Baxter seeks sales tax

BAXTER -- The Baxter City Council voted Tuesday to send a draft resolution to area state lawmakers requesting that the city be authorized by the Legislature to impose a 1/2 percent local sales tax.

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But council members were quick to point out that this is merely the first step in a long process, which will include a March 8 town hall meeting where they hope to gather Baxter residents' comments on whether they are willing to support such a tax.

The council met in a workshop Tuesday to discuss a local option sales tax. Brainerd City Council members also discussed the same issue Tuesday at their council meeting.

Brainerd City Administrator Dan Vogt reported representatives from both cities met recently with Rep. Dale Walz, R-Brainerd, to look at a 1/2 percent local option sales tax. The tax has to come with a sunset time and so far suggestions are to use it for 12 years.

Vogt said they are currently compiling information for Brainerd to see what would be generated by sales in the city. Vogt estimated Brainerd could generate $600,000 to $800,000 or more from taxable sales in the city. And officials are checking to see if other area cities are interested in the local option sales tax. Vogt said another meeting is scheduled in a couple of weeks.

Brainerd council members Bob Olson and Mary Koep both said the only way they would support the local option sales tax was by a referendum from residents.

Baxter Mayor Gary Muehlhausen and Assistant Finance Officer Jeremy Vacinek said when they met with Brainerd city officials Friday, they discussed the creation of a regional optional sales tax district where they said Brainerd officials seemed receptive of the proposal.

Baxter council member Darrel Olson said Pequot Lakes city officials have expressed interest in joining a regional sales tax district if it were created. Olson said he planned to speak to Nisswa soon about such a proposal.

A 1/2 percent sales tax in Baxter could generate $1 million annually in additional revenue for the city.

Vacinek said the St. Cloud/Waite Park area imposed the local option sales, tax which is helping to pay for its regional airport and its parks and trails. The city of Bemidji has a similar bill recently introduced in the Legislature that would help the city raise money for the acquisition of additional parks and trails. He said Willmar used similar funds for a city library. And the city of Hermantown has a 1/2 percent sales tax to pay for sewer trunk lines, a new police and fire station and upgrades to the city's water system.

Vacinek said the city would likely need a voter referendum in order for the Legislature to authorize it to collect the additional sales tax.

One important step the city has to decide is how it would spend the money, Vacinek said.

Muehlhausen said a community center may be a nice addition for Baxter, but the city needs are for infrastructure, such as city sewer and water expansion, and additional parks and trails.

Baxter council member Rosemary Franzen discussed the possibility of using the additional money to help overburdened homeowners who can't afford their city assessments, for projects like road, water and sewer improvements.

Baxter City Planner Todd Holman said the sales tax funding could buy time for homeowners who can't afford to immediately hook up to city water and sewer through deferments. It could also provide funds for efficient development in undeveloped areas in the city.

"This is kickoff money that spurs growth," said Holman. "It's kicking off the ability for some sustaining money as well."

"A sales tax is probably the fairest tax you have because the person who is paying for it is using it," said a woman who declined to give the Dispatch her name at the Baxter workshop meeting. She said she lives in Nisswa but does at least 99 percent of her shopping in Baxter. "I don't spend any money in Nisswa. I spend it all here."

According to Vacinek, the sales tax would amount to a $50-$80 annual tax increase per household in Baxter, or 20 cents per day, based on Baxter's $52,000 median household income. The additional half-percent sales tax equates to an extra 10 cents on a $20 purchase.

Clothing, food and other non-taxable items would still be exempt and automobile sales would be capped at $20 under the provision, according to Vacinek.

Vacinek said research indicates that non-Baxter residents generate more than 80 percent of the taxable sales in the city, which means that Baxter residents would pay less than one-fifth of the proposed sales tax.

At Tuesday's meeting, the Baxter council approved the draft resolution that requests legislative authorization for the local sales tax for a proposed creation of a capital infrastructure fund to help finance sanitary sewer, storm sewer, water, public green space and trail-related capital acquisition and improvements, as well as a proposed fire station.

Council members said they'd discuss exactly how much of the proposed sales tax would be used for specific city amenities and services with Baxter residents at the March 8 town hall meeting.