County moves forward on local sales tax

During a Jan. 26 meeting, county board members began the process of seeking authority to impose a sales tax of .375 percent, or nearly 4 cents on every $100 spent on taxable goods within its borders. Before being imposed probably sometime in 2027, the tax must first be approved by the state legislature during its upcoming session and then by Waseca County voters during the November election.

 

The commissioners’ stated rationale in seeking the sales tax is that it will shift some of the financial burden for the construction of the county’s planned judicial center onto members of the county population who do not pay property taxes and onto people visiting or traveling through the county. The intent is to simultaneously mitigate tax costs for property owners, with the most profound benefit reaching those who own large tracts of agricultural land. 

 

County administrator Michael Johnson summarized during the Jan. 26 meeting that full construction cost for the new justice center is likely to be about $35 million. Roughly $5 million has been set aside over recent years in anticipation of the project. Another $30 million will be “bonded” for, that is, the county will borrow the amount under special provisions allowed to government agencies. Anticipated interest costs over the life of any such bonds may reach $15 million, leading to a total $45 million by the time the bonds are fully repaid, likely 20 or more years in the future.

 

The purpose of the recent meeting was to finalize the terms of the application the county needed to submit to the state legislature before a Jan. 31 deadline. Under state law, such applications must describe the project the tax is meant to support, then provide the amount of the tax, the amount of money it is intended to collect, and the anticipated length of time it will take for the cumulative tax collections to cover that amount. The law further states that the tax cannot continue once either the full amount of money or the stated number of years mentioned in the application has been reached.

 

Since the county has not yet acquired any bonds, much of the discussion surrounding the terms of the application also included conversation about the terms the county might seek for those bonds, including the relative advantages of longer as compared to shorter repayment periods. As with the repayment of any type of loan, a shorter repayment period leads to lower total cost while a longer one allows for smaller payments across the term.

County commissioners weighed these and other topics while speculating about what terms and amounts legislators are likely to find reasonable. They also stated concerns about leaving their options open to allow more flexibility during the bonding process. 

 

After nearly two hours of consideration and discussion, board members voted to request legislative approval for a tax to cover up to $45 million with a possible repayment period of  up to 30 years. Their decision included the strategic recognition that actual amounts and terms are likely to be lower, given that county voters must also approve the terms of the sales tax before it can be implemented.