Cost and Financing
The financing plan was designed to ensure that the proposed projects can serve the City and region’s growing population and demands – while recognizing the need to be economical with taxpayers’ investment. The total cost of the four projects is $205 million.
Economic Vitality Fund: $50 million
Street reconstruction: $50 million
Flood control and water quality: $40 million
Regional sports and recreation complex: $65 million
Local Sales Tax
For more than 40 years, Rochester residents have authorized the use of a local option sales tax to support major public projects in the City. Over the past five years, local option sales taxes have gained popularity across the rest of the state as an investment tool for cities and counties to fund major public projects.
Utilizing a sales tax allows current residents to take advantage of the improvements sooner and shares the responsibility of paying for improvements with nonresidents who often patronize our local businesses and restaurants and use public amenities.
In Rochester, the 2023 ballot question sought to renew the existing half-percent sales tax and did not increase the sales tax rate currently paid by residents.
The sales tax would is not permanent. When sufficient funds have been collected to pay for the $205 million in public investments, the sales tax would either expire, or voters could consider extending it to support new public investments down the road.
The University of Minnesota analyzed the economic effects of a local sales tax increase in several Minnesota cities and found little evidence that overall sales growth for businesses was impacted.
Impact of the Sales Tax
Approved by voters on November 7, 2023, the half-percent local sales tax will be renewed and used to fund the four projects.
According to research by the University of Minnesota, 43% of the sales tax in Rochester is paid by nonresidents. This means approximately $88 million of the project costs will be paid by nonresidents who purchase goods and services within Rochester’s city limits.
As the sales tax is currently applied, consumers in Rochester would continue to pay an additional 5 cents per $10 purchase if the tax is renewed. The sales tax would expire in 24 years or when an amount sufficient to pay for each of the four major projects has been collected, whichever happens sooner.
The average cost of the sales tax per resident would remain at $4.64 per month, or $55.66 per year, according to the University of Minnesota.
