Local Option Sales Tax
From a legislative perspective, we are drafting two different bills for a Local Option Sales Tax (LOST) in House District 19B. One for the City of Owatonna for a proposed community center and one for Waseca County for a new Judicial Center. As you know, this is a multi-step process that includes each voter.
First, the elected convening authority must pass a resolution requesting a local option sales tax. In this case, the Owatonna City Council and the Waseca County Commissioners each passed a resolution supporting a request for approval for a local option sales tax from the legislature. Next, we draft a Senate and a House version of the bill. Senator Jasinski and I are in the process of getting our bills passed through the revisors office, signed, and calendared on our separate tax committee schedules. If passed by the committee, the bills will make their way onto the House and Senate floor for a vote. If one or both bills pass, the respective City of Owatonna and the Waseca County governments will place these options on ballot in November 2026 for the voters to decide if they approve a local option sales tax.
Here’s an example of some of the questions I receive concerning the local option sales tax.
Why does the legislature need to approve a local sales tax? Although the tax is collected locally, it is still a State of Minnesota tax. Thus, the legislature, as the overall taxing authority, gives local government entities permission to use this tool for a local project.
Why can’t the City of Owatonna or Waseca County use state bonding funds for these projects? As a member of the House Capital Investment committee, I can assure you that the backlog for state bonding funds is very long and many of the essential projects fall into two categories: drinking water and clean water. In fact, the prioritized list published by the State of Minnesota lists $4.1B in validated drinking water and clean water projects. Since water is fundamental to life, we are focused on these critical infrastructure priorities first. Second, we are not assured of a bonding bill in 2026. Currently, we need to find $180M in funds for debt servicing to unlock $1.2B in Bonding funds. Third, if we can address the debt servicing issue, we must address Governor Walz’s wish list for bonding. Currently, his list stands at $907M in total capital investments. The debt will be split between $700M in general obligation bonds and $207M in other sources like the general fund cash account. Am I concerned that the governor pet projects receive the bulk of the funds available? Absolutely. As members of the Capital Investment committee will be negotiating this number down. However, we need to make sure Governor Walz does not veto the bonding bill as it is always the last bill to be passed during a normal session.
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