Wheelage tax

McLeod County's wheelage tax is gone, but the decision to repeal it is tied to a web of other issues yet to be tackled.

The move to repeal the wheelage tax came as the first step in a plan proposed by the budget committee to address a shortage of road funds. Tuesday’s action was taken to meet a state deadline, but now County Board members must consider: a 15 percent levy increase vs. a 9 percent levy increase with a new tax, and a $10 million bond.

The wheelage tax kicked in at the beginning of 2014 in response to an option allowed by the state to cover growing transportation expenses. It was collected when county residents registered their vehicles each year. Counties were also given the option of adding a sales tax. Some used both options.

McLeod County's wheelage tax provided $385,000 annually, which was not enough to cover growing road costs. The county is currently contending with a $3 million annual funding gap from the state aid system meant to help maintain highways. The shortcoming is larger when county roads are considered as well.

"Being able to keep up with roads is getting pretty tough, and as a matter of fact we can't," said Board Member Paul Wright, who sits on the budget committee with Board Member Doug Krueger.

Public Works has identified numerous roads in need of updates, with 14 named as top priorities. Those roads are:

  • County State Aid Highway 18 from Renville County to State Highway 15
  • County State Aid Highway 115 from County State Aid Highway 7 to State Highway 15
  • County State Aid Highway 1 from County State Aid Highway 3 to Wright County
  • County State Aid Highway 2 from Sibley County to State Highway 22
  • Ring Road northeast of Hutchinson
  • County State Aid Highway 16 from State Highway 7 to Wright County
  • County State Aid Highway 13 from Sibley County to U.S. Highway 212
  • County State Aid Highway 116 in Winsted
  • County State Aid Highway 5 extension in Winsted
  • County State Aid Highway 10 from County State Aid Highway 2 to Carver County
  • County State Aid Highway 5 from County State Aid Highway 16 to County State Aid Highway 1
  • County Road 57 from County State Aid Highway 17 to U.S. Highway 212
  • County Road 61 from County Road 79 to County Road 60
  • County Road 81 from Sibley County to U.S. Highway 212

"The last winter was especially hard on the roads," said Board Member Rich Pohlmeier. "There have been road projects over the years just left behind because of a lack of funds."

With the wheelage tax gone, board members must now decide how to fund road maintenance.

Sales tax

Proposed by the budget committee is a half percent sales tax that would kick in wherever the standard sales tax is used in McLeod County, with a few exceptions, such as the purchase of motor vehicles registered for road use

On a $100 purchase the tax would add 50 cents. State statues mandate earnings must be spent on the road system.

The $10 wheelage tax was paid exclusively by vehicle owners in the county, and paid on each registered vehicle. Krueger said he is aware of residents who paid the tax when they maintained the registration on vehicles they rarely drove. The sales tax would be paid by all residents who shop in the county, along with shoppers from outside the county and visitors to the county's many events. The county estimates a half percent sales tax would garner $1.9 million annually and a quarter percent sales tax would garner $950,000 annually.

"Its adding a tax, but we need to fix our roads," Krueger said. "We're one county out of the metro area. We're looking for economic development, for people to move out here."

Wright noted the county has a high volume of heavy agriculture and manufacturing traffic on its roads, and that it needs to make sure to meet the demand.

"To allow ourselves to become a bedroom community for the metro is a big mistake," Wright said. "We need to do our own development."

Tax levy

McLeod County is currently projecting a 15.99 percent levy increase of $3.61 million. The county levy is among the levies collected from property owners each year. 

As has been the case with levy increases the past few years, compensation and benefits for the county's roughly 300 employees are cited as one of the main factors. In addition to a desire to offer competitive wages, County Board members have cited the burden of meeting state mandates and the responsibility of county services to handle a myriad of problems stemming from drug and alcohol abuse. 

A $216,051 portion of expenses for the renovation of the former Jungclaus building into the Government Center is expected to be paid for with a one-time 1 percent levy increase, which is accounted for in the whole.

But the need to address roads has become a growing part of the equation, especially as staff hope to tackle problems before they grow larger and raise the price tag even further. 

The half percent sales tax is seen as a way to tackle those road projects and stop a trend of dipping into the county's fund balance. It would also likely reduce the projected 2020 levy increase to 9 percent, which is 2 percentage points higher than the increase for the 2019 levy.

"We sure don't want a 15 percent levy increase," Krueger said.

Board Member Ron Shimanski said he believed a sales tax would have a smaller burden on property owners than a larger levy increase.

$10 million bond

The final issue of note is a $10 million bond proposal that reflects an $8 million bump from a previous proposal.

Following a previous public hearing, the County Board approved a $2 million bond to help fund the remodel of the upcoming McLeod County Government Center in the former Jungclaus building. The project's total cost is projected at $12 million when accounting for the purchase of the building and nearby properties. The renovations account for $9 million. Of that $9 million, the county planned to cover $2 million with its fund balances.

"We no longer want to do that," Wright said. "This whole thing is about (how) we've been depleting fund balances for a few years now. ... We have to stop."

So it has been proposed to bond for $2 million more on the project, bringing the bond contribution to $4 million. 

An additional $6 million bond would be used for highway projects, if the budget committee's plan is approved. That portion of the bond would be paid back by the proposed sales tax. By combining the various bonding proposals, the county hopes it can find a better rate.

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