Study details effect of sales tax for new Moorhead library, community center

The tax would cost the average resident about $2 a month, or $25 a year.

A study has been filed on how a half percent sales tax increase would effect Moorhead residents and businesses.
WDAY file photo

MOORHEAD — A Moorhead resident would pay on average about $2 more a month — about $25 a year — if voters approve a half-cent sales tax increase this fall for a new regional library and community center.

That was one of the main findings in a study commissioned by the city on what effect the sales tax would have on residents and businesses for the facility with funding approved up to $31 million.

Ryan Peach of the University of Minnesota Extension Center for Community Vitality was supposed to give a full presentation on the study at Monday night's Moorhead City Council meeting, but had a scheduling conflict.

He will speak about his findings instead on April 11.

In the meantime, the study, which was done for $3,000, has been filed publicly and will be a part of two open houses on the library and community center proposal scheduled for April 5 and April 19 at the Moorhead Center Mall from 4 p.m. to 7 p.m.


Mayor Shelly Carlson said there will be formal presentations every half hour and that people can visit with those involved at several informational tables that will be set up.

Other main findings of the study show that if the issue passed:

  • An estimated 30% of sales taxes would be paid by nonresidents, totaling about $470,000 a year.
  • Studies of 11 Minnesota cities with a local option sales tax show no appreciable change in retail sales.
  • Fargo also has an additional local sales tax.
  • Moorhead's retail base has remained strong and steady for more than a decade and is expected to remain steady and stable.
  • In 2019, the total taxable sales in Moorhead were $319 million and if a half-percent sales tax was in effect, it would have raised $1.5 million. Taxable sales were estimated at about $225 million for city residents and $94 million for non-residents.

The extra sales tax, which first received approval in the state Legislature, will be on the city ballot on Nov. 8.
If approved, it would put the sales tax in Moorhead at 7.875%, up from the current 7.375%, although Clay County's half-cent rate is set to expire in 2038 if an extension isn't sought. The state sales tax constitutes nearly all of the current rate, 6.875%.

The new tax could be collected for as long as 22 years to pay off the project. Outside funding such as grants, donations and other partnerships could help pay for the facility and expand possibilities.

In Fargo and West Fargo, the sales tax rate is 7.5%, although the cities also tax clothing.

A task force that worked on the proposal met since last year and has decided downtown would be the best central location for such a facility. One of the city's No. 1 goals is to transform downtown.

It's estimated that the extra sales tax this year would have brought in anywhere from $1.3 million to $1.9 million, with a forecast of $1.62 million, said the new study.

Next year, it would be from $1.3 million to $1.97 million, with a forecast of $1.64 million.


The report also addresses a detailed analysis by merchandise category.

The top five retail categories affected by the sales tax would be eating and drinking establishments, 22.3% of taxable sales, building materials, 21.7%; general merchandise stores, 11.9%; food and take-home liquor, 9.1%; and gas and convenience stores, 4.4%.

The sales tax increase wouldn't affect vehicle sales as they are subject to a different tax category, Peach said.

A diverse mix of businesses fall into the nonretail category, with estimated sales of $75.9 million in taxable sales, or 31.2% of the total taxable sales in Moorhead. A significant portion of these sales would be subject to the extra tax, the report states, and includes such categories as construction, manufacturing, utilities, transportation and whole operations.

In his study, Peach states that policymakers are often concerned that enacting even a small sales tax increase will result in a loss of consumer purchases to neighboring communities, which is why he pointed out the extra taxes in Fargo and West Fargo.

He also said Minnesota Department of Revenue records show those cities with the optional tax in place for at least eight years that almost all showed continued sales growth year after year in such communities as Albert Lea, Baxter, Bemidji, New Ulm, Worthington, Hermantown and Marshall. A few communities had dips a few years, but almost all had steady, fairly stable, growth over the years.

More details on the plans and economics of the project will be discussed at the two open houses, with more meetings planned throughout the year. Child care will be available, Carlson said.

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