Brainerd and Baxter look at extending local option sales tax
Brainerd and Baxter city councils met in separate special meetings Monday night but their topics were the same.
Both cities approved resolutions requesting state Legislature approval to extend the current local option sales tax (LOST).
Both cities currently have a one-half percent local options sales tax. Brainerd’s began April 1, 2007, while Baxter’s went into effect on Oct. 1, 2006.
In 2012, the Minnesota Department of Revenue reported Baxter collected $1,928,635 in local sales tax and $74,577 in local use tax for a total of $2,003,212. During that time, Brainerd took in $837,036 in local sales tax and $46,088 in local use tax for a total of $883,124.
In 2012, Baxter took in $101,550 for its vehicle excise tax. Brainerd took in $30,481.
The LOST is set to expire March 31, 2019.
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.
Baxter will most likely collect its maximum amount before the 2019 tax expiration, so local officials must start the process of renewing it. The requests are first submitted to the Legislature. Should the government body approve it, the residents of both cities will then vote on the local option sales tax in the next general election Nov. 4.
“This year, we are planning to work through Legislature jointly with the city of Baxter to extend the current LOST,” said Brainerd City Administrator Patrick Wussow.
The new LOST, should it be approved, will generate up to an additional $15 million for each entity, and will expire after an additional 12 years or when the cost of the improvements have been fully paid, whichever is sooner.
In Brainerd, it will fund the wastewater treatment plant project, and if there is money left over, water infrastructure improvements will be financed and lastly, trail development.
At Brainerd’s special meeting Monday, city council member Gary Scheeler questioned if any other projects should be added to that list.
“I want to make sure we have the full thought on it,” he said.
City council member Mary Koep said nothing else should be added to the list.
“I’m pretty darn sure the voters won’t pass it with a lot of other basket full of goodies in it,” she said.
Baxter proposed the extension to match Brainerd’s and continue through 2031. The city council unanimously approved a resolution of support for the extension.
The local sales tax is expected to generate about $32 million in Baxter. The city identified projects as sanitary sewer, storm sewer, water and street infrastructure and transportation safety, potentially including a pedestrian overpass on Highway 371 or Highway 210.
Rodney Rahn, Baxter resident, attended the council session and asked if the local option tax proceeds would mitigate high water and sewer connection fees in the city. Rahn also asked if, in order to be together so one city wasn’t asking a higher tax than the other, Baxter wasn’t finding new projects as Brainerd needed the extension to pay for debt related to the joint wastewater treatment plant.
City Administrator Gordon Heitke said Baxter has identified needs in the next five years for basic services and if they aren’t paid for by the local option sales tax they will need to be paid from user fees and water and sewer charges. Having funds from the local option sales tax, will stabilize water and sewer connection fees, Heitke said.
Baxter Mayor Darrel Olson said a fire substation, potentially on Clearwater Road, has been suggested as a future city project that could benefit area business insurance rates.
Olson said the fire substation is something that should be done at some point.
“So there are all kinds of needs,” Olson said.
Olson said with the area serving as a regional hub and drawing visitors who use services from roads to water and sewer, residents were willing to tax themselves in order to tap into the tens of thousands of visitors who come to the area.
Baxter voters approved a local sales tax in 2004. In its resolution, the city council noted there is support in the business community and from the general public to extend the tax.
In its resolution, the council reported the current wastewater and water system will not meet the city’s needs within the next five years. Heitke said with continued growth there is a need to both expand and improve the city’s service roads and develop alternative parallel streets to take the pressure off local traffic off state highways.
Heitke said the Brainerd Lakes Chamber has been tracking the issue and expressed an interest in having both cities align so they aren’t charging different tax rates.
Baxter City Council member Mark Cross thought the meeting started later so he arrived after the vote but said he was in favor of the extension.
Combined with the state sales tax, the local option sales tax brings the total sales tax on items purchased in Brainerd and Baxter to 7 percent.
Baxter voters approved the use of a sales tax in 2004, by a vote of 2,177 to 1,559, but the Legislature declined to approve it then, suggesting the city partner with other government entities. With Brainerd on board, both cities received legislative approval in 2006. Brainerd voters approved use of the sales tax in November of 2006 by a vote of 3,009 to 1,236.