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Willmar Finance Committee takes no action on question to halt local sales tax

WILLMAR -- The Willmar City Council's Finance Committee took no action this week on the question of whether or not the council should end the city's one-half percent local option sales tax.

"Do we want to do anything: stop collecting or continue collecting the tax?'' chairman Denis Anderson asked the committee.

After committee members reviewed the history of the seven-year tax, received an update on revenue collected since the tax went into effect in 2006, and after hearing two committee members speak in favor of it, and in the absence of any motions, Anderson declared collections would continue.

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 tax is funding development and expansion of the old airport/industrial park.

Funds have paid for hiking and biking trails, and connecting the Civic Center Arena and Blue Line Center.

No action has yet been taken on the fourth project, which was purchase of about 60 acres of former Willmar Regional Treatment Center land west of Highway 71.

The ballot question said the projects to be financed by the tax had an estimated cost of $8 million.

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

The question of possibly ending the tax early was raised by council member St-eve Ahmann. At the Dec. 20 council meeting, Ahmann asked the issue be brought to the Finance Committee.

City Attorney Rich Ronning had earlier weighed in. He was asked at the Sept. 7 council meeting whether the enabling legislation requires the council to terminate the tax when $8 million had been collected.

In a Sept. 16, 2010, letter to the council, 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 the 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 to finance the projects, the seven-year time limit applies, according to Ronning.

Interest in ending the tax has also been expressed by local resident John Sullivan. He asked the council on Dec. 6 to end the tax, and he repeated the request at the committee's Monday meeting as well as at the Jan. 3 and Jan. 24 meetings.

He said other problems need attention such as railroad crossing quiet zones. He agreed the council has the right to continue to collect the tax but he said the council also can discontinue it.

Anderson said Ronning's letter was pretty clear.

"It's the later of the $8 million or seven years and we are perfectly legal in what we're doing through 2012,'' said Anderson. "This has been bantered about. We've discussed it some. We need to know where we are and do we want to change it.''

According to figures presented by Finance Director Steve Okins, the city has received $9,064,221.93, which includes the tax, a $20 excise tax on the sale of new and used motor vehicles and interest earnings. The total includes subtracting state administrative costs.

Total revenue by year was $1,673,605 in 2006, $1,848,718 in 2007, $1,842,951 in 2008, $1,850,238 in 2009 and $1,848,708 in 2010.

On the expense side, the city has spent $5,206,013 on industrial park and airport redevelopment including the relocation of the airport and construction of the Willmar Avenue extension.

The city has spent $418,232 on bike paths, and $1,071,840 on the Civic Center and Blue Line Center connection. Okins said there's been no activity on the state-owned land.

Anderson said his biggest concern is unknown cost associated with the old airport terminal. Estimates for repairing the unsafe building, which was ruled eligible for the National Register of Historic Places, range from $600,000 to over $1 million.

City Administrator Michael Schmit said the city proved itself when the council ended the first sales tax four years early. The tax generated $4.5 million between 1998 and 2001 to remodel and expand the Willmar Public Library.

But Schmit said the city is not finished with industrial park development and other projects such as paying for all or part of the proposed western collector sewer line that would serve residential customers and new industrial park businesses.

"I think it would be a huge, huge mistake to end the tax early because the city could no way afford to pay for those improvements at the airport,'' he said.

Committee member Ron Christianson said revenue exceeded expectations, due partly to "big box'' retail stores attracting out-of-town shoppers.

"It's major,'' he said. "Use the money for the rest of what needs to be done.''

Rick Fagerlie said a handful of people talked to him. Only two said the tax should be ended and the rest agreed to continue it, he said.

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