SF3560

Purpose

• This bill would let the City of Owatonna create a local sales and use tax (0.5% rate) after voters approve it in a general election. The tax would fund the construction of a community center and cover the costs of collecting and administering the tax.

Main Provisions

• Subdivision 1 — Tax authorization

  • If voters approve, the city may impose by ordinance a 0.5% sales and use tax.
  • The tax is in addition to any other local sales and use taxes and is governed by the state rule on local option taxes (Minnesota Statutes 297A.99).

• Subdivision 2 — Use of revenues

  • Revenues from the tax must be used to pay the costs of collecting and administering the tax and to finance 75,000,000 dollars (plus bonding costs) for the construction of the community center.

• Subdivision 3 — Bonding authority

  • The city may issue bonds to finance all or part of the project costs, with a principal cap of 75,000,000 dollars plus issuance costs.
  • Bonds may be paid from the tax revenues and the city's full faith and credit. They are not subject to certain debt or levy limits, and no separate election for bonds is required.

• Subdivision 4 — Termination of taxes

  • The tax would expire at the earlier of 25 years after first imposition or when sufficient funds are available to pay project and bond costs.
  • Any remaining funds after costs would go to the city’s general fund, and the city could end the tax earlier by ordinance.

• Subdivision 5 — Formerly authorized local tax revenues

  • The city may use any remaining revenues from a previously authorized local tax for the purposes described in Subdivision 2.

Significant Changes or Effects

• Creates a new local option sales tax in Owatonna (0.5%) with voter approval.
• Establishes a dedicated funding stream of up to 75 million dollars (plus issuance costs) for a community center, supported by bonding.
• Provides city-level control over tax collection/administration costs and debt financing, including full faith and credit backing and removal from certain debt/levy limits.
• Eliminates the need for a separate election to approve bonds and ties the tax’s duration to project financing timelines (up to 25 years or sooner if funded).

Potential Implications

• Local control to fund a community center and related costs via a dedicated sales tax.
• Long-term debt financing without some state debt-levy restrictions.
• Tax revenue spent first on administration and debt service for the project, then potentially redirected to the city’s general fund if any funds remain after project costs.

Relevant Terms - local sales and use tax - Owatonna - 0.5% (one-half of one percent) sales and use tax - community center - bonding costs - 75,000,000 dollars (75 million) - Minnesota Statutes 297A.99 - Minnesota Statutes 475 - general election - full faith and credit - debt limits - levy limits - term length (up to 25 years) - bonds not subject to 275.60 and 275.61 - separate election under 475.58 not required - administration costs - revenue use for collection and administration - Laws 2006 ch. 259 art. 3 sec. 12 (previous revenue use)