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Detroit Lakes City Council agrees to put 1 percent food & beverage tax on November ballot

The wording is set.

"The City of Detroit Lakes proposes to provide and allocate resources to pay for control of Flowering Rush infestations of waters within the City; construction and improvement of bike trail facilities; parking improvements near City facilities; and redevelopment of the area returned to the City by the state as a result of the realignment of Highway 10. To fund this proposal, do you approve a city sales tax up to 1 percent on food and beverages sold at restaurants, places of refreshment and retail liquor establishments?"

That is what the November ballot will read, asking citizens to pass a 1 percent -- the city plans to collect the full 1 percent -- tax on food and beverages sold in restaurants and bars. Food and beverages sold in the grocery store, except in a deli, will not be taxed. It also does not apply to off-sale liquor.

Beverages sold in these establishments that will be taxed include soda, milk, coffee, etc., not just alcoholic drinks. And food includes fast food establishments, restaurants and bars.

City Administrator Bob Louiseau said that based on 2008 sales tax reports, the food and beverage tax will generate about $241,000 annually. A slight fee will be paid to the Department of Revenue for collecting the tax, and the city will get the remainder for the above stated purposes.

There is no sunset date on the tax collection. When the city sees fit to end the sales tax, when the listed projects are paid for, it can do so.

"One percent is a lot," Lakeside Tavern owner Chet Collins told city council members Wednesday afternoon. "The half percent was feasible, 1 percent is going to be difficult."

When asking state legislators for approval, the city had proposed a half percent food, beverage and entertainment tax. As a compromise though, since legislators said "entertainment" was too broad a term, the city could collect up to 1 percent but not on entertainment, just food and beverages.

In the past, Alderman Bruce Imholte has also brought up passing a general sales tax, a tax that would tax everything sold in the city, not just food and beverages. Under the same 2008 figures, that general tax would generate about $508,000 annually.

Collins said Wednesday he would be more in favor of that tax because not only would it generate more money, but the tax wouldn't be focusing on one industry, a dying industry, he said.

Alderman Jamie Marks Erickson said she would support a food and beverage tax, but would like to see it dropped back down to half a percent. She also said the vote would possibly be more successful if the list of items the money is going toward was narrowed down.

It would be better yet if residents could vote on which items they wanted to see funded, she added.

Louiseau said limiting the items would limit the city as to what it could use the money for. The money can only be used for what the voters approve, so it would be better to have a wider variety of items that need funding.

Alderman GL Tucker said he also prefers a general sales tax, but it would be harder to get that tax passed by the voters. Also, the half percent tax wouldn't amount to much, so he supports the full 1 percent.

"If you look at it as a tax, half percent or 1 percent, you're not going to support it," he said.

If the voter sees it as a chance to pay for items in the city that need attention, they'll be willing to pay the 1 percent, he added.

The city council unanimously approved putting the question on the November ballot.