Excelsior explores new taxes to cash in on Lake Minnetonka tourism

Excelsior wants to attract more tourists — and their money — by revamping their popular lakeshore park and possibly funding it by joining a few Minnesota cities with special sales taxes.

Leaders of the Lake Minnetonka town are considering asking the Legislature and local voters to approve a new food and beverage sales tax that could generate millions of dollars for the city, funding a makeover for its historic port and 13-acre park, the Commons, such as a new band shell and lake walk. Excelsior would be the seventh city in the state with the special food tax.

It's part of the increasing ways the town of 2,100 is looking to drive up tourism and the cash that comes with it instead of relying solely on residents' and businesses' taxes.

"We've always been challenged as a small community to come up with money to make improvements," Mayor Mark Gaylord said, adding about the tax to support the Commons: "I think it's the right approach. The benefit is for everybody, not just Excelsior residents."

City leaders plan to meet with legislators in February to gauge their support of the tax; the city needs approval from the Legislature and voters.

Six other Minnesota cities have the food and beverage tax — Detroit Lakes, Duluth, Little Falls, Mankato, Minneapolis and St. Cloud — as well as Giants Ridge Golf & Ski Resort in northern Minnesota.

The details of Excelsior's special request are still being worked out, but the city's preliminary discussions have included asking for a 1 percent tax that could drum up an estimated $5 million for the park, or $200,000 a year for 25 years.

The Commons has picnic areas, docks, playgrounds, beaches, tennis courts, a vintage band shell and other amenities. More than 15,000 people flock there for the popular Fourth of July event — for free.

"It's not fair to the residents. … We need some help," Luger said. "It's hard on our taxpayers. They're not as wealthy as people think."

The city doesn't receive local government aid from the state and, at less than one square mile, the city has a limited tax base from businesses and homes. The estimated yearly $200,000 could go toward a multipurpose port building, new band shell, concessions stand, lake walk and other improvements.

Luger said local businesses shouldn't be affected much by the tax, adding: "If the Commons is improved and it gets more people to come visit the town, it benefits them."

But not everyone is convinced.

"They keep looking at the food and beverage industry as a bottomless pit," he said of cities. "It's an easy target, but enough is enough. It just keeps adding up."

The city is also considering starting a lodging tax, which doesn't need legislative approval, once a final plan for a boutique hotel is approved this year. The tax would support tourism activities, Luger said.

In Minnesota, 11 entities have lodging taxes, such as Bloomington, Two Harbors, Minneapolis and St. Paul, according to the revenue department.

No other Minnesota city, though, has gone as far as to limit franchises, which Excelsior leaders are also exploring to preserve the historic, small-town character that they say is what attracts tourists.

The first-of-its-kind ordinance in the state would restrict so-called formula businesses from the quaint downtown district. But how to define that is still up for debate.

City leaders say they favor independently owned businesses like Dunn Bros Coffee, but don't want national chains like Subway making it look like other suburbs. In 2003, the local chamber of commerce caused a stir over an ad campaign that targeted chains like Starbucks and Home Depot, promoting Excelsior as a place for small, local businesses.

National chains like McDonald's are already there, but not on its main street. Since no Minnesota cities have this law, Excelsior is looking to coastal cities for inspiration.

"People like to come to Excelsior to dine and shop because it's not a mall," said Bill Damberg, president of the local chamber and owner of Brightwater, a clothing store on Water Street. "That historic district is worth saving."

Kelly Smith • 612-673-4141