Wright County Board conducts sales tax public hearing, decision later delayed

The Wright County Board of Commissioners laid over a decision Tuesday morning on a proposed local option sales tax to its June 13 meeting.

On a motion by District 3 Commissioner Mark Daleiden, the board tabled a decision to see what happens with transportation funding at the legislature, which is scheduled to end its session May 23.

The vote to table was approved 4-1, with District 4 Commissioner Mike Potter voting against it. The meeting agenda for the board’s May 9 meeting included a local option sales tax resolution and presentation by County Coordinator Lee Kelly.

A public hearing was held the evening of May 4 regarding the local option sales tax. No decisions were made after the public hearing, but a draft resolution for the new tax was included for discussion purposes in the county board’s May 9 meeting packet.

If commissioners decide to implement a local option sales tax, a resolution is required. The half-cent draft resolution included in the meeting packet omitted any tax rate variables and term statement.

The county-wide sales tax would be applied to most purchases currently requiring collection of state sales tax.

The primary exception would be the purchase of motor vehicles registered for road use, including cars, trucks, motorcycles, and trailers where a portion of the state sales tax is already dedicated to transportation.

Leased and rental vehicles, boats, and all-terrain vehicles would be subject to the local option sales tax proposed by Wright County. Boat trailers would be exempt.

The May 4 public hearing at the Wright County Government Center opened with each of Wright County’s five commissioners making an opening statement about the proposed sales tax.

County Board Chairman Charlie Borrell, who represents District 5, said he could support passage of a sales tax only if the funds raised were solely dedicated to highways.

“[Wright County Highway Engineer] Virgil Hawkins and his department are very good with their money, but I don’t want to give any county department an extra $6 million,” Borrell said, referring to the proposed sales tax revenue target.

Potter blamed state legislators for failing to fund highway improvements, but mentioned in 2013, lawmakers gave counties the authority to levy wheelage and sales taxes. Currently, 82 out of 87 counties in the state are using those options, he said.

“If anybody has been paying attention to the legislature for more than 5 minutes, the last three years, they haven’t accomplished anything,” Potter said. “It’s a budget year, and they are having a heck of a time right now and will probably have to do a special session for any bonding.”

Potter added he currently serves as the transportation chairman for the Association of Minnesota Counties. “We can’t wait any longer,” Potter said, referring to the county enacting a local option sales tax or increasing property taxes to pay for a backlog of transportation projects.

“The state has a $12 billion to $18 billion funding shortage, and the federal government hasn’t done anything,” Potter said. “The cost of roads has gone through the roof. We have very few options here. Our road problems aren’t going away. We are going to raise your property tax or we have this option. That’s why we are here tonight, to explain this for you.”

District 1 Commissioner Christine Husom said current consideration of some sort of tax increase to fund transportation has come before the Wright County Board three or four times.

“We have 513 miles of county roads we need to maintain,” Husom told the 35 people in attendance at the public hearing. “We are getting behind. We are about $4 million short every year.”

Husom said she didn’t like raising people’s taxes, but needed additional input. “I don’t’ think it’s fair property owners are pretty much footing the bill for so many of our projects,” Husom added.

Daleiden offered a business owner’s perspective on the proposed local option sales tax. “I have the most to lose of anybody up here,” Daleiden said. “I’m a business owner of a self-service, coin-operated car wash, I can’t raise my prices to cover a half-cent sales tax, so it would eat directly into my bottom line, Hopefully, we’ll have some good dialogue tonight. I don’t like the idea of going for 15 years and tying the next county board’s hands,” Daleiden said. “But, I’ve seen what kicking the can down the road by other boards has done.”

District 2 Commissioner Darek Vetsch said prior to last Thursday’s public hearing, he had spent many hours in meetings exploring the ramifications of the county doing nothing.

“The Wright County Highway Department is already being run lean,” Vetsch said. “How we maintain and build our infrastructure is a quality of life issue. Is the ‘lights on only’ enough? Can we move forward and be progressive? The state used to give the money to do this. Now, they have tossed us a bone [in the form of] a sales tax option.”

Hawkins said lawmakers in 21 states have approved recent gas tax increases to fund transportation. “Minnesota isn’t one of those states,” Hawkins said, adding that Wright County had two options to close its transportation shortfall.

“One method is property taxes and the other is the local option sales tax,” Hawkins said. “The property tax puts the full burden on property owners, where the sales tax option puts a shared burden on residents, commuters and residents of Wright County.”

Assistant County Engineer Chad Hausmann provided background about the county’s road system and funding needs during last Thursday’s public hearing and taxing option comparisons.

Food, clothing, vehicles, and agricultural products would be exempt from the local option sales tax if it’s approved by commissioners, Hausmann said.

Hausmann said 406 miles of paved rural and urban highways have construction and maintenance primarily funded by the state’s Highway User Distribution Fund or gas tax.

Three digit highways in the county road system, 107 miles of paved rural highways, are constructed and maintained with local levy property tax funds.

Wright County currently spends approximately $9.5 million annually on major road improvements such as pavement preservation, reconstruction, safety, and bridge projects. There is approximately a $4 million annual gap in county transportation funding, Hausmann said.

Potential options for addressing Wright County’s transportation needs include doing nothing, working with legislators to increase transportation funding, raising the local property tax levy to fund transportation needs, or implementing a local option sales tax, Hausmann said.

If enacted, a half-cent local option sales tax would raise $6 million. The same level of transportation funding could be raised with a 10 percent property tax levy increase for all Wright County property owners.

A half-cent sales tax would cost a household with a median income of $72,000 approximately $48 a year, Hausmann said.
A 10 percent property tax increase for a typical residential property valued at $200,000 would cost $70 a year. The estimated transportation sales tax impact on Wright County businesses would vary and be based on specific taxable purchases made by a business.

Hausmann said 100 percent of the revenue that the county would collect from a local option sales tax would be applied to a short-term, mid-term, and long-term list of 18 “candidate projects.”

The majority of the proposed projects are located in the eastern part of Wright County and would serve Monticello, Otsego, St. Michael, and Albertville.

The local option sales tax would be removed or no longer collected once projects are finished, Hausmann said.

Sixteen people spoke during the May 4 public hearing once Borrell opened the floor to questions and comments.
Almost half were from Borrell’s district; the rest were spread among the other commissioner districts.

A tally of those who spoke showed those who opposed the proposed tax slightly outnumbered those who supported it and several people who commented wanted commissioners to spend more time on the issue before making a decision.

I-94 West Chamber of Commerce President D.J. Hartley was strongly opposed to the proposed sales tax. The I-94 West Chamber of Commerce represents organizations in 10 core communities as well as numerous surrounding cities along I-94 in the northwest Twin Cities.

“I represent businesses in St. Michael, Albertville, and Otsego,” Hartley said. “My phone is ringing off the hook. You already have money allotted through your levy [for transportation improvements],” Hartley said. “You have other options. Rogers did a franchise fee. You could take expenses from something else. I agree 100 percent that roads have to be great, but you want to enact this for 15 years. The businesses I represent are not for this,” Hartley added.

Don Schmidt, a Buffalo Township resident, suggested the county board increase property taxes to fund transportation needs. “Where’s all of the growth coming from?” Schmidt said. “Where’s the money?”

Kevin Kasel, mayor of St. Michael, urged Wright County commissioners to address the transportation needs as soon as possible

“We are a growing city. You have to fund this,” Kasel said. “Take the $4 million from parks,” he added. “It’s not as essential as roads. This board is fiscally responsible. This [local option sales tax] looks to be one tool that’s politically palatable. This board needs to do what is necessary to properly fund transportation. You can’t keep pushing it down the road.”

Ray Schmidt, another Buffalo Township resident, then asked, “When is enough enough? Maybe you people should look at yourself. We don’t need anymore taxes. Do you ever look at making a cut? We don’t need a sales tax. The roads are in good shape.”

Chris Klein, a Silver Creek Township Board supervisor, said his full board unanimously agreed to support a half-percent local option sales tax.

During the public hearing, Klein asked for an age check of those in the room. “People who are age 45 and younger are not here tonight,” Klein said. “They really don’t care. They are willing to pay. If they cared about this, they would be making phone calls, writing letters, sending emails and would be at this meeting. That’s the point I would like to make. The county is going to continue to grow. This is going to help in the long-term.”

Monticello City Councilmember Lloyd Hilgart said the Wright County Board hasn’t spent money frivolously. “You need to catch up on your projects,” Hilgart said. “For most people, the sales tax will be less of a burden than a levy increase. The sales tax will cost me $1,500 in materials for my business. Businesses will pay the lion’s share of it. I’m OK with it. In the end, the majority of constituents will pay less this way. This board has been fiscally responsible. At some point, you have to maintain what you have or it will cost you more in the long run,” Hilgart said.

After Borrell closed the public hearing, Vetsch commented commissioners could vote on the proposed sales tax because a quorum was present.

Borrell said he would rather not vote after the public hearing. Vetsch replied, “Charlie, you brought all of these people out here for an evening meeting. Are you going to do a vote on a Tuesday morning?”

Husom said she was getting emails and comments from people. Vetsch said his preference was to vote on the sales tax at an evening meeting that could be attended by constituents.

“I don’t think a vote on a Tuesday morning is fair to the people,” Vetsch said.

Daleiden said he thought it would take a couple of Wright County board meetings to discuss and hash out the proposed local option sales tax before a final vote.

”Transparency is key to this,” Vetsch replied. “I worked very, very hard to visit many of my [district] communities and present information about this. That doesn’t mean I’m selling it.”

Borrell said he thought there would be a lot of discussion about the sales tax at a future meeting.

“We are not [totally] closing public input on this,” Borrell said. “The public can call everyone of us. For now, we’ll close this hearing, but it could be reopened if somebody did have additional information they were willing to present.”

See next week’s Monticello Times for a full story on the May 9 Wright County Board of Commissioners meeting and the local option sales tax discussion that occurred.

Editor’s Note: Freelancer John Holler provided a deadline update for this story. Holler regularly covers government and the Wright County Board of Commissioners.

Contact Tim Hennagir at [email protected]