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Why DL is asking for food/drink tax

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Detroit Lakes Detroit Lakes, 56501
Detroit Lakes Minnesota 511 Washington Avenue 56501

When voters head to the polls in less than two weeks, it's not just representatives they'll be voting on. Detroit Lakes residents will also be voting for or against a 1 percent food and beverage tax.

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The tax will generate roughly $225,000 for the city, based on 2007 Department of Revenue numbers. The money is being set aside for four main projects in the city and can only be used for those projects, not the general fund.

Projects include flowering rush control, bike trail system, city parking improvements near public facilities and the downtown crescent area.

"Part of it is the majority of (the city's) income is property taxes and with the unallottment of local government aid, these special projects are going to put more pressure on taxes," Mayor Matt Brenk said. "This will take some of that pressure off."

All food and beverages purchased at restaurants, fast food establishments, bars, on-sale liquor stores and other food service facilities would be taxed. It would not apply to groceries or off-sale liquor.

When the city first asked legislators to approve a tax, it was for a half-cent food, beverage and entertainment tax. Legislators dropped the entertainment portion though and approved the city for a 1 percent tax. But Gov. Tim Pawlenty said he wouldn't sign any new taxes unless it went to a vote of the people.

So, for the first time, the food and beverage tax must be approved by a citizen's vote rather than just implemented like has been allowed in the past.

Brenk said rather than raising property taxes more, the city wanted to ask for a tax that would be fairer to the city residents and tax everyone who uses the city's restaurants and bars.

And since the tax would be collected from those restaurants and bars that tourists and everyone outside the city uses, the funds raised would go back into "things designed to promote Detroit Lakes -- tourism and a destination place," he said.

Especially with the flowering rush issue the city has been fighting for years, trying to keep the city beach vital, "they're asked to pay a little bit to keep the lake clean."

Earlier this month, the Pelican River Watershed District asked the city to support a research project on flowering rush with $90,000 over the next three years. The council tabled a decision until after the November election, but Brenk said that's the perfect example of why this food and beverage tax should pass.

If the tax doesn't pass, he added, the city will have to decide whether to contribute the money, and if so, how.

Some city council aldermen have spoken in support of a half-cent general sales tax instead of the food and beverage tax, which would raise quite a bit more money and be applied to everything purchased in the city, not just food and beverages. But Brenk said the council decided not to go for that tax because the state had a moratorium on the sales tax, which just ended. He said the city wouldn't know until legislators are back in session whether or not that moratorium would be extended or not.

With money raised from the food and beverage tax, the city could bond for more expensive projects as well.

Besides the already requested money for the flowering rush project, Brenk said there are plans being done on the Heartland Trail extension and completing the parking lot across from the Detroit Lakes Community and Cultural Center that the city would like to contribute funds to.

Another project tying in with the downtown crescent redevelopment is redoing Washington Avenue from Highway 10 to Frazee Street to match the newly redone north portion of Washington.

If it should pass, Brenk said he'd likely call a special planning session of the city council to determine how the money generated would be split between the projects.

The tax will end when the council agrees the four projects have been completed and the funding is no longer needed.

Although publicly there hasn't been much of an outcry from restaurant and bar owners, Lakeside Tavern owner Chet Collins has said in the past that the half-cent tax was doable, but that the 1 percent tax was getting to be too much. Zorbaz owner Tom Hanson said that when he had to pay $90,000 to the city for a parking lot, he no longer could support the food and beverage tax.

More information, including a question and answer sheet, can be found on the city's website at http://www.ci.detroit-lakes.mn.us.

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