The City of Two Harbors referendum to increase the local-option sales tax from a half-percent to 1 percent passed 1,162 to 499 during the General Election on Nov. 6.
About 70 percent of voters approved the increase, the revenues of which will be used to pay for infrastructure improvements in the capital improvement plan (CIP).
So, now that the city has the approval of its residents, what comes next?
Since any changes to local sales tax require legislative approve, the next step is for the city to request a special law authorizing the imposition of the tax. According to City Administrator Dan Walker, this will likely include reaching out to state Sen. Tom Bakk and state Rep. Mary Murphy shortly after Jan. 1. Later in the year, representatives from the city, likely Mayor Chris Swanson and councilor Cathy Erickson, will visit the House and Senate tax committees because the authorization needs to be included in the joint house and senate overall tax bill.
This is where the city was held up last year. The authorization was left out of the final tax bill, likely due to the city not yet passing a referendum on the issue. Now that the city has approval, Walker believes approval will come more easily this year.
"I'm feeling confident from what we heard from the people from the tax committee in the senate last year," Walker said. "They wanted us to pass the referendum first, and so I'm feeling confident that they'll stick to their word to do that."
If the tax is not approved, Walker believes the city would try again in the next legislative session. Following the authorization, the city would then need to file local approval with the Secretary of State before the start of the next legislative session and pass an ordinance imposing the tax at least 90 days before the first day of the calendar quarter on which the tax is to be imposed.
Once implemented, the sales tax is expected to provide about $280,000 in revenue annually. The funds would be placed into a designated fund for the street improvement funds and could not be used elsewhere.
The funds raised by the sales tax would not decrease assessment amounts. The special assessment policy (SAP) was amended in April with the hope that the sales tax would eventually be approved.
When the SAP was amended, the city took on 100 percent of underground work costs in the CIP on city-owned facilities: sanitary sewer lines, water mains and storm sewers.
"I think there is a perception that once we get the tax, the assessments will be lowered more. That's not the case," city finance director Miranda Pietila said. "It was considered because we took a step back, looked at the numbers that came and wanted to reduce the costs to the home owners."
Therefore, if the sales tax is not approved by the Legislature, Pietila said she believes the city may have to scale back on the capital improvement projects.
"We might have to maybe look at the scale of the projects and cut them back a bit," Pietila said.