Sales Tax and Land Use

I was in a meeting recently and had an opportunity to have a discussion regarding local sales tax, land use and examples from a couple of our neighboring communities – Brainerd and Baxter. The key points of that discussion are worth sharing here.

Brainerd, Minnesota is an old railroad town. Much of the city was built in the railroad era and has the look and feel of that era. The streets are aligned in a grid pattern, the development is (relatively) high density, there are parks, boulevards and social places. It is a fairly efficient development pattern.

Brainerd’s downfall is that it suffers from neglect. Major infrastructure is badly in need of repair and there is little money available to do it. Investments in key parts of the city have been bypassed in favor of “new growth” projects on the edge of town. Other public investments have been shunned or done in such a way that they create little momentum for growth. While many are trying and there are a number of good things happening, an outsider driving through town would likely conclude that the place has seen better days.

Neighboring Baxter will look completely different to an outsider. Baxter has developed in an automobile era, which shows in the curvilinear subdivisions with large lots and cul-de-sacs. It can also be seen dramatically in the highway strip development that has taken place, again with relatively large parcels, expansive parking and spacing between structures. While parts of Baxter are showing signs of aging (and other sections are sitting and waiting for first life due to the recent decline in housing demand), the development there is young compared to Brainerd. While the outsider would likely conclude Brainerd is in decline, that same person would probably say that Baxter is the place to be.

One thing Brainerd and Baxter have in common is that they both needed to turn to a local sales tax to pay for their key water and wastewater infrastructure.

Water and wastewater systems should support and sustain themselves financially over the long run. Why don’t they in this instance? For Brainerd, years of neglect driven by a desire to “keep rates low” have created a backlog of needs that can’t be paid for by the current users. For Baxter, an expansive and inefficient development pattern is an expensive thing to maintain.

So residents of both communities agreed that a local ½ cent sales tax was the best option. After all, both communities benefit from summer swells in population and that means the tax is being largely paid for by outsiders.

Perhaps that is true, but imagine the opportunity for growth and investment that both communities would have had if they could have reserved that sales tax money for something else – something that would make the area more prosperous instead of simply allowing it to tread water (no pun intended). Had Brainerd made incremental and disciplined investments in properly maintaining its infrastructure and had Baxter realized a more efficient development pattern, the sales tax would not have been needed for sewer and water.

Unfortunately, when that next great idea comes up at a future Brainerd or Baxter council meeting – you know, the obvious one that would improve everyone’s quality of life many times more than the actual dollars invested – and the councils for each city indicate that they don’t have any money, they will be right. It’s already committed to treading water.