$5 million economic development fund.

First of all, most of the money going into the Rochester sales tax comes from residents outside the city of Rochester

-Rep. Greg Davids via Rochester Post Bulletin

The problem is this statement is complete false.  I wonder why no one holds Rep. Davids accountable for this?

Here are some other reasons we need to address the current situation where by the public stands to throw away up to $5 million for no discernible gain.  I could live with sharing $5 million, I can’t live with wasting $5 million.  Based on early returns, that is what we are set to do.

We need some accountability added to these dollars!

Fact 1: Rochester already disproportionately subsidizes surrounding communities.

While it is true that residents of local surrounding communities do pay a sliver of sales tax to Rochester it is also true that Rochester residents do far more for these communities in return.  Set aside for a moment that none of these communities would exist in their current form without Rochester.

  • Many of the sales tax funded projects specifically go to pay for amenities, roadways, public safety, and economic development that benefits the entire region, not just Rochester.
  • Stewartville for example will receive a far greater benefit from the sales tax dollars set to improve US 63 between Rochester and Stewartville than there citizens will ever pay in Rochester sales taxes.
  • Those who work or shop in Rochester are benefiting from our roads, public safety, building services, airport, and other services that enable their employers to exist.
  • Surrounding communities use our parks, trails, arts, senior center, and culture without contributing tax dollars.
  • A substantial percentage of property taxes in surrounding communities are due to the proximity and employment offered by Rochester.  We don’t get a cut of that.

Fact 2: Rochester Area Chamber support points to foolishness of policy.

The Rochester Area Chamber of Commerce recently came out to support the gift dollars.  Put another way they courageously endorsed a plan to funnel tax payer dollars to its membership with no incremental public benefit.  John Wade incorrectly insinuated at the last city council meeting that the $5 million was agreed upon by local government.  This is false.  Rochester had this clause forced on them by Greg Davids, who set up a policy by where he chose what cities got a chuck of this revenue and what cities did not.  The city council, never got to weigh in on this decision.  In conjunction with this decision, Rochester lost funding to expand our library which both serves the entire region and is the busiest in the state of Minnesota.

Fact 3: Greg Davids extraction of sales tax funds is unfair to Rochester.

Rochester is the only city in the state of Minnesota that has been subjected to the policy.  To illustrate how hypocritical this move was consider that Rep. Davids did not apply the same standard to Lanesboro in his district.  This is particularly confusing given his statement that the justification for Rochester sharing its revenue is because visitors pay a share.  This would likely be even more true for Lanesboro.  To be clear I don’t think that Lanesboro should have to do this, but neither should Rochester.  The hypocrisy is clear.

Fact 4: Rochester Tax Payers will spend an additional $1.2 million to give away the money faster.

People have tried to spin this, but it is an undeniable truth.  We were obligated by Greg Davids to pay $5 million in the nex 15-20 years, not today.  The cost of moving this forward is $1.2 million using the most conservative numbers.  Here is what I wrote previously.

This alone would be sufficient for a “no” vote.  Sadly the method in which we are distributing these funds will also cost Rochester an additional $1.2 million dollars for the benefit of blank checks to be spent elsewhere.

Photobucket

In the chart above 5 members voted to give away the money shown column 2, I supported column 3.

We are obligate by state law to provide $5 million to surrounding communities, but we can do that any time over the course of the sales tax collections which should run through 2028-2031.  We as a city are within our legal rights to have this $5 million be the last $5 million that comes in.  Because we authorized this money to go out in 2013-2014 the effective c?ost in today’s dollars is about $4.95 million.  Had we waited to pay the money in 2028 the cost in today’s dollars would have been $1.2 million less.  Because we are paying out this money 15 years before we need to we are effectively bonding for it in the interim.  This is just plain nuts.

 

Fact 5: Bad Policy:

Here is what I wrote months ago:

  1. Rochester is the only community in the state that the MN legislature insisted share its revenues with surrounding communities.  In fact, communities big and small don’t even vote on their sales taxes.  This is punitive policy applied to Rochester.
  2. While Davids and company saw fit to add his appropriation to surrounding communities, they also saw fit to eliminate funding for the busiest and most regional library in the state.
  3. We are signing over $5 million in blank checks with no ability to oversee how the funds are spent.
  4. We are distributing the money on the basis of an arbitrary population number as opposed to how we can do the most good.
  5. Claims that we are protected my statute are incorrect as there is no provision to prevent intraregional competition, with the narrow exception of pursuing an existing company within Minnesota

This alone would be sufficient for a “no” vote.  Sadly the method in which we are distributing these funds will also cost Rochester an additional $1.2 million dollars for the benefit of blank checks to be spent elsewhere.

Now that we have seen the first couple of projects proposed we see that the funds will be abused.

Pine Island, already sitting on a ton of wasted infrastructure at Elk Run, plans to use the dollars to build another road.  Stewartville will subsidize development, likely sprawl.  Neither of these activities add to the regions economy.  Rather they simply move funds around.  Stewartville’s plans, in particular, do not create economic activity, just move it from one community to another.  This is NOT economic development, this is economic redistributionism.  There are potential uses of the $5 million in funds that would benefit the region as a whole, we just haven’t seen any announced yet.

 

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