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Duluth Area Chamber of Commerce endorses half-percent sales tax increase for street repair

David Ross

After threatening to withhold support for a requested half-percent increase in the local sales tax, the leadership of the Duluth Area Chamber of Commerce voted Monday to endorse the tax as a mechanism to fund street improvements.

Chamber President and CEO David Ross had earlier suggested that the city's business community would not back the sales tax request unless the city put the brakes on a proposed ordinance that would require local employers to provide a paid-time-off benefit for workers dealing with illness or other family crises.

Ross explained the shift in posture, saying: "So when these two initiatives were being promoted on a parallel path by the city, it was concern to us. We expressed that concern, but we never took a formal position. This is our first formal position, and it's our singular position on the street program and the half-percent sales tax that's associated with it."

"We had hoped earlier by drawing attention to these two initiatives — earned sick and safe time and the street program — both of which result in additional expense to customers of businesses, if not the businesses themselves. We wanted attention drawn to that. And we initially, by calling attention to our concerns, encouraged the mayor and the City Council to choose the most important — one being this very important 25-year street program and the other being this discretionary initiative by the council," he said.

But the political calculus changed in November, after 76 percent of local voters registered their support for the proposed sales tax in a non-binding referendum, and Mayor Emily Larson also came out in public support of an earned-sick-and-safe-time policy.

Ross said the Chamber has acknowledged the political reality of the situation.

"The business community is a minority voice within our community in that there are about 3,000 businesses within this community of 86,000. So despite some people's belief and assertion that the business community is a political powerhouse, we're a minority voice within the community and certainly within the City Council," he said.

Larson praised the Chamber for its pragmatism and support of a plan to address Duluth's deteriorating streets. Any increase in the local sales tax still would need to win the approval of the Republican-controlled state Legislature.

"I think voters spoke very clearly about what they see as a priority and a strategy that can help us get ahead of what's been a perpetual frustration, and so I'm really happy that the Chamber has chosen to step in line with the community's support. It really gives us an opportunity to go down to the Capitol united on an issue of basic infrastructure, which I think is always a better message," she said.

"It's a very significant and meaningful vote, that they would fully choose to embrace this step forward. That says a lot to me," Larson said.

Ross said the Chamber's board of directors took a hard, critical look at the city's sales tax proposal before unanimously agreeing to endorse it.

"Our business community is aware of and is paying close attention to the high level of sales tax we already have in this community. That was something we had to give serious consideration to, prior to coming out with this endorsement," he said noting that Duluth already charges the highest sales tax in the state.

Duluth's sales tax would increase to 8.875 percent if the additional half-percent tax is approved.

"Yet it is, in the end, a far more attractive source of funding than would be having the property owners of Duluth pick up the tab," Ross said.

The proposed half-percent sales tax is expected to generate about $7 million annually — funds that the city would dedicate solely for street repairs and improvements. In order to raise a similar sum for streets through the levy, Duluth would need to hike property taxes by about 40 percent.

As owners of much of the city's commercial and and industrial property base, Ross noted that Chamber members would be hit especially hard.

"Those (properties) are typically appraised far above our residential property values, and they are taxed at a higher rate, so any property tax is amplified for our business community. So avoiding additional property tax and channeling that to sales tax is a more attractive option for the Chamber and our business community," he said.

The sales tax also spreads the tax burden beyond residents to others who use Duluth's roads, including more than 35,000 people who regularly commute to work in the city and about 6.7 million tourists who visit the community in the course of a year.

Ross said the Chamber aims to play an active role in St. Paul.

"Our initial and unwavering commitment and goal was to take a formal position on the street improvement program prior to the initiation of the Minnesota legislative session that begins Feb. 20th," he said. "So we are now in a position to be a part of an advocacy effort at the Legislature. ... Let's fix our roads and streets."

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