ABC 6 Investigates The Money Trail: Rochester City Sales Tax

Created: 05/07/2014 7:16 AM

(ABC 6 NEWS) - Our investigation following the money trail continues. One of the many taxes we pay can be found on our receipts after a shopping trip. It's the sales tax, and in Rochester, the amount you pay is a little higher than other places.

Reporter: "So you paid 98 cents in sales tax today?" Shopper: "Yes, 98 cents." Reporter: "You don't think that's too much for what you bought today?" Shopper: "No, that's not bad."

Sales tax. It's something we pay on almost everything we buy; toys for our kids, cleaning supplies for our homes, and even new cars. In Minnesota, the going rate for most things is 6.875%. But if you shop in Rochester, you're paying an extra half a percent, for the Rochester City Sales Tax.

Shopper: "I don't mind it. It doesn't bother me. As long as its going toward something good, its ok."

So where is that money going? First, a little history lesson. Rochester first established a 1% sales tax back in 1983. Its original purpose was flood control.

"Rochester had a history of having two major floods a decade and there were studies for flood control that went back to the 1950s, where they were trying to find a way to solve the flooding problem in Rochester," said Gary Neumann, the Rochester Assistant City Administrator.

Each time the tax expired, Rochester citizens voted to extend it. The percentage actually went down, from one percent to half a percent. Over the years, the money has funded all kinds of projects.

The list includes everything from a new city hall, to water quality improvements in the 90's, one of them on Valley High Drive, and transportation projects back in 2005, including improvements to Highway 52.

In 2012 voters once again approved to extend the tax. It was the biggest sales tax package in Rochester history, with projects totaling $139.5 million.

And where is that money going? The biggest chunk, $38 million, is going towards Rochester's future. That includes money for Destination Medical Center, downtown infrastructure, and economic development. There's $30 million for transportation projects within the city of Rochester. Some of that money you can already see in play. For example, the Highway 52 and 65th St. Interchange. Higher education is also in there. $26.5 million will help RCTC and UMR with new projects and site improvements.

"The decision, without the sales tax, would be you don't do the projects, or you pay for them with property taxes because the city doesn't have any other funding sources to use. Many of the projects would not have happened without the sales tax, " said Neumann.

The tax is in effect for as long as it takes to pay for all the authorized projects, city leaders expect it to take about 15 years.

As far as the future of the city sales tax, that's where things are still up in the air. As you can imagine, when the tax was up for a vote in 2012, not everyone was on board.

"This seems to be a permanent tax," said former lawmaker Fran Bradley.

Here's the curve ball in all of this. Until now, the city had to vote to extend the tax. But the 2012 vote happened before Destination Medical Center legislation was passed by state lawmakers. That legislation included authorization for the city to extend the tax without a vote. It also gives the same authority to Olmsted County. The county already took advantage of that. On January 1st of this year, a quarter of a percent tax was added for the county. But city leaders say they're still not sure when or if they'll extend their portion.