Cloquet Local option Sales Tax Q and A

Talk about it

After years of being denied by the state legislature, the city of Cloquet finally got permission during the most recent 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 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 Nov. 6.

Not sure what you think about a local option sales tax? Read on to get your questions answered.

What is a local option sales tax?

Currently, the state of Minnesota levies a 6.875 percent tax on the purchase of certain products. The local option sales tax allows local communities to impose up to an additional one percent on these same products. The city of Cloquet is proposing a one-half of 1 percent (.5 percent) sales tax.

How much will the half-percent sales tax raise for the city?

Estimates generated by the city’s financial advisor say the sales tax will generate between $500,000 and $625,000 annually.

Who pays the sales tax?

A sales tax would apply to anyone shopping in Cloquet – not only property owners as is the case with property taxes – so others who work or play in Cloquet but who don’t live here would also contribute. Items such as food, clothing, gasoline, fuel oil and prescriptions will not be taxed. The sales tax on motor vehicles sales is proposed to be limited to $20 per motor vehicle.

What if people decide to shop elsewhere to avoid the sales tax?

They would have to travel, because most of the local commercial centers have a local sales tax. Duluth currently charges a 1 percent sales tax on all purchases within the city. The cities of Proctor and Hermantown also have their own ½ percent local option sales tax and Hermantown is looking to expand its tax to 1 percent this fall.

How can the money be used?

Revenues raised by the tax cannot be used to finance normal city expenditures, only those outlined in the legislation passed by the Minnesota House and Senate. Therefore, revenues from the Cloquet sales tax could only be used for the following items included in the legislation:

+ 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.

Are there other ways of financing the same improvements?

Without the sales tax, the city would need to re-evaluate all projects in terms of priority timing, and alternative funding sources. To raise the same $625,000 per year through property taxes, the city of Cloquet would need to increase its general fund levy by at least 24 percent. City officials have not said they will raise property taxes. Nor have they said they won’t raise property taxes. For next year, the city’s portion of the property tax levy is already set at zero percent.

Is this a forever tax?

No, the tax either sunsets at 30 years or $16.5 million, whichever comes first. By state law, when the tax collections reach that point, the sales tax will be removed unless otherwise extended by the state and voters.

How will the question be phrased on the ballot on Nov. 6?

Shall the City of Cloquet, Minnesota (the “City”) be authorized to impose a sales and use tax of one-half percent (0.5 percent) to finance the costs of improvements to City parks, trails and recreation areas and street and utility infrastructure?

( ) Yes

( ) No

Where do I go to vote?

This is a city-wide election, so you will go to your usual polling place. For more information on precinct locations or voting information, contact Cloquet City Hall at 218-879-3347 or go online to http://pollfinder.sos.state.mn.us/.

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