Sales tax increase might fund Civic Center and VFW Arena upgrades

Brenda Halvorson
Reporter@page1publications.com

Truth in Taxation meeting is at 6 p.m., Tuesday, Dec. 10

Taxes – specifically sales taxes and property taxes – topped the discussion at the East Grand Forks city council work session Nov. 26.

Is adding one or two percent to sales taxes collected in East Grand Forks the way to raise funds for the proposed Civic Center expansion and the VFW Arena multi-purpose conversion?

Karla Anderson, city finance director, and Reid Huttunen, parks and recreation superintendent, presented information on potential sales tax revenue projects, the financial projections and the process to start a local sales tax. They were seeking direction from the council for the next steps because of a tight timeline.

A local sales tax must be approved by the state legislature. The resolution and supporting documents must be submitted to the house and senate tax committee chairs by Jan. 31, 2020. Once it’s approved the city can present the question to voters at the November 2020 general election.

Some council members were concerned about having enough details to inform the community and get public input. Anderson and Huttunen reported having informal conversations with the Blue Line Club, the figure skating club and a few other entities, but wanted to make sure the council wanted to proceed before scheduling a public meeting.

Huttunen said if the Jan. 31, 2020, deadline is missed, the whole process would be pushed back to the 2022 general election. Anderson added that would be for 2023 construction season. With inflation it would also increase the cost of the projects.

JLG Architects presented a feasibility study with preliminary drawings at the Nov. 12 work session. Council President Mark Olstad asked about fees to prepare more specific designs to present to the public. Huttunen said the architects and could have a proposal at the Dec. 10 work session. That would also include statistics on sales taxes such as those collected from residents versus visitors to the city.

Financial projections prepared by Bakertilly Municipal Advisors (formerly Springstead) based on one and two percent sales tax increases were also part of the council’s packet.

Council member Tim Riopelle noted that other funding sources could include naming rights and donations from groups and businesses that support the projects. “We can look at other sources to drive the cost down. We don’t know until we start,” he said.

Council member Marc DeMers was concerned that the proposal approved by the legislature had to be the exact project that would go on the ballot. Huttunen said if it was approved the city would have time to refine the designs and gather public input before it went to a vote.

Anderson added that she and Huttunen would do the legwork of meeting with businesses and organizations as well as determining the regional impact, which is one of the legislature’s requirements.

DeMers, Mayor Steve Gander and council member Dale Helms all expressed “sticker shock” at the costs, even though they generally supported the improvements and saw value to the city. DeMers suggested the cost of the Civic Center/VFW Arena project be split with one third coming from the city, one third from supporting organizations and one third possibly from naming rights.

City Attorney Ron Galstad asked to speak as a citizen of the city. He believes that a sales tax is the only way the projects would get done. He suggested doing the research and putting it to the people. If it’s not supported, then “you can pull the plug. You’ll never get there if you don’t present what you have to the legislature.”

Potential Sales Tax Revenue Projects
1) Civic Center Expansion and VFW Arena Multi-purpose conversion
     – Civic Center
          • Building expansion to include additional ice sheet
          • Replacement of ice plant and rink floor at current Civic Center
          • Improvement to climate control for dry floor activities
          • New locker rooms to serve both current Civic Center and new arena
          • Improvements to building accessibility and access
          • Improvements to parking lots
     – VFW Arena Multi-Purpose conversion
          • Transfer use of current ice surface to dryland facility with field turf and walking track
          • Multi-functional space for many indoor sports/activities
          • Improvements to building accessibility and access code
          • Improvement to exterior envelope and drainage
          • Improvement/redesign of parking lot
Projected Project Cost: $25 million

2) LaFave Park Master Plan
          • LaFave Park Improvements including replacement and addition of boat access ramp on Red River, park access road improvements, addition of walking/hiking trails and shore fishing sites. Improvements of critical “buffer” habitat to improve storm water runoff.
Projected Project Cost: $2.5 million

3) Greenway Trail improvement and maintenance fund
          • Establish and add further revenue to the Greenway Maintenance Fund, to ensure the proper funding is available for continued maintenance needs of the paved trails and multi-use paths. Allow funding for additional trails as the community grows further north and south.
Projected Project Cost: $130,000 per mile @ 13 Miles = $2 million

4) Stauss Park Baseball Field Improvements
          • Project ideas include turf infield on main field and complete replacement of Field 2; including installation of a turf on one field, new field lighting, dugouts, grandstand and team changing spaces.
     Projected Project Cost: $2.5 million

The total of all projects is estimated at $32 million at 2020 construction costs.

Anderson and Huttunen listed the assumptions used in their calculations:
          • Project #1 and #2 begin construction right away and bond for the projects
          • Wait to do construction of Project #3 and #4 (not any order)
          • Use 2.5 percent inflation rate on today’s construction cost

With those assumptions the total cost of all projects grew to $34 million for construction.

Property tax levy
Anderson presented a revenue and expenditure summary that showed actual figures for 2016, 2017 and 2018 along with budget figures for 2019 and 2020.

Although the city is proposing a five percent increase on the city’s portion of their property taxes next year, Anderson prepared a spreadsheet examining properties of varying values that showed the average increase will be one to three percent over last year’s tax.

The total preliminary levy is $5,442,241, a five percent increase over the 2019 levy of $5,183,086. Of this year’s proposed levy, $5,073,120 is for general operations.

The Truth in Taxation hearing for public input will be at 6 p.m., Tuesday, Dec. 10, with a final hearing, if needed, at 6 p.m., Tuesday, Dec. 17.

A full copy of the budget can be requested by calling 218-773-2483 or emailing City Clerk Megan Nelson at mnelson@egf.mn.

In other business the council:

          • Considered a change to the 2020-21 lease agreement with the East Grand Forks school district for use of the Civic Center for varsity hockey. The school district has requested a modification to the next arena lease to $150,000 from the current $100,000. In return, the city would lease the softball fields located between South Point and the middle school for $45,000. This would result in a net increase to the city of $5,000. The school district would like to make some improvements to the softball fields, however there are restrictions on how district funds may be used for capital improvements. The district is allowed to use lease revenue for capital improvements. DeMers questioned the intent to get around state guidelines. Galstad and City Administrator David Murphy both assured him that the city would not be breaking the law.

          • Considered an amendment to the Border Cities Tax Credit Agreement with Todd’s Trailers. The original agreement was for the construction of a new building and the addition of two jobs, but it covered only one parcel. A second parcel should have been included and so Paul Gorte, Economic Development Director, was requesting the amendment to add the second parcel. He noted that almost half a million dollars in improvements had been made to the property.

          • Considered the adoption of a policy governing the use of security cameras in city buildings. At present the city technology staff manages 15 cameras at the Campbell Library, 11 at city hall, three at Green Site, 17 at the police department and one at the VFW Arena. Corey Thompson, technology manager, reviewed a proposed policy. Galstad noted he was going to research a few issues, such as how long to retain recordings, who handles requests for information and policies on what can be released under Minnesota’s Data Practices Act. Olstad asked who pays for the time required to retrieve requested materials. Gander asked for transparency in the process and the costs, saying the complaints he’s heard in the past is that the “process is too tedious and the costs is prohibitive.” A resolution will be brought to a future meeting.

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