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Chamber wants Willmar Council to end local option sales tax early

WILLMAR -- The Willmar Lakes Area Chamber of Commerce is encouraging more discussion by the City Council and the public on what the voters' intent was when they approved the city's half-cent local option sales tax six years ago.

That was the message from Chamber officials who said their recent membership survey indicated nearly half of respondents understood that the tax would "sunset'' (end) based on whichever event happened first: when the tax raised $8 million or when seven years had expired.

"We're not really sure what the voters' intent was when they went in and voted on this,'' Chamber President Ken Warner told the council Monday. He said the last time voters approved a local option sales tax, the dollar goal was hit first and the council turned off the tax early.

"There's confusion out there from our standpoint where the tax sits today on the amount of revenue that's been collected, the additional revenue that's going to come in over the $8 million where those monies are allocated,'' he said.

Dave Baker, chair of the Chamber's Public Policy Committee, said the panel's consensus is the tax is a great tool that Willmar has learned works well, pointing to projects that benefited from the tax.

But Baker said the question facing the council is that with budgets being tight and local government aid a big question mark, the business community is hoping that the city "maybe not ruin this tool'' to use it in the future and say that this is the time to end the tax.

"I know that the Chamber of Commerce will very likely support another local option sales tax if it's used for good purposes, good projects and if we've got a council we believe that will use it as they say they will use it,'' he said.

Baker acknowledged ending the tax early is not necessarily a legal question.

"You guys can really do whatever you want to do ... Is this the right thing to do for the citizens? If we ever want to use this tool again, it'll sure be a whole lot easier to get through the next time when you sunset it twice in a row,'' Baker said.

The tax was approved by Willmar voters in November 2004, authorized by the state Legislature in 2005 and went into effect on Jan. 1, 2006.

The ballot question asked if the city should impose the tax to finance completion and expansion of the airport/industrial park, hiking and biking trails, connection of the Blue Line and Civic Center buildings, and purchase 60 acres of state-owned land west of Highway 71.

The ballot question said the projects had an estimated cost of $8 million. City officials said the original estimates were just that: estimates.

The ballot said the tax will expire upon payment of all bonded indebtedness issued to finance the various projects anticipated to be seven years from the date of implementation.

City officials estimated the tax would raise about $1.5 million a year but actually brought in $1.7 million a year, resulting in a collection to date (including a $20 excise tax on all vehicle sales and interest earnings) of $9.65 million. As a result, the city has paid cash for all projects rather than borrow funds.

Funds have paid for hiking and biking trails, connecting the Civic Center and Blue Line buildings and are paying for industrial park development purposes. No action has yet been taken on the state land purchase.

Last year when the question arose of which came first, the $8 million or the seven years, City Attorney Rich Ronning said the legislation was clear when it stated that the tax expires at the later of seven years after the date the tax is imposed, or when the council determines that $8 million had been received to finance capital and administrative costs and to repay or retire the principal interest and premium due on any bonds issued.

Since the city paid cash and no bonds were ever issued, the seven-year time limit applies, Ronning said.

On June 20, Chamber members were asked for their interpretation of the ballot question. Surveys were sent to all member contacts and 19.7 percent (227) responded.

Results were as follows:

- 25.1 percent understood the tax would sunset after the seven years.

- 26.4 percent understood the tax would sunset after the $8 million was raised.

- 48.5 percent understood the tax would sunset based on whichever event happened first ($8 million or seven years).

This is the city's second experience with the local option sales tax. The first time was between 1998 and 2001 when the tax was used to pay off $4.5 million in bonded indebtedness to remodel and expand the Willmar Public Library. The money was raised and the tax was ended four years ahead of schedule.

Council members last March discussed the question of whether to end the tax early but took no action. Last night, the council again took no action.

David Little
David Little covers the Willmar City Council, Willmar Municipal Utilities and other city news.
(320) 235-1150