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HomeMy WebLinkAbout04-28-2026 (Workshop - Local Sales Tax)HUTCHINSON CITY COUNCIL WORKSHOP LOCAL SALES TAX MINUTES TUESDAY, APRIL 28, 2026 - 4:00 PM CITY CENTER — COUNCIL CHAMBERS 1. Call to Order Mayor Forcier called the workshop to order at 4:00 p.m. Members present included Tim Burley, Pat May, Chad Czmowski, and Dave Sebesta. Others present were: Matt Jaunich, City Administrator and other city directors. LOCAL SALES TAX DISCUSSION 2. Local Sales Tax Matt Jaunich, City Administrator, presented before the Council. Mr. Jaunich noted that today's workshop is to discuss the details on the City's current local option sales tax. Mr. Jaunich noted that the current local option sales tax is dedicated solely to retiring the debt in the water and sewer funds which expires after 2026. Mr. Jaunich also reviewed other cities throughout the state with a local sales tax. Mr. Jaunich reminded the Council that the current local sales tax revenues must be dedicated exclusively to the payment of the construction and associated bonding costs related to the construction of the water treatment facility and renovating the wastewater treatment facility. The City must terminate the tax after the revenues raised are sufficient to fund the projects. Ending the tax can only occur on the last day of a calendar quarter. The City must notify the state Commissioner of Revenue at least 90 days before terminating the local sales tax. Any excess funds after the local sales tax has terminated may be used by the City for any purpose. Mr. Jaunich reviewed that almost $2 million is collected per year in local sales tax. Mr. Jaunich noted that the state moratorium on local sales taxes expired on May 31, 2025, and cities may now submit requests to the legislature during the 2026 session. No changes have been made to the previous local option sales tax process. Local option sales taxes can only be used for "regionally significant" capital projects. State law limits these projects to "a single building or structure, including associated infrastructure needed to safely access or use the building or structure; improvements within a single park or named recreation area; or a contiguous trail". In recent years, several of the requests were modified to exclude road and other infrastructure projects on the basis that those projects are not "regionally significant" and can be financed, at least in part, with other revenue sources. As of yesterday, 35 local and county bills have been introduced in the 2026 legislative session. During hearings, legislators have stressed that projects funded through local sales tax must provide regional value; illustrate clear, articulable need; and demonstrate why a local sales tax is the most effective way to raise funds. Mr. Jaunich reviewed the process a city must follow to renew a local sales tax. These steps include: 1.) adopt a resolution; 2.) submit the resolution and supporting materials to state tax committees; 3.) get legislative authorization; 4.) adopt a resolution; 5.) hold a referendum; 6.) pass an ordinance. Mr. Jaunich described these steps in more detail. Discussion was held on the timeframe on when the City may be ready to submit a resolution — January 2027? January 2028? Mr. Jaunich noted that up to five capital projects can be funded. A capital project is defined as a single building or structure, including associated infrastructure needed to safely access or use the building or structure; improvements within a single park or named recreation area or a contiguous trail. Part of the documentation that has to be provided for each project is an economic benefit to residents, businesses and visitors from outside the jurisdiction. Based on assumptions, a local sales tax could pay for a $30 million project. Mr. Jaunich then reviewed potential projects that staff have brainstormed. These projects include an expanded Rec Center/Senior Center; an expanded campground; an updated/expanded Burtch Arena; splash pad/trail head/flex space; Event Center/Senior Center; projects associated with Campbell and Otter Lakes improvements; pickleball courts. Another option is to do nothing and let the local sales tax expire. Mayor Forcier noted that an Event Center/Senior Center and Rec Center expansion would be his preference for a project. Council Member Czmowski agreed with Mayor Forcier and suggested touring the new facility recently constructed in Litchfield. Mr. Jaunich noted that with the ice arena needs perhaps the project can be looked at as a campus project. The consensus of the Council was to proceed with renewing the City's local sales tax and determine plausible projects such as a recreation campus focusing on updates to the rec center, senior center and ice arenas and perhaps a Crow River recreation area with an expanded campground and the costs of such projects. Staff will work with professional consultants to develop plans for consideration and associated costs. 3. Adjournment Motion by Czmowski, second by May, to adjourn the workshop at 5:10 p.m. Motion carried unanimously. ATTEST: Gary T. Forcier Mayor Matthew Jaunich City Administrator