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COMMON CURRENCY: Local sales tax could be 'life boat'

Alan Zemek

"Think globally - Act locally" is commonly associated with the emergence of the environmental movement in late 1960s and early 1970s, and by the mid 1980s was widely adopted by educational institutions and multinational corporations as a buzz word with which to demonstrate their world understanding.

I have not heard the term used much in recent years, probably because it was over used and became a cliché. But it might be time for a comeback.

The term "Think global - Act local" actually belongs to Patrick Geddes, author of "Cities In Evolution," who wrote the following about city planning: "...each valid scheme should and must embody the full utilization of its local and regional conditions, and be the expression of local and regional personality". "....In social and civic terms, our life and progress involve the uplift of people with work and place, as well as of place and work with people."

Sounds progressive and modern, doesn't it? "Cities In Evolution" was published in 1915.

Here's the point: plans to solve Minnesota's fiscal crisis and balance the state budget are almost certainly going to include eliminating or drastically reducing Local Government Aid payments to local governments.

LGA makes up a significant portion of the operating revenues of cities all over the state. In recent years, the risk of losing LGA to state budget cuts has put the city of Park Rapids on a budgetary yo-yo, cut, restored, cut again.

(The formal term for cutting an LGA payment that was promised is "unallotted." As in "sorry, but your payment has been unallotted.")

For a city of about 3,500 people, this would be a devastating blow. The consequences are either higher local property taxes or cuts in city services.

There is another option. If balancing the state budget requires reducing or eliminating LGA payments to cities like Park Rapids, then Park Rapids should be allowed to enact a local sales tax to fund essential services and promote economic development.

Why a local city sales tax? Because Park Rapids by virtue of its geography provides essential public services to a much larger regional community that extends far beyond the city limits.

Why should property owners inside the city limits of Park Rapids pay the cost of providing services that are used outside the city limits by tourists and seasonal property owners who use the city's resources, yet pay nothing for them?

Sales taxes are exempt on items such as food and clothing, so the impact would fall most exactly where it should: Not on the city's residents, many of whom live on fixed incomes, but on the discretionary purchases made by tourists and visitors who use the area for recreation.

Most tourists expect to pay local sales taxes, and most tourism based economies use the local sales tax as a way to pay for the services that keeps the tourists coming back.

Currently 21 cities in Minnesota have a local option sales tax that provides revenue for community services, funds economic development and pays for investments in essential city infrastructure, like sewer and water systems.

Much of this column first appeared in the Enterprise as an editorial piece just about a year ago. I am repeating it today because two more Minnesota cities may soon join the list of cities that are funding public investment with a local option sales tax, Detroit Lakes and Grand Rapids.

Just last Friday, March 4the Detroit Lakes City Council held a special council meeting to authorize city staff to submit a request to the state legislature to enact a 1 percent local sales tax option.

The city of Grand Rapids is also requesting the authorization. It is estimated that a 1 percent local option sales tax in Detroit Lakes would raise $2 million in revenue.

The trade off is LGA payments from the state would be eliminated.

In years past Detroit Lakes received as much as $1.5 million in LGA. This year, Detroit Lakes is supposed to get $983,000. The city finance officer thinks it will actually be even less, as little as $550,000, because each year more and more of the scheduled LGA payment has been "unallotted."

Giving up what you aren't going to get anyway seems like a pretty good deal to me.

Think globally - Regardless of your politics, anyone who will honestly debate the sorry state of our public finances will admit that we can't tax our way to prosperity, and we can't cut our way to prosperity either. It is going to take some of both, a more efficient mix of the right taxes and the right spending cuts to get our house in order.

Act locally- Detroit Lakes and Grand Rapids are requesting authorization from the state Legislature for a local option sales tax as a way to reduce the increasing burden on local property taxes as LGA payments are cut every year.

If the state of Minnesota is going to throw us over the side, we had better make sure we have a life boat.

Alan J. Zemek is a Park Rapids area developer and author of "Generation Busted: How America Went Broke in the Age of Prosperity." You can follow his blog, or comment on this article on his website, www.genera tion