Committee approves new plan for sales tax

A one-half percent city sales tax would go to pay for a flood control project under a proposal approved by the Minot City Council’s Finance and Improvements Committee Tuesday.

The money would come out of an existing tax that now is split with 50 percent going to capital improvements, 40 percent to economic development and 10 percent to property-tax relief.

The recommendation that goes to the council Monday provides 50 percent for flood control, 25 percent for capital improvements, 15 percent for economic development and 10 percent for property-tax relief after July 2014, when the current tax will sunset unless renewed.

Minot Area Development Corp. supported use of the tax for flood control but suggested economic development be cut to 20 percent. Based on 2011 sales tax collections of about $11 million, 20 percent would generate $2.2 million for economic development, or about the same as pre-boom revenues in 2005. The MAGIC Fund currently has a balance of about $5.5 million.

“MADC considers that in today’s environment, we can function as a city program with a sacrifice of 50 percent of our revenue and still provide a quality program,” MADC chairman Matt Kramer said.

However, the committee voted 4-3 for the deeper cut, trimming about $500,000 from the request. The 15 percent recommendation had been proposed by Mayor Curt Zimbelman, council president Jim Hatlelid and finance committee chairman Mark Jantzer.

Some council members were concerned about MADC’s effectiveness if money for the MAGIC Fund and MADC administration is cut to 15 percent. Others were concerned that the half of 1 percent being squeezed out for flood control might not be enough.

Cindy Hemphill, city finance director, presented information showing that over 30 years, a 0.5 percent tax would raise $230 million. That would be 28 percent of an $820 million flood protection project. The required local share is unknown at this time.

The idea of using city sales tax to pay for the project from Burlington to Velva, rather than just fund the city’s $530 million project, drew a few sparks. But that conversation was postponed for another day.

MADC did not base its request on 2013 sales tax collections of more than $13 million, thinking the figure might be skewed by post-flood rebuilding. But Kramer said MADC will work to grow the economy to maintain and increase that level of tax collection, generating the money the city needs to support the allocations.