Changes in the gravel tax law could affect Kandiyohi County
WILLMAR -- Legislative changes could affect whether Kandiyohi County continues its new gravel tax.
The county just recently became aware that state lawmakers approved changes this spring to the aggregate material production tax.
In a Sept. 15 letter, the county's consultant Donald Walsh, called the changes "major."
Kanidyohi County officials say they will have to analyze how the state changes will affect the county tax, which was implemented 10 months ago.
County Board Chairman Richard Larson said there's "some confusion" about how to interpret the new changes that will have to be reviewed.
"We just found out about the changes," said County Administrator Larry Kleindl. The commissioners implemented the gravel tax in January on a two-year trial basis, but Kleindl said the commissioners may address the topic sooner rather than later.
Last October, the Kandiyohi County Board of Commissioners agreed to start collecting a tax on gravel that is mined in the county with hopes the new revenue would help pay for township and county roads that take a beating under heavy gravel trucks.
Under the existing law, the county can charge 7 cents per ton or 10 cents per cubic yard with 60 percent of the revenue going to the county road and bridge fund, 30 percent going to the township road and bridge fund (as determined by the county board) and 10 percent dedicated to restoring abandoned gravel pits on public or tax-forfeited land.
The old law does not allow the county to use any of the revenue to offset accounting expenses, which is one reason why Commissioner Richard Falk voted against the county gravel tax last year.
The state changes, which will go into effect Jan. 1, increase the tax rate and change the distribution so that the county gets less and townships get more. Counties, however, will be able to take 5 percent off the top of the tax revenues to offset administrative expenses.
Under the revised law, a rate of 15 cents per ton or 21.5 cents per cubic yard can be charged.
The road and bridge funds for the county and townships will be equal -- at 42.5 percent.
But instead of letting a county board decide which townships should get the revenue for road repair, the revised law says the revenue must go to the townships where the gravel is mined and the revenue is generated.
That would be good news for Dovre or Roseville townships where many of the county's gravel pits are located, said Gary Danielson, Kandiyohi County public works director.
But neighboring townships, where gravel trucks travel, also suffer from heavy traffic and could use extra revenue for roads, he said. "It's a real equity question," Danielson said.
Not a fan of the gravel tax in the first place, Danielson said he has additional reservations since the legislative changes were made.
"My impression is it didn't seem like a very good deal for us," Danielson said. "It's almost like a whole different animal."
There's "good and bad" with the new legislation. While the county can collect twice as much money, the changes in distribution could mean the county will "barely break even," he said.
Another change in the law will increase the amount that's dedicated for restoration of gravel pits from 10 percent to 15 percent. And the revenues can be used to restore any abandoned pit -- not just a publicly owned one.
It's estimated that the county collected about $20,000 in revenue in the second quarter of the year, said Kandiyohi County Auditor Sam Modderman. Not much gravel is mined in the first quarter of the year.
Chairman Larson said the $20,000 collected is "OK," noting there's been a downturn in the economy and private construction.
Reporting the gravel that's mined is currently done on an "honor system," Modderman said.
Earlier this year he created a list of gravel pits in the county and sent letters to owners saying a tax would be collected. There are about eight operators who currently report what they've mined and pay the tax. "It did work out fairly well," Modderman said.
Harris Duininck, from Duininck Bros. Inc. of Prinsburg, said because much of their work is done under contract for a specific amount of gravel, it's not been difficult for his company to comply with the reporting standards for the new county tax. All of their trucks are weighed before they leave the pit, he said.
Duininck questions if the county is really gaining much in new revenue. He suspects the county is "paying themselves" for a county tax on gravel that's purchased for public road projects. "I don't know if it's been a positive for the county as a whole," Duininck said.
The county has done "quite a bit of work," said Danielson, who guessed much of the revenue generated so far has come from the local government entities. "Government remains one of the biggest users (of gravel)," he said. An analysis of that will be done "when the dust has settled."
Although the law changes threw in some new wrinkles that will have to be discussed and could put an early halt to the tax, Danielson said there is interest in knowing how much gravel is mined in the county that could be obtained during the two-year trial period.
As it stands now, Danielson said the tax is scheduled to continue through 2009 and "everyone should plan accordingly."