The Free Press, Mankato, MN

May 24, 2013

North Mankato sales tax nearly tapped out

Tax to be collected until 2020

By Dan Linehan
Free Press Staff Writer

NORTH MANKATO — North Mankato’s sales tax is spent.

The city has reached about $6 million in sales tax expenditures, the limit imposed when the Legislature authorized the half-percent tax in 2007.

That money has helped pay for an interchange at Highway 14, new soccer fields, park improvements, a library expansion and downtown redevelopment.

The city has borrowed about $4.8 million for these projects and used another $1.2 million in cash from the tax, City Administrator John Harrenstein said.

He said the city is asking its attorney whether or not the tax’s legal limit has been technically hit. He said it might be the case that the city is authorized to borrow $6 million, in which case the city could borrow and spend another $1.2 million.

But that may end up being a moot point; the tax is also taxed out.

Based on conservative projections, Harrenstein estimates that the tax will only have about $175,000 to spend, in total, through 2020.

As was the plan from the start, the city borrowed millions early on so it could complete projects before money accrued in the fund. But it will be paying interest on these loans until about 2024, Harrenstein said.  And until then, there may not be much extra money to spend.

In 2015, the first year for which new projects are not budgeted, the sales tax fund is slated to have obligations to spend $528,362, all on old projects and loan payments. Of that, about $85,000 is interest.

The fund collected $544,443 in 2013, and Harrenstein’s projection estimates it will get $500,000 each year until 2020. It will probably collect more — collections rose even during the recession — but that’s why Harrenstein’s projection is conservative.

The City Council was briefed on the state of the sales tax earlier this week.

“It looks to me like this whole sales tax fund is really mortgaged until 2020,” Councilman Kim Spears said.

Harrenstein replied: “I wouldn’t say mortgaged, but, yes, it’s obligated.”

It’s also possible that the $100,000 budgeted in 2014 for the soccer fields is in jeopardy, he said.

Mayor Mark Dehen said the tax has accomplished what it set out to do.

Its biggest expenditure is $1.26 million in downtown redevelopment, not including $220,000 in business loans. The $1.26 million was spent on a downtown study, loans and grants to downtown businesses and the first phase of the Marigold project.

“The question is where do we go from there,” Dehen said. “We may need to look at reauthorizing those sales taxes into the future.”

House Majority Leader Paul Thissen said Thursday he was “open” to expanding that authority but was noncommittal.

That step would presumably require a referendum similar to the one that approved the North Mankato tax in 2007. Mankato’s local sales tax currently has authority to be collected until 2022.