City sales tax extension option included with delayed tax bill
Final legislative decision will require a special session.
ROCHESTER — State approval to extend Rochester’s 0.5% local sales tax is in the tax bill waiting for final approval in the Minnesota Legislature.
“We’re just waiting to hear about a special session,” Rochester City Administrator Alison Zelms said.
While the agreement on the final tax bill was touted during the weekend, a final vote was delayed.
House Speaker Melissa Hortman, DFL-Brooklyn Park, said Friday that a final vote on the tax bill, which must originate in the House, would wait until several state spending bills were approved.
The required approvals didn’t happen by the session’s required end on Sunday, but Gov. Tim Walz said Monday he plans to call a special session once agreements are reached and bills, including the tax bill, can be passed.
Senate Tax Committee Chairwoman Carla Nelson said she’s hopeful the current tax bill remains unchanged as it waits for approval.
“You’re always concerned when you have a highly negotiated complex bill like the tax bill,” the Rochester Republican said of the agreement that includes a income tax cut to the state’s bottom tax bracket, with a rate reduction from 5.35 percent to 5.1 percent at the estimated cost of $277 million for the initial year, and the removal of the state's social security tax.
Rochester’s sales tax request seeks approval for $205 million, which would fund four proposed programs. They include:
- $50 million for street reconstruction projects
- $50 million to address housing needs
- $40 million for future work related to flood control and water quality
- $65 million to create an undefined regional community or recreational complex
Approval for the full housing request wasn’t part of the House version of the tax bill, but efforts to negotiate with the Senate version reinstated the potential program.
The compromise also includes the potential to add $10 million for Rochester Area Economic Development Inc. grants, with half the economic development funds used in Rochester and the remainder set aside for specified surrounding areas.
“The authorization is there, and it’s really flexible for the city,” Nelson said of the added potential use of sales tax revenue. “If the city chooses to do a sharing provision, they have the ability to do that.”
If the tax bill continues on its expected path toward approval as written, the sales tax approvals will lead to a public vote on Nov. 8, with Rochester residents being asked to approve each of the four spending areas. The order of approvals is defined by state statute, which has changed since the last sales tax authorization .
Rochester’s current city sales tax is expected to expire in 2024. It collects $12 million to $13 million a year.
If the requested extension is approved, it will extend the tax until the cost of any approved programs are paid.