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Food tax approved for Fargo: Quarter-cent fund ends in 5 years instead of 10

Fargo city commissioners approved the Convention and Visitors Bureau's quarter-cent food tax Monday night in a 3-2 vote, rejecting the idea to send the issue to a public vote.


Fargo city commissioners approved the Convention and Visitors Bureau's quarter-cent food tax Monday night in a 3-2 vote, rejecting the idea to send the issue to a public vote.

Throughout the almost two-hour debate, commissioners' biggest disagreement was over how long the tax should be allowed. The CVB requested the tax, which would apply to all restaurant food sales in Fargo, for a 10-year period.

Commissioners gave them five years instead.

John Cosgriff and Rob Lynch voted against the tax, urging the other commissioners to approve the tax for a two-year maximum -- if at all, in Cosgriff's case.

The tax would generate about $450,000 annually for tourism marketing and would result in a $16 million economic benefit to the community, said Cole Carley, CVB executive director.


But the decision doesn't mean the new tax will automatically take effect. Since it will be handled in the form of a city ordinance, it must go through two readings and two public hearings before its official.

Fargo resident Mike Williams said he may now seek an Attorney General's opinion on the issue.

All along, Williams' argument has been that the city's Home Rule Charter requires 60 percent voter approval on any new sales or use tax. That stipulation was added in 1996.

North Dakota law, however, allows city's to adopt up to 1 percent food and beverage taxes for the purpose of promoting tourism.

Since the food tax is now going to be treated as an ordinance, the city's Home Rule Charter must apply, Williams said.

Fargo commissioners considered sending the issue to the ballot at the urging of Cosgriff, who said the tax is a "sales tax" no matter how it is disguised. But the Commission rejected the notion that the food tax should be decided by a public vote.

Again, Cosgriff and Lynch were on the losing side.

Cosgriff's other major issue was the use of public money for private business benefit.


"So, for $450,000, the private sector can buy $16 million in benefit?" Cosgriff asked. "Why wouldn't the private sector finance that themselves (through dues)?"

The F-M CVB does not collect member dues.

Also, Cosgriff and Lynch were opposed to the idea of the tax extending 10 years, without some assurance of West Fargo and Moorhead adopting the same.

Moorhead is part of the CVB and contributes to the 2 percent lodging tax that funds the CVB. To add a food tax in Moorhead would require state approval. West Fargo is not part of the CVB and doesn't plan to be.

The tax issue Monday was just one part of an almost 5½ hour meeting -- a record-length as far as city officials can recall.

In the end, the majority of commissioners agreed to the five-year sunset clause for the tax, with the understanding that the CVB would report to the Commission annually.

At the end of five years, the CVB could come back to seek an extension, assuming it could prove it had spent the public's money wisely.

Carley said the five-year clause wasn't what the CVB was looking for, but neither was the quarter-percent. The CVB initially requested a half-percent food tax with no end-date.


"We've gone through the first step of the process. We're gratified that the commission supported our request," he said. "We look forward to marketing the city even more aggressively."

Readers can reach Forum reporter Mary Jo Almquist at (701) 241-5531

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