Wadena City Council members believe they have found a way to fund a new library in the former First National Bank building using a Local Option Sales (LOST) Tax.
Changes in the process of seeking a local option sales tax have prompted the council members to jump on a chance to fund the remodeling of the Wadena City Library in a new location by adding .25% to the sales tax on purchases within the city.
How do they get there?
The process of imposing the .25% LOST tax is far from instant. Council members voted in favor of the proposed tax Jan. 29, but the Legislature and local citizens must also approve of it. Here’s how the events would unfold, according to the League of Minnesota Cities:
Adopt a resolution proposing the tax. The council adopted resolution states the proposed rate, documentation of regional significance, documentation of the the amount to be raised with the tax, and the estimated length of time the tax will be needed.
Submit resolution to state tax committees. The city is required to submit the adopted resolution and documentation on regional significance to the chairs and ranking minority members of the House and Senate Taxes committees by Jan. 31 of the year that it is seeking the special law.
Get legislative authorization. The city must secure the passage of a special law authorizing the enactment of the local sales tax. The city would typically work with its local legislators to introduce special legislation.
Adopt a resolution … again. After approval, the city must adopt a resolution accepting the new law. The city must also file the resolution and a local approval certificate with the Office of the Secretary of State before the next legislative biennium begins.
Hold a referendum. The city must conduct a referendum during a general election within two years of receiving legislative authority for the local sales tax. The referendum must include separate questions for each project, and only the ballot questions approved by voters may be funded by the sales tax. It’s the city’s hope that this question would be on the November 2020 ballot in order to get this project moving.
Pass an ordinance. The city council must pass an ordinance imposing the tax. It must also notify the commissioner of Revenue at least 90 days before the first day of the calendar quarter that the tax will be imposed.
How much would this raise?
Wadena Economic Development Director Dean Uselman was not shy about celebrating the fact that people actually spend a lot of money in Wadena -- about $86 million in taxable sales annually. At that rate of .25%, the city could raise about $4.3 million over 20 years. If it passes the necessary steps, the tax would go towards remodeling the former First National Bank building into a new library. The estimated cost of this project is about $3 million.
Once moved out, the city plans to sell the current building. Potential buyers have shown interest in the library building, according to Mayor George Deiss, who is also on the Library Committee.
City Administrator Janette Bower said this tax can help the city gain funding in quick order, which is important as the city is currently paying for both buildings ever since the city purchased the bank building in December 2017. She also said it’s important as the library continues to be one of the most used branches in the Kitchigami library system. A study done in 2017 showed the library needed to double in size and this bank building would allow them to do that.
Why the local option sales tax?
Wadena property owners are already overtaxed, according to Deiss. By using the LOST tax, the city would be pulling funds from everyone that shops in Wadena, not just the city residents. The resolution states that this project is of regional significance, so it makes sense that the cost to complete the work should be paid out by those of the region.
“I wanted to give the citizens an option, because if we bond and we have to raise the levy, 100% is on the citizens of Wadena, there is no outside help … this should lessen it,” Deiss said.
The tax would expire either in a set of years or when the council determines that the amount of revenue from taxes to finance the improvements equals or exceeds the $3 million, plus the additional amount needed to pay the costs related to issuance of bonds, including interest.
While the city council wants to see this project go through, they are restricted to providing the facts about the tax. In other words, they can not spend money promoting the passage of the referendum. The public can feel free to promote or denounce the idea.
City council member Mark Lunde questioned if the city could figure out just how much of the money spent in Wadena is coming from local residents. He wanted to see how much of the cost would be borne by local residents. While that number seemed hard to nail down, Dean Uselman said perhaps the Buxton Group, a group the city contracts with for obtaining data for potential business, has the ability to obtain credit card address data to perhaps capture a snapshot of where customers are from.
Bower said she could check with the Department of Revenue to see if there are cost models that may show that picture.
Third in retail sales
While Wadena sits within one of the poorest counties in the state, people are still spending a lot of money here.
Uselman explained that Wadena stacks up quite high when compared to other communities.
“The last information I got from the Department of Revenue shows that Wadena is the third highest in retail sales per capita in the state of Minnesota behind Brainerd and Alexandria, excluding the metro seven-county area,” Uselman said. “I know the people of Wadena are not spending that much money. They’re just not. It’s coming from outside.”
Uselman mentioned a study the city was involved in with the University of Minnesota, close to 10 years ago, the city was drawing 42,000 people to Wadena to shop. He said that shows that the residents of Wadena make for maybe 10% of the total people doing the spending, if every man woman and child in the city were spending money.