House and Senate Committees Consider Local Sales Tax General Law Changes and Restrictions

The bill would allow some types of city projects to go straight to the voters for approval without requiring special law authorization from the Legislature.

SF 5424 (Sen. Ann Rest, DFL-New Hope) was heard in the Senate Taxes Committee on April 16. The bill would impose a new authorization structure for local sales taxes. It was laid over for further discussion and possible inclusion in an omnibus bill.

In the House, similar legislation, including HF 5335 (Rep. Aisha Gomez, DFL-Minneapolis), was discussed during the week of April 8 in the House State and Local Government Finance and Policy Committee and House Taxes Committee.

The proposal was included in the House omnibus tax bill, which was approved by the taxes committee on April 19. The omnibus version added certain correctional facilities and law enforcement centers to its list of projects that could be eligible to go directly to voters without special authorization from the Legislature.

These bills are in response to the Local Taxes Advisory Task Force Report (pdf), which was released in February. Though the bills include some components from that report, neither bill mirrors the exact recommendations of the task force. The bills would also impose new requirements.

What’s in the bill?

The House bill would allow the following types of city projects to go straight to the voters for approval without requiring special law authorization from the Legislature:

• Parks that meet the criteria established by the Parks and Trails Legacy Plan in 2011.
• Trails that meet the criteria established by the legacy plan in 2011.
• Libraries that are part of the Regional Public Library Systems as designated by the regional board.
• Convention centers that are at least 50,000 square feet and not within 15 miles of another convention center (8 miles in the metro).
• Athletic complexes where regional tournaments may be hosted and are not within 15 miles of another similar athletic complex (8 miles in the metro).
• Certain correctional facilities, district courts, and law enforcement centers.

Cities would have to apply to the  Minnesota Department of Revenue to certify that their project is eligible for general authority. The House bill would also impose additional restrictions on projects that use this general authority and any project that comes to the Legislature for special authorization. The limits on the proposed general authority include:

• Letters or resolutions from at least two surrounding local governments indicating their support for the project.
• That 15% of the funds raised by the local sales tax go to a new “local sales tax equalization distribution account.”
• A resolution documenting regionality and the share of the benefit going outside the jurisdiction.
• Prevailing wage requirements — the minimum hourly wage employers must pay certain workers on the construction of the projects.
• Equal admission fees for residents and nonresidents.
• Public hearing on the city council resolution.

The Senate version sets up a structure similar to the House but with numerous differences, most notably it would:

• Require that eligible parks and trails meet only three of the five criteria established by the Parks and Trails Legacy Plan in 2011.
• Not allow parks in the seven county metro to be considered eligible projects.
• Include certain community centers and airports as eligible projects.
• Not include a 15% set aside for an “equalization distribution account.”

Testimony on the bill

League staff spoke in favor of the Senate bill while noting that there were still some issues to be worked through.

In the House, League staff shared how the new requirements would be complicated for cities to follow and would likely result in fewer cities using the authority, with many continuing to request special law authorizations from the Legislature. League staff also submitted written testimony on the proposal.

View the League’s written testimony on the House bill on page 3 (pdf).  

League staff continue to meet with authors to push for a simpler process for cities to navigate as well as fewer restrictions on qualifying projects.

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