HF5039

Purpose

• Allow the city to raise local revenue to fund a new indoor athletic facility by imposing a local sales and use tax of up to 0.5% (one-half of one percent), if voters approve.

How the tax would work

• The tax is a local option on top of existing local sales and use taxes and would be collected and administered under state law (Minnesota Statutes). Approval requires a vote by residents per statute 297A.99, subdivision 3.

Use of tax revenues

• Revenues from the tax would first cover the costs of collecting and administering the tax.
• After that, funds could be used to finance up to $18,000,000 plus bonding costs to build the new indoor athletic facility.

Bonding and financing

• The city could issue bonds under Minnesota Statutes chapter 475 to help pay for the project, up to $18,000,000 plus the costs of issuing the bonds.
• Bonds may be paid from tax revenues or from other city funds.
• Bond issuance would not be subject to certain debt rules (not subject to Minnesota Statutes sections 275.60 and 275.61) and would not count toward the city’s debt limit.
• Any levy of taxes to pay bond principal and interest is not subject to levy limitations.
• A separate election to approve the bonds under 475.58 is not required.

Termination and sunset

• The tax would expire at the earlier of:
  • 30 years after the tax is first imposed, or
  • the point when the city determines the tax revenues are sufficient to pay the project costs and bond-related costs approved by voters, plus interest.
• Any money remaining after paying approved costs would go to the city’s general fund.
• The city can end the tax earlier by ordinance.

Additional governance points

• The revenue use and bond related provisions are designed to be consistent with the voter approval requirement and existing state debt rules, while providing a dedicated funding stream for the indoor athletic facility.

Summary of likely impact

• Residents would be asked to vote to authorize a new 0.5% sales tax.
• If approved, the city could issue bonds and use the tax revenue to pay for constructing an indoor athletic facility, with a defined sunset period or sooner if funds suffice.

Relevant Terms

• local sales and use tax
• up to one-half of one percent (0.5%)
• indoor athletic facility
• bonding costs / bonds
• Minnesota Statutes section 297A.99 subdivision 3
• Minnesota Statutes chapter 475
• debt limitations (275.60, 275.61)
• levy limitations
• election / voter approval
• termination / sunset of tax