Cloquet to propose half-cent sales tax

Talk about it

Each time a customer purchases batteries at Target, a new record from the Electric Fetus or dinner in Canal Park, a small portion of the final bill goes to the city itself.

That’s because Duluth and Hermantown – as well as Proctor, Two Harbors and a total of 23 other Minnesota cities, plus two counties - have passed and implemented a local sales tax.

City officials are hoping Cloquet will become No. 24.

After years of being denied by the state legislature, the city of Cloquet finally got permission during the most recent legislative session to ask voters to approve a half-percent (equivalent to half a cent) sales tax. Essentially, passage of the sales tax would give the city another funding source to finance projects that might not happen otherwise. Revenues raised by the tax could not be used to finance normal city expenditures, only those outlined in the legislation passed by the Minnesota House and Senate.

“It’s taken us 10 years to get approval from the legislature, this could be key for the city,” Cloquet Mayor Bruce Ahlgren said at the Aug. 7 Cloquet City Council meeting, when he and city council members voted on the sales tax question that will appear on the ballot in November (see “On the ballot” for the exact question).

If passed by voters, the tax would only apply to taxable items – NOT groceries, clothes or prescription drugs – purchased in Cloquet. As well, proceeds from the tax – estimated between $500,000 and $625,000 per year – could only be used for improvements outlined in the legislation.

According to the bill, revenues from the Cloquet sales tax could only be used for the following:

- Construction and completion of park improvement projects, including – but not limited to – the St. Louis riverfront area; Veterans, Hilltop and Braun parks; Pine Valley (both the park and two hockey arenas) and development of pedestrian trails within the city.

- Extension of utilities and improvements associated with the development of commercial property adjacent to Highway 33 and Interstate 35.

- Engineering and construction of public infrastructure improvements, including storm sewer, sanitary sewer and water, as well as city streets.

Current city estimates of improvement costs stand at $4.5 million for parks and trails, $6.2 million for water, sewer and street improvements and $5.8 million for infrastructure improvements related to a new business development near the intersection of Highway 33 and I-35. Those allocations, however, are flexible. Nor is there an itemized or ranked list of particular improvements that the sales tax would pay for.

“Most of the projects would be to enhance the quality of life for residents,” City Administrator Brian Fritsinger said, “– from improving parks to better roads and utilities.”

Fritsinger explained how the city arrived at the cost estimates for improvements.

“For the I-35 development, we based the estimates on some of the work we’d done with a previous developer,” Fritsinger said. “And over the years, the city has listed a number of capital improvements for our parks, which we refined. During the Comprehensive Plan process, we identified some cost estimates for street improvement projects and a recent water study showed some improvements we would need in the future.”

If passed, the maximum money that could be raised by the sales tax is $16.5 million. By state law, when the tax collections reach that point, the sales tax will be removed unless otherwise extended by the state and voters.

Fritsinger noted that a sales tax would help fund improvements the city might not otherwise be able to afford after a decade of budget cuts and decreasing state funds. Recent budgets have delayed parks projects and other expenditures because councilors did not want to increase the burden on Cloquet’s citizens, whose property taxes fund approximately 34 percent of the city’s general fund.

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