Local Option Sales Tax
During the 2023 Legislative Session, Monticello's request for a local option sales tax received legislative approval to bring the proposed sales tax to Monticello voters in 2024. If approved by voters, the proposed half cent tax would go into effect in 2025.
On Monday, Jan. 23, 2023 Monticello City Council began discussions about the use of local option sales tax. Monticello’s City Council identified two large-scale projects that have a regional significance to our area: the Bertram Chain of Lakes Regional Athletic Park, and The Pointes at Cedar Recreation Area. The City identified the local option sales tax as a mechanism to alleviate the financial costs on local taxpayers and capitalize on the many visitors we have engaging, shopping and recreating within our community.
Rather than limiting cities to only the taxpayers within their city limits, a sales tax allows revenue to be generated from people shopping in the community. As a regional commercial center, Monticello stands to benefit from a tax that includes contributions from the people drawn to the community from across Central Minnesota.
About the Proposed Projects
Bertram Chain of Lakes Regional Athletic Park is already a regional destination for recreation. The initial phases of construction created space for regional regular season play as well as tournament play, bringing in teams from across the state. The completion of the first phase of premiere fields allowed the Minnesota Youth Soccer Association to host the 2021 State Soccer Tournament at the park.
The Pointes at Cedar is a more recent project. It’s intended to mix residential, commercial, and recreational spaces within a 100-acre development area. The project is anchored by a large central lake surrounded by pathways, art, and entertainment that will add a unique flair to the center of the community.
The City Council is committed to phased development of both projects, but the proposed tax would be a transformational funding opportunity. It will create a specific source to finance future phases of the projects to ensure they can continue to develop for public use.
What is a Local Option Sales Tax?
The proposed sales tax would be a half cent tax, or $.50 on every $100 of taxable purchases for 20 years. This would generate an estimated $30 million in funding, $15 million to Bertram Chain of Lakes Park and Athletic Complex and $15 million to The Pointes at Cedar Recreation Area project. State law requires the tax to automatically sunset once funds required for the projects are collected, or the proposed 20 years (pending approved legislation), whichever occurs first.
This resolution is the first step of a two-year process.
The Minnesota State Legislature must first approve the sales tax to fund the specific projects proposed. If the legislature authorizes the sales tax, City Council must vote on a second resolution to place on the 2024 General Election ballot. A local vote would occur, with residents voting on the sales tax for each individual project. Voters can say yes to both projects, no to both projects, or pick one and decline the other.
- Step 1: The local sales tax will be considered by the State Legislature during its session in 2023.
- Step 2: If approved, the City Council must adopt a resolution accepting the new law.
- Step 3: If Resolution is adopted by City Council, there will then be questions on the ballot of the next general election in November 2024. Voters will be asked to vote on two questions, one question for each proposed project.
- Step 4: If approved by the voters, the City Council must adopt an ordinance imposing the tax and notify the Minnesota Department of Revenue at least 90 days prior to the calendar quarter in which the tax will begin to be collected.
What can a L.O.S.T. be used for if approved?
If approved, the City of Monticello would receive revenue from the local option sales tax from the MN Dept. of Revenue monthly, which will be accounted for in a separate fund. Local sales tax funding is only allowed to be used for the projects that are authorized by the state of Minnesota, approved through the resolution of the Council, and approved by voters during the general election.
Local option sales taxes apply to the same items and services as the general state sales tax. Items exempt from regular state sales tax are also exempt from the local option sales tax including many essential items such as groceries, prescription and over-the-counter medications, baby products and clothing (here is a complete list of non-taxable items, from MN Dept. of Revenue).
City staff submit project background and future plans for The Pointes and Bertram, as well as a breakdown of the proposed financial components to the MN state legislature on January 31, 2023.
- What is a local option sales tax?
- What can receipt of local option sales tax funds be used for?
- Can any city create a local option sales tax?
- What does Monticello want to fund using a sales tax?
- How much would the local option sales tax be and how long would it be in effect?
- What happens if the local option sales tax is not supported by voters?
- What is the estimated timeline for the local option sales tax?