Cloquet tax to go up in April

Talk about it

Some financially savvy folks may be wondering why their sales tax receipts in Cloquet are not showing an additional half percent sales tax yet.

Don’t worry, it’s coming.

Cloquet City Councilors and Mayor Bruce Ahlgren passed an ordinance at last week’s Cloquet City Council meeting amending the city code as it relates to special taxes – in this case the Local Option Sales Tax approved by voters in November – a move that will allow the Minnesota Department of Revenue to begin collecting the half-percent sales tax in April.

Cloquet voters approved the creation of a local option sales tax by a vote of 3,785 (63 percent) to 2,219 (37 percent) on Nov. 6. The state Legislature had already given its approval to the sales tax, pending approval by the voters.

Essentially, passage of the sales tax gives 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, which included certain parks and trails, infrastructure and development of commercial property adjacent to Highway 33 and Interstate 35.

“Whatever is taxable for state taxes will just increase by the local tax amount, a half percent,” explained Cloquet Finance Director Nancy Klassen, noting the Department of Revenue will be contacting local businesses. “It’s not too complicated, just an additional line item on whatever [the businesses] are already doing.”

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 – Cloquet joins Hermantown, Duluth and Two Harbors plus more than 20 other Minnesota cities – to impose up to an additional 1 percent on these same products.

The half-cent tax will apply to anyone shopping in Cloquet. 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.

The sales tax sunsets at either 30 years or $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.

City Administrator Brian Fritsinger previously noted that a sales tax will 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.

Although collection starts in April, Klassen said it will likely be late May or June before the city sees any money. For now, she said, city officials are waiting for the final parks task force recommendations and completion of a capital improvement plan plus a council retreat before they start making any plans to spend the money.

Spending the sales tax

Sales tax revenues can only be spent on the following areas:

- 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.

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