Local option sales tax collections indicate economic changes
With five years of local option sales tax collections, the cities of Brainerd and Baxter have numbers that also document the economy’s path from boom to recession and recovery.
Brainerd and Baxter were both approved by the Legislature for a local option sales tax in 2006.
Baxter’s local option sales tax collections:
• 2006-07 — $1,957,988.
• 2007-08 — $2,014,097.
• 2008-09 — $1,853,029.
• 2009-10 — $1,892,348.
• 2010-11 — $1,924,176.
Brainerd’s local option sales tax collections (with most of the year reported for 2011):
• 2007 — $532,803,92.
• 2008 — $804,395.82.
• 2009 — $854,391.89.
• 2010 — $815,628.36.
• 2011 — $746,134.25.
Baxter reported the first full five years of collection — from inception in October 2006 through September 2011 — show a slight rebound in the past two years. “After an 8 percent reduction in 2008-2009, revenues were up 2.1 percent in 2009-2010 and an additional 1.7 percent in 2010-2011,” reported Jeremy Vacinek, Baxter finance director.
Baxter voters approved a .5 percent local option sales and use tax and a $20 motor vehicle excise tax in a Nov. 2, 2004, referendum. Baxter voters approved the use of a sales tax in 2004, by a vote of 2,177 to 1,559, but the Legislature in 2005 denied Baxter’s use of the tax and suggested the city partner with other government entities in seeking a sales tax. With Brainerd on board, both cities received legislative approval in 2006. Brainerd voters in November approved the use of a sales tax by a vote of 3,009 to 1,236.
The primary goal for implementing the sale tax in both cities was to fund the upgrade and expansion of Brainerd’s wastewater treatment plant shared by the cities, estimated to cost up to $30 million.
The local sales tax is charged on top of the state’s sales tax, bringing the total tax for items purchased to 7 percent. The .5 percent sales tax equated to 10 cents on every $20 purchase, $1 on a $200 purchase and $10 on a $2,000 purchase. Sales tax on vehicles is limited to $20 on those valued at more than $4,000. Food and clothing are exempt from the tax.
When it was approved, the local option sales tax was expected to provide Baxter with $15 million in revenue over 12 years to supplement the construction and expansion of the city’s water and wastewater facilities and finance the construction and initial equipping of a fire station.
The money went to the water and wastewater facilities, trail improvements such as the Paul Bunyan Trail Bridge and is now helping to finance the new water tower going up along Highway 371.
Baxter noted about 80 percent of the tax is estimated to be generated by non-Baxter household with the median income Baxter household incurring less than $80 per year in additional sales tax.
Baxter was authorized to collect the $15 million to finance projects or collect the tax for 12 years, whichever came first. Now Baxter expects to reach the $15 million limit before the 12 years are up in October of 2017. Brainerd reported it does not expect to reach the $15 million before the 12-year deadline.
Dan Vogt, Brainerd city administrator, reported that unless the local option sales tax is renewed there would be substantial increases in sewer charges so he suspected a renewal would be sought for the city in 2017.
In 2010, Baxter collected $1,939,915 from the local option sales tax and motor vehicle excise tax. Without the local option sales tax, the city of Baxter reported the monthly effect on the average household in the city would be a $20 property tax increase on a $160,000 home and a residential water and sewer utility bill increase of $83.
For Baxter, $2 million in sales tax supported bonds were sold to finance the $10.3 million water treatment plant and $2.75 million will finance the entire water tower project, with $9.31 million in sales tax supported bonds sold to pay Baxter’s $10.3 million share of the wastewater treatment plant. With $23.31 million going for the water treatment, water tower and sewer capacity projects, the city reported the sales tax revenues of $15 million pays almost two-thirds of the cost of the three utility projects.
RENEE RICHARDSON may be reached at firstname.lastname@example.org or 855-5852.