Hermantown is looking at increasing its sales tax to pay for a new hockey arena, trails and other athletic facilities.
The City Council voted Tuesday night to ask the state Legislature if it can raise up to $28 million over the next 20 years with a 0.5% sales tax increase.
If the Legislature says yes, the city will then ask voters for approval. If it goes into effect, the sales tax in city limits, where several big-box retailers are located, would increase to 8.875%. That would tie Hermantown with Duluth and Walker as having the highest rate in the state.
The city is proposing a second indoor ice sheet and upgrades to the existing arena at 4309 Ugstad Road, with improvements to nearby baseball fields and a new basketball court, skatepark and playground also planned. A paved trail between the Essentia Wellness Center and Proctor would also be part of the project. Together the work would cost $19 million, and with borrowing costs and interest the total comes to $28 million.
An economic impact study paid for by the Hermantown Amateur Hockey Association found the expanded arena could pump an additional $2.3 million into the local economy every year.
The sales tax is expected to raise $1.5 million per year and would sunset when it reaches $28 million or 20 years, whichever comes first.
A draft of the city’s pitch to legislators said the “payback on this investment is immeasurable.”
“As we age, we know you cannot put a price on good health. But what you can put a number to is the investment in everyone’s healthy recreation opportunities. We believe that number is a half percent.”
The process for cities asking to increase their sales tax changed with the legislation that allowed Duluth to increase its sales tax last year. Instead of first holding a vote and presenting voter opinion to the Legislature, St. Paul must now sign off before the issue is placed on a ballot.