After more than 11 years of collecting sales taxes for the Northwest Area Water Supply project, the City of Minot is nearing the time when it no longer needs the tax. The 1 percent sales tax will cease, possibly as soon as the end of this year, unless voters decide they want to continue it for other uses.
Voters will hand down their verdict June 14. That's the date of a special election to determine whether residents want to shift the tax to a combination of property-tax relief, infrastructure development and support for community facilities.
The plan to continue the tax came from a group of city residents whose spokesmen were former mayor Orlin Backes, former city manager Bob Schempp and former city alderman Dean Somerville. Members of the group, now called Citizens for Property Tax Relief, have been speaking to service clubs and buying advertisements to educate the public about the merits of continuing the tax.
Jill Schramm/MDN • Opponents of Minot’s Measure 2 advertise their position on a billboard on Burdick Expressway West near Broadway.
Jill Schramm/MDN • The paving of 13th Street Southeast south of 16th Avenue, which was a mudhole May 27, is one of the many projects on the city’s infrastructure improvements program. The street is located in a growing section of the city.
The committee has sought to assure people that NAWS won't be harmed if the tax is re-directed.
"There's nothing we are doing here to put NAWS in jeopardy. NAWS is our priority," said group chairman Dean Frantsvog, Minot City Council president. "We are committed to finishing the project."
The city finance director, in conversation with the State Water Commission, has determined that the city will have enough money to finish paying the local share of NAWS once the sales tax account reaches a balance of $45 million. That could happen by the end of the year. Once it happens, the city will suspend the NAWS tax as directed in the ordinance approved by voters in 1999.
Don't forget Measure 1
Passage of a Measure 2 creating a new use for the NAWS tax hinges on more than just a majority vote June 14. It also hinges on voters passing Measure 1.
Measure 1 on the ballot adds language to the Minot's home-rule charter to comply with a 2005 state law. That law states that local governments cannot levy a sales tax unless their home-rule charters specifically grant levying authority. Cities have not needed this specific language prior to 2005. Minot's charter must be updated to provide the taxing authority if any new sales tax is to be enacted. Existing sales taxes are not affected by passage or defeat of Measure 1.
The question regarding the change in the NAWS tax is contained in Measure 2.
By suspending rather than eliminating the tax, the city can re-instate the tax if more money is needed in the future. Frantsvog said the city would know in advance of incurring costs whether more money is needed so it can re-instate the tax and generate money to keep the project on schedule.
If voters elect to maintain tax collections for other purposes while the NAWS tax is suspended, those collections would continue only as long as NAWS doesn't need the money. Should NAWS need more revenue, the proposed ordinance on the ballot states that other uses would be suspended or take a proportionately lesser share.
The ballot measure also has no effect on the existing NAWS account. The committee stresses that the money will remain in the account to earn interest or be spent to cover the local share of costs for the NAWS project.
Opposition to the measure is led by the Ward County Farm Bureau and Ward County Farmers Union. The two farm groups formed NAWS Only No New Tax to lobby to defeat the measure. The group has two billboards in Minot. It also has been advertising in free publications offered in town and reports that more media advertising will occur as the election nears. Representatives may be speaking to service clubs.
A desire to see the tax continue for NAWS is part of their motivation.
"I don't think anyone really knows for sure what the final cost for the NAWS project will be until the judge makes a ruling on the lawsuit," said Bob Finken, Douglas, president of the Farmers Union, referring to a federal court case brought by Manitoba against the project. "Plus, we would like to see NAWS go to more communities."
The farm groups also consider the sales tax to be taxation without representation.
"It just goes to benefit the citizens of Minot, even though it's reported that a majority of the tax income comes from outside the city of Minot," Finken said.
Jim Lee of Max, president of the Farm Bureau, said non-residents of Minot pay 55 to 58 percent of the city sales tax so he prefers to see the tax spent on projects that benefit the region. NAWS benefits the region, as did the All Seasons Arena expansion project, which received the sales tax proceeds before NAWS.
"We feel it's a little unfair for Minot to want to take our tax dollars and use it really for their benefit," Lee said. "They want to stick their hands in our pocket to solve their problems."
Citizens for Property Tax Relief notes that Minot has spent millions of dollars from its other 1 percent sales tax on projects in neighboring towns.
"We have always been huge supporters of our outlying communities," Frantsvog said.
Minot also supports the rural area through property taxes that residents pay to the county, said Ward County Commissioner Bruce Christianson of Minot, a member of the citizens committee. Seventy-three percent of the money for the county's farm-to-market road system comes from Minot's property-tax base, he said.
Frantsvog said it is appropriate that non-residents who use Minot's roads, water and sewer and other services help pay for them.
"To put the burden of our city services solely on the property owners isn't right," he said.
Bob Schempp, chairman of the NAWS Advisory Committee, said Minot needs support from around the region to remain a service center. Everyone who benefits from having that service center should help maintain and improve it, he said.
Lee noted that rural residents already support Minot's road system through the gas tax. He estimates he will pay as much as $2,000 over the 10 years of the proposed tax. That is money he could spend on needed infrastructure improvements in his own rural area, he said.
Lee questions the importance of the sales tax in helping the city council lower property taxes.
"They do not need the sales tax to do that. They can do that by spending less on what they do," he said.
If voters approve the tax change, it would not take effect until the NAWS tax is suspended. Tax income then would shift, with 40 percent going toward infrastructure projects such as street repairs, airport improvements, extending water and sewer lines in growth areas, enlarging the city lagoon or expanding the landfill, which serves communities in six counties.
The city has identified $122 million in infrastructure projects required in the next few years.
Four large water and sewer projects together total more than $10 million. To place the full cost on water and sewer bills would require a 7 percent increase that would remain in place for 20 years, according to city information provided by Citizens for Property Tax Relief.
Thirty percent of the proposed sales tax would go to each property-tax relief and community facilities. Facilities supported by the city in the past included the All Seasons Arena, Municipal Auditorium, Minot State University and YMCA.
The property-tax relief would amount to a 20.3 percent reduction in the city's share of a Minot homeowner's property-tax bill. The relief calculates to about $100 a year for every $100,000 of assessed valuation of a home.
The 1 percent sales tax currently generates $8.6 million a year. Assuming no increase in annual revenue if the tax continues, that's $34.4 million for infrastructure needs, $25.8 million for property-tax relief and $25.8 million for community facilities over 10 years.
The tax collections would be on top of an existing 1 percent sales tax that gives 50 percent to a capital improvements account funding infrastructure and facility needs and 10 percent to property-tax relief. The other 40 percent goes to economic development.
- 40 percent goes to infrastructure. Minot's infrastructure needs total $122 million in the next five to 10 years. Projects include sewer lift stations, landfill and lagoon expansion and street repairs.
- 30 percent goes to property-tax relief, providing homeowners with a break of $100 a year for every $100,000 of assessed value.
- 30 percent goes to upgrade, remodel and construct community facilities. A public hearing must be held before the city can approve spending. Facilities would include improvements for conventions, recreation, law enforcement, fire protection, airport or landfill.
- Raises about $86 million over the 10-year life of the tax.
Voting early is an option
Polls will be open in Minot's special election June 14 from 7 a.m. to 7 p.m. in Minot Municipal Auditorium.
Early voting will be held at the Ex-Servicemen's Room, Ward County Courthouse, this week from Monday through Friday, noon to 6 p.m.
Voters must show photo identification with a current address, produce a utility bill or be willing to sign a voter affidavit. To be eligible to vote, a person must be at least 18 years old, be a North Dakota resident and have lived in the city of Minot for at least 30 days preceding the election.
Absentee ballots continue to be available from the Ward County Auditor, P.O. Box 5005, Minot, N.D. 58702. Voters must fill out and submit an application provided by the office. The office then will provide a ballot that must be returned with a postmark dated no later than June 13.
Voters not able to personally obtain a ballot may authorize an agent to obtain one for them by filling out absentee ballot application-agent authorization forms. A person is allowed to be an agent for up to three other people.