Answer Man: One man's estimate for DMC taxes
Dear Answer Man, let's say all the new local taxes to pay for the local share of Destination Medical Center are enacted. What would the annual impact be on the average household in Rochester?
I love this question —total guesswork, but people will put up with a little imprecision to get a vague idea of the truth.
If you're not interested in DMC and taxes, however, I'm afraid you'll need to come back tomorrow.
First, there's the half-cent local option sales tax, which Rochester voters approved last year. There's $20 million in that for DMC, about one-seventh of the total money to be raised by the special tax. The tax will generate about $140 million in about 15 years, according to projections, so let's say it generates $10 million per year. One-seventh of $10 million is $1.4 million.
Sales tax promoters such as the Rochester Area Chamber of Commerce said that about half of the city's sales tax revenue comes from people who live outside the city limits, though many of those people also work here. Nonetheless, accepting that as true, we'll chop that $1.4 million in half, to roughly $700,000.
The population of Rochester last year was estimated at 106,000, and about a quarter of the people here are age 18 and younger. We'll just count those older than 18 for this estimate, though I can testify to the fact that teenagers spend money. So let's say about 75,000 sales-tax paying people live in Rochester. Doing the math, I'm going to say that the average adult in Rochester pays about $9 per year in special sales tax for DMC.
(You're welcome to challenge me on this, by the way. No one else has worked up these numbers, so it's a perilous enterprise.)
OK, on to the other taxes that are now in the city's toolbox. The city was given the OK to raise its lodging tax, which won't affect residents, though it'll certainly have an effect on hotels and travelers. It's currently at 4 percent.
The city also can impose a food and beverage tax, which is currently at zippo percent, as in nada, goose egg, squat. The food and beverage tax in Minneapolis is 3 percent, but St. Paul and Duluth are also at goose egg. St. Cloud, however, has a 1 percent food and beverage tax, so let's assume Rochester tries that.
The federal Labor Department estimates that the average consumer spends about $2,500 per year on dining out. That seems high to me, but for today's guesswork, it's fine. One percent of that is $25.
Finally, the city can add an entertainment tax, applied to tickets and such, but for today's exercise, we'll ignore it.
So far, we're at $34 per year for the city taxes for DMC. Still with me?
On to the county, which needs to scrape up $40 million. The Legislature gave the OK for two new county tax options — a 0.25-percent sales tax and what's called a wheelage tax. The latter can run up to $10 per vehicle-owning resident.
Let's assume the county takes both bites of the apple. Maybe they don't need the full amount, but we need to start somewhere. The sales tax would cost that hypothetical Rochester adult about $65 per year, based on my earlier calculations. With a $10 wheelage tax, assuming your name is on a vehicle title, the total would be $75 annually.
Total it up, city and county, and DMC might cost the average Rochester resident about $109 per year in direct taxes of this kind.
Go ahead — cook up your own numbers and we'll compare.