Monticello councilors support exploring local sales tax

Cities are generally limited in the ways they can raise money for big projects, said Monticello City Administrator Rachel Leonard, and those methods are heavily weighted towards property taxes, she said.

But a local option sales tax would allow the city capture revenue for projects that are regional in nature, Leonard explained.

The Monticello City Council on Monday unanimously passed a resolution supporting the City’s authority to impose a local sales tax. City staff’s preliminary plan calls for a half-cent sales tax.

Before any sales tax is implemented in the City of Monticello, it must be approved by the tax committee in the Minnesota Legislature, and then by the Minnesota Legislature itself. Residents of Monticello would also need to approve the sales tax measure through a referendum during the 2024 general election, Leonard told members of the City Council.

The City consulted with the Minnesota Department of Revenue, Leonard said, and received an estimate of the revenue a half-cent local option sales tax could generate in Monticello.

The tax could potentially generate $1.4 million per year, Leonard said, and $30 million over the proposed 20-year term of the tax, Leonard told members of the City Council.

With that said, city staff has suggested earmarking $15 million for both The Pointes at Cedar and Bertram Chain of Lakes Regional Park.

Monticello Mayor Lloyd Hilgart said its reasonable to expect that both The Pointes at Cedar and Bertram Chain of Lakes Regional Park will be used by people on a regional basis when completed. That makes both projects ideal for being funded by a local option sales tax.

He noted that the tax would also allow the projects to be funded, in part, by people don’t live in Monticello because area shoppers come from throughout the region.

“These projects are the type of projects we should be using (a local option sales tax) for,” Hilgart said.

Council member Tracy Hinz called the local option sales tax a great first step in funding the local projects.

Hinz made a motion to pass a resolution supporting the City’s authority to impose a local sales tax. The measure passed unanimously.

With a local option sales tax, unlike property taxes, everyone who makes purchases in the city helps pay the local-option sales tax. The tax would not apply to items exempt from regular sales tax, for example food, clothing and other necessities such as home-heating fuels, prescription drugs, certain medical devices, caskets and funeral urns. The local-option sales tax would not be applied to gasoline.

Minnesota lawmakers created in 1997 the option for local governments to implement a local-option sales tax. It must be introduced by resolution and enacted by voter referendum unless the money will be collected for specific road or transit projects, and then no referendum is required.