GOLDEN VALLEY, Minn. — Whether they're being used for road repairs and parks in St. Paul, or a new fire and police station in Golden Valley, local option sales tax increases have been gaining more approval from both cities and voters in recent years.
"Years ago, there maybe only about four or five cities with these taxes," said Bruce Schwartau, Community Economics Program Leader for the University of Minnesota Extension Office.
A decade ago, Schwartau and a statewide team first helped the city of Brainerd forecast the impact of an expanded local sales tax to fund water infrastructure and trails. He says the success of that tax — and the report they compiled — and led to more and more cities to take up tax increases in recent years.
Schwartau: "According to the Department of Revenue, this April we saw taxes increase or extended in Fergus Falls, Lichfield, Carlton County, Edina, Grand Rapids, Itaska County, Maple Grove, Staples, Oakdale and more. There's probably 15-20."
Erdahl: "Are you surprised at how many of these taxes have passed?"
Schwartau: "I guess I'm not surprised. I think it's kind of that feeling of, well yes, I wouldn't mind sharing the cost with someone else. If we pass a local option sales tax. It means some of that city expense or county expense won't just be paid by people within our county."
Erdahl: "You get asked to do the forecasting. Projections of how much additional tax revenue will come in. How often do you go back and look and say, this was accurate or this might have been way off."
Schwartau: "We've been, I think, surprisingly accurate, but I will say, it's always going to be an estimate. Every year the amount of sales change, where people are buying can change."
But while many worry that tax increases will cause people to take their business elsewhere, Shwartau says data has shown — in most communities — sales tax increases do little to impact buying habits.
But voters still have to buy in. That's something that didn't happen in Mounds View this week. A 1.5% proposed sales tax increase that would have helped expand the community center, was voted down.
"City and county leaders have to ask, are the expenditures that we are making, do they have real high public value?" Schwartau said. "They need to be able to communicate that."
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