The Two Harbors City Council will consider a resolution of support for a 0.5 percent sales tax increase at its Tuesday, Dec. 19, meeting at 6 p.m.
Council President Cathy Erickson told the council Tuesday, Dec. 5, at their committee of the whole meeting that that the city is looking at increasing its sales tax 0.5 percent to help pay for the capital improvement plan projects.
"We want to use those tax dollars to make it affordable for these projects to happen for our community members," Erickson said.
To implement the raise in sales tax, the city will have to put the raise to a referendum vote and have the state Legislature pass special legislation to raise it. Erickson said she is hopeful the referendum vote can be done during a special election in the spring.
"The soonest that we could anticipate seeing a sales tax started should our voters approve it and our legislature approve it would be 2019," she said.
The push for a vote in the spring is due to Duluth residents' recent vote to approve a referendum to raise the city's sales tax 0.5 percent, which will be used on roads and infrastructure.
Erickson said the city is hoping to take advantage of that vote.
"Part of the timing is that Duluth has run its referendum already with 77 percent of the vote being in favor of the 0.5 percent, so they will be lobbying down at the Legislature," she said. "So to have someone else doing the same thing, we may be able to partner with them, and having our legislative leaders and their legislative leaders at the Capitol could really only help us as a community."
Currently, the City of Two Harbors has a 3 percent lodging tax split between the Edna G. Fund and tourism marketing outside the area as well as a 0.5 percent sales tax used for water and sewer infrastructure upgrades.
According to Finance Director Miranda Pietila, the 0.5 percent sales tax generated about $324,000 in revenue last year. Though the amount isn't considered to be a lot of funds when looking at the full scope of the CIP cost, Pietila and City Administrator Dan Walker said it will help the residents.
"We've looked at scenarios that it's significant enough that it makes sense to do it," Walker said. "We would love to have a scenario where we could split the assessment 75/25 and apply it to the city portion of 75 percent, and (the tax would be) significant enough to help with the assessment side."
Right now, funding mechanisms set up for the CIP are assessments to the affected property owners and levy tax funds. This would be a way to bring in outside money to help pay for the city's infrastructure.
"A sales tax would allow neighboring people that live outside the city limits but utilize our streets and infrastructure to help fund the projects," Erickson said. "We would then see that money stay in the community and be used on our infrastructure."