Memorandum

The City Council recently discussed the opportunity request legislative approval of a local sales tax authority at the June 15, 2026 workshop. The purpose of this continued discussion is to further review the topic and consider directing staff to take additional action.

Cities have the ability to adopt a local sales tax to use for regionally significant capital projects by following a strict procedure as outlined  in Minnesota state law. The process is as follows:

• City Council adopts a resolution proposing the tax
• Submit adopted resolution to the House and Senate Taxes committee and appropriate subcommittees by January 31st
• Receive legislative approval by passage of a special law to enact the sales tax
• City Council adopts a resolution accepting the new law
• Hold a city referendum during a general election within two years of receiving legislative authority
• City Council adopts an ordinance imposing the tax

In order to understand the impact of imposing a local sales tax, a report was commissioned by the University of Minnesota Extension for Community Vitality. The report was to show the impact of imposing a half-cent (.05 percent) sales tax. The study shows the following outcomes based upon 2023 sales and use tax data:

• It is estimated that non-residents would pay for 48.3% of the tax; Shoreview residents would pay 51.7%
• The average Shoreview resident would pay $15.30 in taxes in 2023 if the tax had been established
  • Using the average household size of 2.31, this would amount to $35.34 annually per household
• The taxes generated using 2023 data are estimated at $810,000 annually
  • According to extension office staff, this number would likely be 10-15% larger as it does not include online sales
  • MN Department of Revenue requires an administrative fee that is less than one-percent

In Ramsey County, the cities of St. Paul and Roseville have adopted local sales tax. Below are the sales tax rates for Ramsey County cities and a link to a Minnesota Department of Revenue sales tax rate map

• St. Paul: 9.875%; including a 1.5% city tax
• Roseville: 8.875%; including a .5% city tax
• All other Ramsey County cities: 8.375%; no city tax
• https://taxmaps.state.mn.us/salestax/ 

Since the last discussion, additional information has been obtained which staff would like to review with the city council and seek further direction.

As discussed previously, the sales tax may only be used for "regionally significant" projects which are specifically listed in the approvals. A recommended focus for the use of sales tax funds would be to pay for parks amenities which are commonly used by those outside of the Shoreview community in addition to our residents. A draft local sales tax project list is attached to this report for consideration. Specific cost estimates are needed for a majority of these items.

Additionally, since the last discussion, meetings have been held with our legislative delegation to understand potential support for this initiative as legislative authorization is required. At a high level, legislators offered their support for the proposal, however the level of support would ultimately depend on the request including final details on projects and cost.

Should the city council desire to move forward with a request to the legislature the next steps would be the following:

1. Develop a refined proposed project list, including cost estimate and timeline
2. Develop finance plan
3. Develop supporting information proving regional significance
4. Finalize proposed language for adoption in collaboration with legislative staff
5. Adopt a resolution proposing the tax
6. Seek legislative approval in the 2027 or 2028 legislative session

Due to the intensity of work that would need to happen prior to the 2027 legislative session, additional staff support would be required. This could be accomplished through hiring a consultant who would work at the direction of the city manager. It is anticipated that this work would cost between $5,000 and 7,500.

Staff is looking for direction on two specific items prior to proceeding forward:

1. Confirmation this is a priority of the City Council
2. Feedback on the proposed project list
3. Direction on the urgency of moving forward with this request in the 2027 legislative session as opposed to the 2028 legislative session