Citys Local Sales Taxes and the MSFAs Financial Condition Presented - - PowerPoint PPT Presentation

CITY OF MINNEAPOLIS

Overv rview of the City’s Local Sales Taxes and the MSFA’s Financial Condition

Presented by: Finance & Property Services Department

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June 18, 2019

City’s Five (5) Local Sales Taxes

1) Sales Tax (0.5%, city wide) 2) Lodging Tax > 50 rooms (will be 3.0%, city wide)

• Prior to 2009 rate was 3.0%

(sum of various sales tax rates on lodging capped at 13.0%)

• Tax rate reduced in 2009 to 2.625%

(when State sales tax raised by .375% - Legacy)

• Tax rate further reduced on 10/1/17 to 2.125%

(when Hennepin County imposed 0.5% sales tax)

• Tax rate will be increased to 3.0% on 10/1/19

(2019 tax bill, 13.0% cap replaced with 6.5% cap on applicable Mpls. taxes, $3.2M more annual revenue)

3) Downtown Liquor Tax (3.0%, downtown only) 4) Downtown Restaurant Tax (3.0%, downtown only) 5) Entertainment Tax (3.0%, city wide)

Note: All Minneapolis local sales taxes are collected and distributed to the City by the MN Department of Revenue (two distributions per month)

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Downtown Taxing Area (p

(per r St State St Statute)

(Applies to City’s downtown liquor and restaurant taxes)

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History of City’s Local Sales Taxes

4 0.00 10.00 20.00 30.00 40.00 50.00 60.00 70.00 80.00 90.00 100.00 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Net $’s Received From MN Department of Revenue (millions of $)

Sales Liquor Lodging Restaurant Entertainment

Appli licable State & Local Sale les Tax x Rates in in Min inneapoli lis

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State of Minnesota Hennepin County City of Minneapolis Downtown Sales Liquor Sales Ballpark Sales Lodging Liquor

• Restrnt. Entertain.

Tax Tax Tax Tax Tax Tax Tax Tax Tax Total Restaurant (not downtown) No entertainment 6.875%

• 0.50%

0.15% 0.50%

• 8.025%

Low Live entertainment 6.875%

• 0.50%

0.15% 0.50%

• 3.00%

11.025% Downtown restaurant No entertainment 6.875%

• 0.50%

0.15% 0.50%

• 3.00%
• 11.025%

Live entertainment 6.875%

• 0.50%

0.15% 0.50%

• 3.00%

3.00% 14.025% Liquor on-sale (not downtown) No entertainment 6.875% 2.50% 0.50% 0.15% 0.50%

• 10.525%

Live entertainment 6.875% 2.50% 0.50% 0.15% 0.50%

• 3.00%

13.525% Downtown liquor on-sale No entertainment 6.875% 2.50% 0.50% 0.15% 0.50%

• 3.00%
• 13.525%

Live entertainment 6.875% 2.50% 0.50% 0.15% 0.50%

• 3.00%
• 3.00%

16.525% High Liquor off-sale 6.875% 2.50% 0.50% 0.15% 0.50%

• 10.525%

Lodging 50 rooms or less 6.875%

• 0.50%

0.15% 0.50%

• 3.00%

11.025% More than 50 rooms (**) 6.875%

• 0.50%

0.15% 0.50% 3.00% (*)

• 3.00%

14.025% Theater admissions 6.875%

• 0.50%

0.15% 0.50%

• 3.00%

11.025% Other retailers 6.875%

• 0.50%

0.15% 0.50%

• 8.025%

Low (*) Minneapolis lodging tax rate increased from 2.125% to 3.00% effective October 1, 2019. (**) Sum of Minneapolis sales taxes capped at 6.50%, effective October 1, 2019.

Related It Items

• Minnesota Sports Facilities Authority (MSFA)

was established in 2012

• Five member board of which two are appointed by Mayor
• Four-year terms
• Oversees operation of U.S. Bank Stadium
• Downtown East Redevelopment Project
• Five block area (including The Commons)
• City negotiated with Ryan Companies and MSFA

(about the same time as U.S. Bank Stadium agreements)

• City issued $61.9 million taxable G.O. bonds

(to finance a portion of the project)

• Bonds payable from Ryan payments & parking revenues

from two MSFA owned ramps

• Agreements for use of The Commons

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Uses of f Local Sale les Taxes

• Support to City’s General Fund
• $31.7M in 2019 ($24.4M entertainment taxes and

$7.3M other local taxes)

• City Debt
• Convention Center bonds (to be paid off in late 2020)
• Target Center renovation bonds
• Downtown Assets
• Target Center, Convention Center, Commons and

Peavey Plaza operations, repairs and maintenance

• State “retains” Minneapolis local taxes for various

stadium purposes (pursuant to 2012 legislation)

• Funds for the benefit of the MSFA began in 2014
• Approximately $2.2M in 2019
• Starting in 2021, approximately $25M per year for:
• Portion of State bonds issued for stadium
• Stadium operating and capital improvement costs

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Local Sales Taxes Retained by State

(Exclu ludes City ity Entertain inment Taxes)

1) For the benefit of the MSFA

• Retained by State and paid to MSFA

2) U.S. Bank Stadium debt

• $150M share of State bonds plus interest (4.25%)

City pays in 2021-2043

3) U.S. Bank Stadium operating costs

• $6 million began in 2016 + inflation (0-5%)
• Paid by State 2016-2020, then City pays in 2021-2046

4) U.S. Bank Stadium capital improvements costs

• $1.5 million began in 2016 + annual inflation (0-5%)
• Paid by State 2016-2020, then City pays in 2021-2046

5) Reimburse State for operating and capital imp. costs it paid in 2016-2020 (repaid by City 2021-2046)

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MSFA Contract wit ith SMG

• SMG is operator of U.S. Bank Stadium
• Handles the day-to-day management and

solicitation of events for the Stadium

• Similar relationship to City contract with

AEG for Target Center operations

• Separates operating and capital costs covered by

SMG versus MSFA

• Details performance measures
• MSFA and SMG agreed in an amendment to shift

from calendar year to fiscal year

• First new fiscal year from 7/1/17 to 6/30/18

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Revenue In Inclu luded in in SMG Contract

(Source: MSFA 2018-2019 Budget & City Estimates)

0.00 10.00 20.00 30.00 40.00 50.00 60.00 MSFA Budget FY 2018/19 City Estimate FY 2019/20 City Estimate FY 2020/21 City Sales Taxes for Operations (a) Vikings Operating Payments Event Revenue

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Millions of $

(a) In 2016-2020 the State actually makes these operating payments. However, beginning in 2021 the City will be reimbursing the State from Minneapolis local sales taxes.

Transfers & Non-Operating Revenue to MSFA

(Source: MSFA 2018-2019 Budget & City Estimates)

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0.00 2.00 4.00 6.00 8.00 10.00 12.00 MSFA Budget FY 2018/19 City Estimate FY 2019/20 City Estimate FY 2020/21 Miscellaneous City Sales Taxes for Benefit of MSFA Transfers from SMG Millions of $

MSFA Operating Expenses & Net In Income

(Source: MSFA 2018-2019 Budget & City Estimates)

• 0.25

0.75 1.75 2.75 3.75 4.75 5.75 MSFA Budget FY 2018/19 City Estimate FY 2019/20 City Estimate FY 2020/21 MSFA Operating Expenses MSFA Net Income

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Millions of $

Sources of f Revenue for Stadium Capital Im Improvements

(MSFA 2018-2019 Budget & City Estimates)

0.00 1.00 2.00 3.00 4.00 5.00 6.00 7.00 8.00 MSFA Budget FY 2018/19 City Estimate FY 2019/20 City Estimate FY 2020/21 Final Four Contributions City Sales Tax for Capital Imp. (a) Vikings Capital Imp. Payments Net Transfers From Other Accounts

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Millions of $

(a) In 2016-2020 the State actually makes these capital cost payments. However, beginning in 2021 the City will be reimbursing the State from Minneapolis local sales taxes.

Projected Account Balances on 6/30/19

(Source: MSFA 2018-2019 Budget)

0.5 1 1.5 2 2.5 3 3.5 4 4.5 5 Operating Account Capital Reserve Account Concession Capital Reserve Account Millions of $

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Summary ry

• City staff working with MSFA and State staff
• Details of amount to be retained by State

beginning in 2021 under discussion with Minnesota Management & Budget (MMB)

• U.S. Bank Stadium is early in its life
• Revenues, expenses, and capital improvement

needs will continue to evolve over time

• City staff will keep City’s appointed members
• n MSFA Board informed of our perspective

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