Minot’s second penny of sales tax would continue for many more years under an extension given preliminary approval by the Minot City Council on first reading

Monday.

The tax expires next year unless extended. Currently, 40% of the tax goes to the Northwest Area Water Supply project. The remainder is dedicated 24% to infrastructure, 18% to property tax relief and 18% to community facilities. The community facilities money is being redirected to flood protection. The tax generates about $10 million a year.

The tax was designated for NAWS until 2011, when it was believed enough money had been collected for the water project to then redirect the tax to other uses, with the stipulation that NAWS would receive funds again if more money is needed.

The change was approved by the council, subject to approval by the voters, in 2011. Voters approved the sales tax on June 14, 2011.

Finance Director David Lakefield explained the council sent the sales tax measure to voters, even though not required to do so, because of the redirection of funds and creation of a community facilities fund. NAWS eventually did need more money to reach completion and is expected to continue to require additional funds for another three to four years.

If renewed, the tax would extend until 2084, or until all debt obligations funded by the tax are paid.

“A portion of this sales tax funds flood control. If we’re going to issue bonds to pay for that flood control, we can’t have the sales tax expiring during the life of those bonds,” Lakefield said. “It would be less attractive to the bond holders if we were to have that sales tax expire 10 years into a 40-year bond. So, on the recommendation of our bond counsel, we’ve added some language in there as far as the termination clause to cover any outstanding debt that we might have in relation to those projects.”

Council member Shannon Straight said once NAWS is fully funded, voters might want a say in where future dollars go.

“It would be my hope that when we get to that point down the road, that folks will keep that in mind and also enter their voice into that conversation,” he said.

“I like what Alderman Straight suggested, which is let’s keep this moving but be willing to have the conversation about potential adjustments to make sure that this tool is being used to the degree that it’s meeting the needs of our community. And I think that needs to be sort of an ongoing or regularly revisited topic,” council member Josh Wolsky said.

Wolsky also asked to withhold second and final reading on the ordinance until a new council is officially seated following the June 9 election.

Lakefield said the city is working to resolve a discrepancy over when the existing tax expires and when a renewed tax would begin. City ordinance lists the effective date as June 14, 2011, indicating expiration in June 2021. However, the State Tax Department, which administers the tax, lists Oct. 1, 2011, as the effective date because implementation must be 90 days before the first day of a new quarter. The state considers the sunset date to be Sept. 30, 2021.