Common Currency: Park Rapids, as a tourist destination, is a candidate for a local option sales tax

I guess I have an unusual hobby. Economics, public finance and examples of good policy choices that actually work are something I get excited about. I know it's weird; and mostly boring. I can make anyone look good at a party by comparison. But h...

Alan Zemek
Alan Zemek

I guess I have an unusual hobby. Economics, public finance and examples of good policy choices that actually work are something I get excited about. I know it's weird; and mostly boring. I can make anyone look good at a party by comparison. But here is something that is worth talking about:

An unusual thing happened at the Park Rapids City Council meeting a couple weeks ago. The city's financial advisors reported that the four million dollar bond sale for the downtown reconstruction project received an A+ credit rating based on the city's strength as a regional hub of economic activity, adequate financial reserves, and the city's relatively conservative utilization of its net tax capacity.

Wow! This is just catnip for a finance guy like me.

This means the taxpayers and the property owners who will ultimately pay off these bonds through special assessments and the general levy will save tens of thousands of dollars over the next 20 years through lower interest payments. And this is just a bonus on top of the hundreds of thousands of dollars in cost savings already realized by the most competitive construction bidding environment in modern memory.

The city could not have planned it better if they had tried. The bids came in low, the interest rate on the bonds is dirt cheap, and the region will get an economic shot in the arm with badly needed jobs in the construction trades.


And to be fair, the city and a lot of other folks interested in economic development and public policy have been working on this project for more than the last three years. So it wasn't just luck. It proves the adage: "Fortune favors the prepared."

This kind of stuff is exciting to me, because it is a perfect example of how strategic use of debt and borrowed money can achieve important public policy objectives. And as far as stimulus spending goes, it doesn't get more basic than public health. Clean water and a sewer system that works is about as essential as it gets.

All of this is good news for the taxpayers, but there is more here than meets the eye. I generally try to steer away from any discussion of economics that revolves around the issue of "fairness," because economics generally is concerned with analytical tools that can produce measurable results.

"Fairness" is a stickier problem. After all, what is "fair," and how do you know it when you get there? I am pretty sure there is not an equation for that yet.

So here's a bold assertion for you: The property tax system in Park Rapids is fundamentally unfair. The City of Park Rapids is a regional hub that by virtue of geography must provide public services and benefits to an economic base that extends far beyond the physical boundaries of the city limits.

Example: The entire region benefits from the city- owned airport, and no doubt about it, it is a great asset. But it also operates at a loss every year, and that operating loss comes right out of the city budget, paid for by the city's taxpayers, even though most of the benefit goes outside the city limits.

However, rather than whine about "fairness" which is ultimately a losing argument, there is a perfect policy response that is an elegant solution for just these circumstances. And I just love public policy that makes economic sense:

Rather than bemoan the constraints of a property tax system that overburdens business and property owners in the city, Park Rapids should take advantage of its strength as a tourist destination and regional hub of economic activity and lobby the state Legislature for a local option sales tax.


The City of Park Rapids should play this trump card, and keep the engine of economic development going in Park Rapids far beyond just the reconstruction of the downtown infrastructure.

A local option sales tax would provide a secure source of revenue paid for and funded almost entirely by tourists and visitors. Dedicated to economic development, these funds would create a virtuous cycle of local improvements that would ultimately keep the tourists coming back and spending more money.

As I write in my book, debt, borrowed money, public spending and policy choices are the essence of self-government and self- determination, and the economic consequences of public policy choices actually does matter.

Let's keep the momentum going and use good public policy tools to revitalize Park Rapids.

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.generation busted. com.

What To Read Next
Get Local