The Free Press, Mankato, MN

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January 28, 2013

Changes in sales tax could be windfalls for some cities

(Continued)

"We've been on the razor's edge with our budget for over a decade in the city of Duluth, and while we're getting close to finding stability, we still have a long way to go," Ness said Monday. Ness envisions using the revenue uptick to plug the hole from the casino decision and pay off other debt, but he's well aware that the expansion is no sure thing.

St. Paul, which levies a half-cent sales tax, is also taking a wait-and-see mentality. Sixty percent of those proceeds go for neighborhood or cultural development, with the rest used to repay debt from the city's convention center.

"Any assistance we can get to help put more firefighters and police officers on the street or help further our economic development is good for us," said Joe Campbell, communications director for Mayor Chris Coleman.

One of Minnesota's most lucrative local sales taxes is the 0.15 percent imposed in Hennepin County to pay construction bonds for the new Twins ballpark. In 2011, the tax brought in $31 million, a slice of which the county was allowed to use on libraries and youth recreation fields. If the expanded base was in place that year, House researchers estimate it would have meant almost $20 million more. The tax is due to expire once the Target Field borrowing is paid off.

Hennepin County Board Chairman Mike Opat said the faster repayment would mean less interest costs on bonds that had a 30-year lifespan when they were sold in 2007.

"We would turn off that tax. There are very narrow uses for that tax, and it's not the desire of the county board to leave that on," he said.

In 1971, the Legislature prohibited new or increased local sales taxes as a way to centralize collections and reduce disparities that reward cities with the most political clout. But it wasn't long before cities started pressing legislators for exemptions, with some success. Most were enacted only after local voters approved them. Three new sales taxes kicked in last year — in Fergus Falls, Hutchinson and Lanesboro.

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