2020 will forever be associated with a number of negative economic measures, but for Crow Wing County, it brought the highest sales tax revenue recorded thus far.
County Engineer Tim Bray shared this and a number of other statistics about the county’s half-cent local option sales tax, adopted in 2015 to bolster funds available for road maintenance, during the Tuesday, March 16, committee of the whole meeting. Focusing on revenue gains surpassing expectations and the county’s increasing reliance on the funds, Bray’s presentation sought to make the case for an extension of the tax through 2040.
“The percentage of the local option sales tax has grown over time, and we’ve become reliant on it,” Bray said. “Now, as I mentioned, it’s the largest revenue source we have.”
More than $7.4 million in sales tax revenue was collected in 2020, a 6.5% increase over 2019, generated from approximately $1.5 billion in retail sales in Crow Wing County. This is significantly higher than projections at the time the board considered adopting the sales tax, which predicted the county would garner $4.2 million annually. A study conducted by the University of Minnesota Extension at the time predicted slightly more than half of the tax would be covered by tourists spending money in the county.
“There is a reason why those big boxes want to be here, because people come here. We’re a region hub, and this is a great reason why it’s been so successful,” Bray said.
That amount surpassed state aid for the first time last year as the highest source of revenue for the highway department. Minnesotans spent less time on the roads while working and going to school from home — thus contributing fewer dollars through the state’s gas tax, Bray said.
“We have discovered that state aid, which has traditionally been very stable, is not as stable as we thought. Some of the trending is still yet to be seen, but I think we all know — we’re hosting this meeting remotely now — that the work in Minnesota and the country, there’s going to be a lot of people who try to keep this once we’re out of COVID. Work remotely, drive less,” Bray said.
Currently scheduled to sunset in 2025, the local option sales tax has earned $31.2 million for the county’s coffers thus far, all of which was directed toward road reconstruction, resurfacing and maintenance. Bray said this infusion of cash resulted in significant improvements in the ride quality index throughout the county — or, more simply put, the county’s roads are a lot less bumpy. A map of the county system once splattered in red, indicating poor road quality, now sports mostly yellow and green tones.
As Bray and his staff look to lay out the next five-year highway improvement plan for 2022-26, he said not knowing whether the tax will be extended presents a challenge to those efforts.
“One of the reasons why we need to continue on is if we don’t continue to put money into the system, it will go right back to the red roads and orange roads that we saw in 2015,” he said. “And we need to protect our investment. … We were there back then because we had the roads, but we couldn’t maintain them. At that time, we weren’t even crack sealing. We didn’t have the money to crack seal as much as we should have.”
Beyond catching up on maintenance, Bray said there are expansions to the road and highway system he’d like to implement in the future, including longer-lasting fixes, intersection and safety improvements, wider roadway sections in some areas and the conversion of some gravel roads to pavement.
According to Bray’s figures, replacing the revenue from the sales tax would mean increasing the county’s overall property tax levy by 19.1% — and that’s assuming no other departments proposed increases. This would equate to a nearly 500% increase to the portion of the levy dedicated to the highway department.
Commissioner Paul Koering, participating in Tuesday’s meeting virtually from Florida, was the lone county board member who voted no on the sales tax measure in 2015. As he has a number of times since, Koering pointed out he’s since changed his mind.
“I just want you to know that I certainly am convinced in your program here,” Koering said. “Just letting you know, you don’t have to convince me anymore.”
A public hearing on extending the local option sales tax is set for the board’s April 13 meeting, at which time the board may vote on a new resolution extending it through 2040.