East Grand Forks mayor weighs sales tax veto

EAST GRAND FORKS — East Grand Forks’ mayor said he might flex his veto power to alter a proposed citywide sales tax.

Steve Gander, who’s been the city’s mayor since 2017, told the Herald on Wednesday morning, Jan. 5, that he’s deciding whether he’ll veto a 5-2 city council vote held Tuesday night that approves a 30-year, 1.25% sales tax. The vote also forwards it to the Minnesota Legislature for a further round of deliberation. Eastside voters would also have to approve the new tax via a citywide referendum this fall.

“I either sign it and support it,” Gander told the Herald, referring to the council resolution approved the night before, “or I veto it and try to tweak it a little bit.”

City code gives the mayor 10 days after a council vote to issue a veto. Gander said he’d make his decision by Monday, Jan. 10. He did not offer an alternative sales tax proposal.

“It’s a conversation, really,” he said. “It’s a friendly discussion, negotiation.”

The tax would pay for part of a $37.4 million slate of renovations at the VFW Memorial Arena, plus the East Grand Forks Civic Center and adjacent Fitzwilliams Park. City consultants estimate that the tax council members approved on Tuesday would generate about $27.4 million, assuming citywide sales grew by 1% for each year the tax was in effect.

That $10 million difference, city leaders hope, can be made up with private donations and/or by trimming elements from the plan. City fundraising consultants suggested that East Grand Forks wait until the sales tax proposal is approved — or not — before rolling out a campaign for private donations. They did not provide an estimate for the city’s fundraising “capacity,” but city leaders have sometimes used $5M as a sort-of placeholder amount while they deliberate the project and tax.

Gander said he planned to meet with Reid Huttunen, the city’s parks and recreation superintendent, this week to figure out what could or would be cut from the project if the city used a smaller or shorter-lived sales tax to fund it. He also plans to meet with Eastside business leaders and residents.

“I've probably talked to about 10 individual business people in our community, I've talked to countless residents,” Gander said. “Even though the council took action, I need to finish my own fact finding.”

The project has, in essence, two types of renovations. The first: more necessary or necessary “deferred maintenance” work that would make the ice arenas comply with the Americans with Disabilities Act, repair their mechanical or electrical systems, fix up their parking lots, and so on. The second type: fancier “enhancements” that would, say, install a shared viewing area between the VFW and Blue Line Club Arena or build a grandstand at Fitzwilliams that would connect to the adjacent Civic Center.

Huttunen told the Herald on Wednesday that a smaller sales tax would preclude some of the higher-profile work suggested in the $37.4 million plan.

“If we went down to the 1% sales tax, as he may suggest for us,” Huttunen said, “to me, the only thing that really gets done out of the proposed project is upgrades and improvements to the existing facilities.”

The mayor has voiced general support for the project in prior meetings and noted in a Wednesday morning email to the Herald that several of the renovations are necessary to move away from an environmentally hazardous refrigerant, improve the air quality in locker rooms, and so on. Gander compared progress on the project that the tax would pay for to a trip to California for a vacation or family reunion.

“Are we going to drive or fly? Are we going to stay in a tent in the KOA campground or Holiday Inn? And are we going to go two days at Disney or four?” he told the Herald. “It’s going to be great, we know it’s going to happen, we’re enthused about it, but just working out the details.”

This isn’t the first time a citywide sales tax has been hampered on its way from East Grand Forks to St. Paul.

In January 2019, council members approved a 2% sales tax that would have lasted 30 years and paid for a different, $32 million set of parks and rec upgrades that have since been reworked. That proposal was nixed, informally, by East Grand Forks’ representatives in the Legislature — Sen. Mark Johnson, R-East Grand Forks, and Deb Kiel, R-Crookston — who said at the time that they didn’t like the 2% tax’s chances in the state capitol.

Council members hurriedly revamped their proposal and came back with a 20-year, 1% sales tax plan that lawmakers set to one side anyway as they worked to address the COVID-19 pandemic in the spring of 2020.

A new sales tax might be a tough sell again this year, according to Johnson, because the state is sitting on a $7.75 billion surplus over the remainder of this budget year and next.

“(The) political reality of it right now is a sales tax increase or a new sales tax are going to be a difficult conversation to have,” Johnson told the Herald on Wednesday. Money from the surplus, he suspected, could head toward East Grand Forks’ parks and rec project through various state programs, such as one designed to upgrade local parks and trails. Johnson sighed when asked if that was a realistic option.

“Maybe through some of the programs, there would be an opportunity to have some funding, but no program is going to be able to do a $30 million upkeep on anything, it’s just not the nature of those programs,” he said. “It would have to be, like almost all projects, multiple arenas of funding.”

Johnson said he had no opinion as a state senator about the city’s sales tax proposal. As a citizen of East Grand Forks, he said he hasn’t looked into it enough and doesn’t have a good idea of whether the tax is appropriate or not.

“I don’t want to cop out, but…I’ve been spending more of my time on redistricting and kind of the state-level stuff,” Johnson said.

Kiel also said wasn’t sure that the sales tax as written would make it out of the state capitol.

“Although this is local money, there are just some people that do not feel we should raise sales taxes. Believe it or not, both Democrats and Republicans do not like those kinds of requests,” she said Thursday. “We’ve got to be really careful. We’re having a hard time keeping business in Minnesota, and we’re hurt very much by it on the border. We see a lot of business, industry goin across the river because there are different things that make it cheaper for them to function.”

When asked whether she was on board with the city’s proposal, Kiel said she’d try to “carry” to a vote in St. Paul whatever sales tax the East Grand Forks City Council requests, but that she might ultimately vote against the tax if she hears a considerable amount of opposition to it.

After the city’s 2% sales tax idea was shot down two years ago, Kiel on Thursday said she was hesitant to say whether or not a 1.25% one was small enough to be approved by state legislators.

“I’m just not quite sure how the feel would be on that,” Kiel said, “but I would say anything closer to 1(percent) is going to be a much better request.”

Legislators in 2019 rearranged the order in which sales taxes are ultimately approved . Before then, new sales taxes would be approved by a city council, then by a citywide referendum, then by state lawmakers. The new system means that order now goes: council, then lawmakers, then voters.