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NORTH MANKATO — Several business owners and residents made their views known to the North Mankato City Council Monday night when they spoke out against a proposed 0.5% food and beverage sales tax.

The council is considering the sales tax, which would raise an estimated $50,000 annually, as part of its 2020 budget plans.

North Mankato officials have floated the idea of a food and beverage sales tax for the past few years as a way to offset operating costs at Caswell Park. While the city touts the tax as a good way to capture out-of-city funding to benefit a regional attraction, restaurant and bar owners say the tax will adversely hurt local business since they’ll have to raise prices.

“When you’re going to throw another half-percent on top, now my prices have to go up,” Jim Downs, owner of the NaKato Bar & Grill, said. “If you don’t think people don’t notice when prices go up, you’re absolutely wrong. I’m sure you’ve gone into places and went, ‘Geez, you know, I ate here a month ago and my bill seems higher,’”

The Minnesota Legislature included the city’s request for a 1% tax in this year’s tax bill, which the city requested to mirror Mankato’s existing food and beverage sales tax.

Mankato approved a 0.5% sales tax in 2008 to fund operating costs at the Mankato Civic Center. North Mankato’s sales tax is estimated to bring in about $50,000 annually.

The council is split on the sales tax, however. North Mankato Mayor Mark Dehen and Council member Diane Norland support the tax, while Council member Oachs opposes it. Council members Billy Steiner and Jim Whitlock have been opposed to the tax in the past, but have since said they’re undecided on whether to pass it.

North Mankato hit upon the food and beverage sales tax as a way to help subsidize Caswell Park, which city officials estimate runs at a deficit of between $50,000 to $125,000 each year. Caswell Park has hosted the state high school girls softball tournament for more than 30 years, and city officials say more than 2,000 games each year are played at the softball complex.

Yet city officials are also looking at Caswell as the future site of an indoor recreation center, which residents have wanted for more than a decade. North Mankato is requesting about $10.5 million for the project, which includes $3 million for Caswell Park upgrades and maintenance. The food and beverage sales tax would also go toward the fieldhouse’s operating costs.

North Mankato Mayor Mark Dehen said the city needs to find ways to ensure Caswell Park and the future recreation center meet the community’s needs. He and other city officials have noted in the past community features like recreation centers and softball complexes often run at deficits — cities keep them open despite cost concerns as a public good.

“This is what they voted for when people voted for the local option sales tax,” he said. “While that wasn’t the sole piece of that, there was the vast majority of people who were asking for indoor rec as part of that, on both sides of the river.”

Bar and restaurant owners — including Oachs, who co-owns Spinners Bar & Grill — are concerned the tax won’t draw as much money from visitors as the city hopes. Several people with businesses in lower North Mankato told the council they don’t see any boost from softball visitors; their business comes from devoted regulars.

“There’s no difference between a tournament up there and a MoonDogs game,” Jeni Bobholz, owner of the Circle Inn, said.

Oachs said she thinks the tax is premature since North Mankato doesn’t yet have a recreation center. She also questioned why the council would approve the tax when it may not cover about half of Caswell’s deficits.

City officials say they’re working to shrink Caswell’s deficits. North Mankato secured a license to sell beer at the softball complex this year, staff sold another $25,000 in banner advertising and the city looks to benefit from a few other cut costs such as bringing local softball tournament organizing in-house.

Yet Oachs and others questioned whether the city should wait until after they analyzed how the cost-saving measures impacted Caswell’s deficits.

“At this point in time, I think the best option is to allow staff to continue to implement their changes rather than adding another tax that their citizens have to bear,” Oachs said.

City Administrator John Harrenstein pointed out the softball park will require renovations regardless of whether Caswell or the recreation center gets legislative support in the future.

Business owners told the council they should work within their current budget, or raise property taxes rather than target restaurants. They pointed out they’re not against Caswell Park or the recreation center, but didn’t want increased taxes when restaurants already work under thin profit margins.

Bobholz, who took over the Circle Inn this year, said a half-percent tax on her business from January through September of this year would have amounted to “thousands and thousands of dollars.” Bobholz said she’s already dealing with thousands in costs due to various business-related licenses and fees, and another tax would likely hurt her ability to stay open.

“I just raised my prices on Tuesday,” she said. “I don’t want to do it again in the very close future time. If this does go into effect now, that just washed away the markup I had to do to cover the mounds of debt that I have from being a new business owner.”

Harrenstein and Dehen say the city is managing its finances well already. They pointed out North Mankato plans to cut its tax levy by .6% in 2020. North Mankato is also the only city in the area to cut property taxes in the past six years, according to Dehen.

Both officials framed the food and beverage sales tax as a means to encourage growth in upper North Mankato, similarly to what the city did with the Belgrade Avenue corridor in the past.

Harrenstein said several business owners who oppose the tax have benefited from tax programs specifically geared toward them, similar to the food and beverage sales tax. North Mankato annually donates $10,000 to the Business on Belgrade Association, on top of free public works and police staffing for Belgrade events.

The city offered those programs because staff believes it’s a community benefit, similar to the food and beverage sales tax proposal, Harrenstein said.

“Without that sales tax investment, without that investment in BoB, we wouldn’t be seeing $7 million of improvements down there between the Rooftop Kitchen & Bar and Frandsen Bank,” Harrenstein said. “The use of this tax and the expansion of Caswell will result in benefits to those areas as well.”

The council will vote on the tax proposal at its Oct. 21 public meeting.

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