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Local governments in Minnesota use the local option sales tax to fund capital projects such as public buildings, libraries, parks, and other amenities.
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A local option sales tax (L.O.S.T.) is simply a sales tax that is collected within the geographic boundaries of a city or county. Local option sales taxes apply to the same items and services as the general state sales tax. Items exempt from regular state sales tax are also exempt from the local option sales tax including many essential items such as groceries, prescription and over-the-counter medications, baby products and clothing. Complete list of non-taxable items from Minnesota Department of Revenue
Yes and no. Cities can explore creating and collecting L.O.S.T. but the process to do so is defined by state law. Before L.O.S.T. can be collected, it must receive approval from the state legislature, the local governing body (i.e. the City Council or County Board of Commissioners), AND the voters via a ballot referendum.
Oakdale’s City Council has identified two large-scale building projects and identified the local option sales tax as the preferred funding source. Oakdale’s Police and Public Works facilities – built in 1992 and 1985, respectively – were constructed when Oakdale had a smaller population and the need for services was vastly different. These facilities need to be updated and/or replaced to meet the needs of a growing community.
Yes, the City Council considered several options, including property taxes, and concluded L.O.S.T. made the most sense for Oakdale residents because the cost would be born not only among Oakdale residents. The benefit of the new Police Department and Public Works facilities and the services these departments provide will be felt by not only Oakdale residents but by anyone that works, shops, or visits the City of Oakdale. In an independent study conducted by the University of Minnesota Extension office that analyzed general state sales tax collected in Oakdale, the data showed that 50 percent of all sales tax collected comes from non-Oakdale residents.
The proposed L.O.S.T would be one-half of one percent (0.5%), or $.50 on every $100 of taxable purchases. State law requires the tax to automatically sunset once funds required for the projects are collected, or 25 years per approved legislation, whichever occurs first.
Yes, on August 8, 2022, the City Council voted unanimously to put the local option sales tax to voters on the November 8, 2022 ballot.
Voters will have two questions to respond either YES or NO to for the local option sales tax. The ballot language is as follows for both questions:
Question 1: Considering Sales Tax for Construction of New Public Works Facility
Shall the City of Oakdale be authorized to impose a temporary sales and use tax to finance all or a portion of the cost of constructing a new Public Works Facility, in an amount equal to one-half of one percent (0.5%) for a period of twenty-five (25) years or until $22,000,000 plus the costs of collecting and administering the tax and the costs of issuing any bonds including interest is collected, provided that such tax shall terminate sooner if the City Council determines that all such costs have been paid?
The total sales and use tax approved by voters at this election to finance this project and any other project will not exceed one-half of one percent (0.5%).
Question 2: Considering Sales Tax for Expansion and Remodel of Police Facility
Shall the City of Oakdale be authorized to impose a temporary sales and use tax to finance all or a portion of the cost of construction and rehabilitation and associated building costs of the Oakdale Police Department Facility, in an amount equal to one-half of one percent (0.5%) for a period of twenty-five (25) years or until $15,000,000 plus the costs of collecting and administering the tax and the costs of issuing any bonds including interest is collected, provided that such tax shall terminate sooner if the City Council determines that all such costs have been paid?
This is already done for Washington County’s Transit sales and use tax, which is at the same percentage as the city’s proposal of one-half of one percent (0.5%). Yes, L.O.S.T. would require two additional lines of reporting.
If the voters do not support the local option sales tax, it will be up to the City Council to determine how to fund the two proposed projects. Before putting the local option sales tax before voters, the City Council considered several funding options including property tax increases. The City Council felt a local option sales tax would be fairest because the burden would be shared by residents and non-residents.