BEMIDJI -- In order to support improvements to water infrastructure and capital needs at the Sanford Center, the city of Bemidji will approach the Legislature in 2020 with the hope of authorizing a sales tax.
For the past several months, the City Council has been exploring the need for a special use tax, such as a sales tax or a hospitality tax. Initially, both types of taxes were seen as viable to propose this session. However, on Monday, the council narrowed its scope to a sales tax.
A 1% sales tax would generate roughly $5 million, while a 1/2% sales tax would create $2.6 million. For a sales tax to be implemented, it needs both approval by the Legislature and by the public through a referendum.
To make it through the Legislature, though, a sales tax proposal needs to be included in a tax bill. While this year isn't a traditional tax bill year, representatives with the city's consultant, Bradley Peterson of Flaherty and Hood, said a bill is still likely in 2020.
"Based on conversations with the House Tax Chair and staff of the Senate Tax Chair, I'm convinced there will be a robust discussion about a tax bill this year," Peterson said. "There are going to be a number of cities coming in with requests."
If a sales tax were to pass, a top priority would be to dedicate the dollars toward a new treatment plant for chemicals called perfluorocarbons, or PFCs, originating from firefighting foams found near Bemidji's water wells. The new treatment plant will cost an estimated $16.3 million, according to estimates.
While funding may be available through a 2020 bonding bill from the Legislature, though, the local share is still expected to be sizable. As a result, the city is hoping for relief through the sales tax option.
The situation is similar for the future of the city's wastewater treatment plant. The city is applying for a new permit from the Minnesota Pollution Control Agency. Future permits could include requirements for the city to start treating for ammonia and nitrogen, meaning new equipment estimated at close to $10 million would be needed.
District 5A Rep. John Persell, DFL-Bemidji, who attended Monday's meeting, said Bemidji has a good argument this session when it comes to its water issues
"I think the treatment plant for drinking water is unique," Persell said. "I certainly would make the argument that 3M (which produced the foams) should be paying for this, and ultimately, I believe they will. It's not going to come in time for the mandate that you all are getting from the Department of Health, though. So, I think in this situation, you're showing that you're mandated to do this. I think the argument can be a strong one for accomplishing this."
State statute also allows sales tax dollars to go toward capital projects and the rehabilitation of structures, according to Peterson. As a result, a portion of the sales tax could also be directed to the Sanford Center.
For 2019, the city authorized an $860,000 investment in capital needs at the city-owned event center. Sanford Center staff have informed the city about future needs for the 10-year-old building that will come to hundreds of thousands of dollars.
At the end of Monday's meeting, the council directed city staff to evaluate the amount of money needed from the projects, and research how much time would be needed on them, as sales taxes have a sunset date. According to Peterson, a sales tax proposal must be approved by the city by Jan. 31.
If the sales tax proposal would be successful at the Legislature, voters would be able to vote on each of the three uses of the tax separately.
The Legislature is scheduled to convene on Tuesday, Feb. 11.