GARRISON, Minn. – The Garrison, Kathio, West Mille Lacs Lake Sanitary District board approved Resolution 6-2016 at its monthly meeting Thursday.
The resolution is the first step in gaining voter approval for a local use sales tax to be used for repayment of the sanitary district’s loans that originally funded construction of the wastewater collection system and costs associated with system maintenance.
The resolution received unanimous support by the board of managers requesting that Mille Lacs and Crow Wing County election officials place the question of a 1 percent local use sales tax on the Nov. 8 general election ballot for voters of the sanitary district to decide.
Minnesota Statute 297A.99 requires that this type of local use sales taxes be approved by voters as the first step in implementing the sales tax. If approved then it will then require legislative action followed by administrative action by the Minnesota Department of Revenue to add the special sales tax to the current state sales tax collected within the district. The amount of revenue raised by the special sales tax is estimated to be in the range $80,000 to $100,000, but the actual amount if dependent on the economic activity within the district that generates the sales tax, which will vary from year to year.
“The board of directors have been working very hard to improve the financial position of the district.” Rep. Dale Lueck, R-Aitkin, said. “They have already refinanced a part of the original construction loans and are in the process of doing the same with the remaining construction loans, as well as carefully managing system operating costs.”
The district is facing a significant financial challenge as the system’s financial model was originally assumed to serve well over a thousand customers. However, due to system construction costs the system has only been able to reach just under 600 customers. Lueck said the inability to reach additional customers has resulted in significant increases in monthly service rates to current customers and increases in the annual property tax assessed against all properties within the sanitary district.
“In addition to adopting resolution 6-2016, the board also approved the 2017 district operating budget.” Lueck said. “The board did not increase the current $380,000 property tax level for 2017, however the decrease in special assessment revenue for 2017 is reflected in the budget. As customers pay off the initial special assessments the district faces a sharp reduction in annual assessment revenue over the next couple of years.”
The property tax levy and special assessment revenue must be used for debt service, but as the assessment revenue continues to drop, it will be necessary to raise service rates and/or continue to raise the levy, Lueck said. He added that, if the voters decide to approve implementing a special use sales tax, it would provide another revenue source to help slow future increases in the service rates or the annual levy.
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