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Detroit Lakes City Council OKs half-cent tax

The Detroit Lakes City Council gave a thumbs-up to a half cent sales tax on food, beverages and entertainment in the city, and voted to approve contacting the state legislature and starting the process of implementing the new tax.

"The purpose would be to undertake some of the things we don't have the funds for right now," City Administrator Bob Louiseau said.

A few of those to-do items include flowering rush, the crescent redevelopment area, and bike trail and parking.

The money from the food and beverage tax would go directly to designated projects and not into the city's general fund.

Lakeside Tavern owner Chet Collins said that he doesn't have a problem collecting the tax - which figures out to 2 cents on every $4 - if it goes to something specific that is agreed upon beforehand and not into the general fund.

The tax would generate about $110,000 a year, with a likely sunset of 10 years.

Louiseau said the city wants to move forward on several projects, but "quite frankly, we keep running into a funding issue." He also added, and others agreed, that the list of projects is longer than the tax will pay for, but it's a start.

Once the legislature approves the taxation (it does not need to be voted on by the public like a general sales tax does) the city will then ask for public input on which projects they would like to see funded first.

Collins agreed, pointing out that tourism is only a few months out of the year, and it's really locals who will be paying this tax on a regular basis and should have some input on what the projects will be.

While the tax won't replace the hundreds of thousands of dollars in lost state aid over the past few years, the money could at least be used to do some of the projects that have been put on the back burner due to the LGA cuts.

"All this burden is going to the property taxes," Mayor Matt Brenk said of the LGA cuts.

At this point, it looks as though the city will lose $334,194 of its $690,636 in LGA for 2010. The current law could allow the city to levy back 100 percent of that cut, but the governor's proposal would limit that to 50 percent if it is passed.

With that said, and not knowing exactly how much the levy limit will be, city staff asked the council for direction on how much to levy and how much needs to be made in cuts to the budget.

Those cuts will need to be implemented in April because it is much easier than trying to make up for the cuts in June or July.

The city will be setting dates for meetings to discuss cuts, but the Finance Committee advised staff to plan to levy back 50 percent of the lost LGA and find the remainder to cut from the budget.

"There are not a lot of easy thing to cut," Louiseau said, adding that this will affect the police, fire, administration and public works. The cuts will be permanent because the cuts to LGA will likely be permanent as well.

"You need to look at it as a permanent decrease" City Finance Officer Lou Guzek said. Regardless of who the new governor will be, he added, "I'll be very surprised if we get that whole $690,636."

In two to five years, LGA will likely be zero for Detroit Lakes.

Alderman GL Tucker said that when the city decides and votes on the cuts, it has to stick with it. After the calls and pressure over the warming house being proposed to be cut this year, the city reconsidered and found the $3,000 to keep it open. This time with the cuts, he said, there will likely be more phone calls.

"The pet projects have got to go," he said.

In order to recoup at least half of the lost $334,000, the city will need to increase property taxes to residential and commercial residents.

For the city to raise $100,000, the owner of a $100,000 house in Detroit Lakes would have to pay an additional $10.30 a year in taxes.

The owner of a $150,000 commercial property would pay an additional $23.18.

The owner of a $500,000 commercial building would pay another $95 a year.

The three largest commercial property taxpayers in Detroit Lakes are Menards, which would pay an extra $2,335; Walmart, which would pay another $1,553; and BTD, which would pay an additional $1,458.


The Detroit Lakes Tribune and the Echo Press are owned by Forum Communications Company.