Financing Plan
County residents will help decide how to pay for this investment
The total cost of the new law enforcement center and government center will be about $41.2 million, plus interest and bond issuance costs. The county developed a financing plan to ensure that the projects will meet the needs of our community while minimizing the tax impact on Jackson County residents.
The county has been carefully preparing, putting aside money to build a cash reserve of $10.9 million that will cover about 25 percent of the cost of the project. This reserve will serve as the down payment for moving forward with this investment.
The remaining construction costs will require selling bonds, which is similar to a home mortgage. The county will use these bonds to finance $30.3 million, plus interest and bond issuance costs, over a 25-year period. The county would repay the bonds through the following resources:
Existing tax revenue: About two-thirds of the bond payments would be made by using current wind production and property taxes.
Local sales tax: To cover the final portion of the bond payments, the county received permission from the state legislature to propose a 1% local sales tax to local voters that would raise $17.5 million over 25 years.
While a property tax increase could be used instead of a local sales tax, the county board concluded that Jackson County residents should decide whether to use a local sales tax in the same way other Minnesota counties have done, including Beltrami, Itasca and Carlton.
As part of the November 5 general election, Jackson County voters will decide whether to approve a 1% local sales tax to help finance the new law enforcement center and government center. If approved, one-third of the bonds will be repaid with the new sales tax.
Nearby towns where Jackson County residents shop already charge a local sales tax to pay for public investments. These include Worthington, Fairmont and Mankato in Minnesota; Spirit Lake, Estherville and Spencer in Iowa; and Sioux Falls, SD.
Funding Breakdown
Jackson County residents would pay approximately $4 per month, or $48 per year, for the local sales tax, according to the University of Minnesota.
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Why a Local Sales Tax?
The county board is proposing a local sales tax for two reasons. First, a sales tax allows exemptions on purchases for basic needs. Second, nonresidents would contribute a portion of the cost. If approved, nonresident spending would contribute about $5.5 million in sales tax revenue for the project, according to a study by the University of Minnesota Extension Center.
If the sales tax is rejected, a county property tax increase of approximately 5% would be used to raise the remaining revenue to repay the bonds.
This is not a permanent tax. Collections from the local sales tax would be used to make bond payments to finance the county’s investment for up to 25 years or when the bonds used to pay for the project have been repaid – whichever happens first.
By law, collections from the local sales tax can only be used for the law enforcement center and government center projects. The sales tax rate nor the amount collected can be changed without approval by the State Legislature and local voters.
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How the Sales Tax Works
If approved by Jackson County voters, the local 1% sales tax will be applied the same way as the state sales tax. The 1% sales tax adds one penny for every $1 spent. In other words, 10 cents will be added to a $10 purchase or 100 cents for a $100 purchase.
Exemptions to the local sales tax include the same as the state sales tax, including agricultural items, farm equipment, motor vehicles, clothing, groceries, baby products and feminine hygiene products. The Minnesota Department of Revenue provides a full list of nontaxable items, here.