West St. Paul will ask voters to approve a half-cent sales tax in November to pay for future street projects, a move the City Council said is necessary because of the steep cost of having to rebuild Robert Street.
If the city gets the go-ahead from residents and then the Legislature, it may well be the first metro suburb in the state to levy a local sales tax in addition to the statewide general sales tax of 6.875 percent.
"We have a debt on Robert Street that we have to pay for," said Council Member Dave Napier. "With this, we are spreading the burden a little bit further to the users of Robert Street."
The Robert Street project, completed in 2017 after about three years of construction, cost an estimated $46 million, City Manager Ryan Schroeder said. West St. Paul racked up $21.4 million in debt to pay for the project, a figure expected to increase to $27.6 million by the time the bond is paid off in 15 years.
Robert Street is a state highway, Schroeder said, and the project received some state and federal funding. But when West St. Paul officials twice went to the Legislature for more money for the project, they came back empty-handed.
The debt "makes it more difficult for the city to complete major maintenance on the rest of the streets within the community," Schroeder said. "The council has looked for ways to recover from that."
The City Council voted in late July to put the tax question on the November ballot.
City research shows that West St. Paul could take in an estimated $1.3 million per year from the tax, 30 percent of that from people living outside the city.
A range of items would be subject to taxation, including appliances, cigarettes, candy, restaurant meals and health club memberships.
The earliest the tax could go into effect is Oct. 1, 2019, but that's only if local voters approve, the Legislature gives permission and the City Council finally adopts the tax. "The Legislature does not automatically approve these things," Schroeder said.
The city could raise property taxes to pay off the debt, Schroeder said, but city staffers believe the sales tax would be easier on residents. West St. Paul homeowners pay half the current cost of street projects with property taxes; the new tax would bring that rate down to 30 percent, Schroeder said.
At least 27 Minnesota cities and four counties have a local tax, and most levy a half-cent, according to a West St. Paul memo.
Duluth, Mankato, Bemidji and Austin levy local sales taxes, among other outstate cities. In the metro area, Minneapolis, St. Paul and Hennepin County levy sales taxes.
Bloomington received authorization from the Legislature to implement a local sales tax in 1986 to improve the area near the Mall of America, but never used it.
Burnsville discussed implementing a local sales tax in May but decided to table the matter and discuss it next year. Council Member Dan Kealey said the idea didn't make a lot of sense for a city with a struggling mall and located near other suburbs with the same stores.
"You have that anti-competitiveness by being in the middle of all this retail," Kealey said.