Cloquet proposes half-cent sales taxEach time a customer buys batteries at Hermantown Walmart or a new record from the Electric Fetus or dinner in Canal Park in Duluth, a small portion of the final bill goes to the cities.
By: Jana Peterson, Pine Journal
Each time a customer buys batteries at the Hermantown Walmart or a new record from the Electric Fetus or dinner in Canal Park in Duluth, a small portion of the final bill goes to the cities.
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 in the 2011 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 — estimated between $500,000 and $625,000 a year — could not be used to finance normal city expenditures, only those outlined in the legislation.
“It’s taken us 10 years to get approval from the Legislature,” Cloquet Mayor Bruce Ahlgren told the City Council in August. “This could be key for the city.”
If passed, the tax would apply only to taxable items — not groceries, clothes or prescription drugs — purchased in Cloquet.
According to the bill, revenues from the Cloquet sales tax could only be used for the following:
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.
“Most of the projects would be to enhance the quality of life for residents,” City Administrator Brian Fritsinger said.
If passed, the maximum amount 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 pay for improvements the city might not otherwise be able to afford after a decade of budget cuts and decreasing state funds. Recent budgets have delayed park projects and other expenditures because councilors did not want to increase the burden on Cloquet’s citizens, whose property taxes pay for about 34 percent of the city’s general fund.
A sales tax would apply to anyone shopping in Cloquet — not just property owners, as is the case with property taxes — so others who work or play in Cloquet but who don’t live there also would contribute.
City Councilor Mark Roberts pointed out that the most recent census demographics indicated Cloquet is retaining more young people and would not be classified as an “aging community.”
“We’re a growing community,” he said. “It’s important to think of the future and what direction we’d like to see our community headed.”
If the sales tax proposal fails to pass, Fritsinger said all the projects would have to be reevaluated in terms of priority, timing and funding sources.
“We’d have to decide what the city could and couldn’t afford to do,” he said.