Carlson said. 

Moving ahead

Not every project brought to the Legislature last year is on hold. Rice County is moving ahead on a new corrections facility because they must. The Department of Corrections alerted the county in 2019 that the existing facility would be downgraded if big changes weren’t made, said County Administrator Sara Folsted. 

The county has issued bonds and increased its levy to pay them down. Folsted said she'd still like to use the local sales tax to help cover the cost. 

"We've broken ground, it's going, we've issued the bonds. It's more like, 'OK, do we still want to look at that as an option, and then be able to put some relief on the property tax,’” she said. 

The county board is still deciding whether to submit its request to the Legislature again in the new year, she said. 

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