Loading...
HomeMy WebLinkAboutCity Council - 12/02/2025 - WorkshopEden Prairie City Council Workshop Approved Minutes 5:30 p.m. Tuesday, Dec. 2, 2025 City Center Heritage Rooms, Council Chambers 8080 Mitchell Road Eden Prairie, MN 55344 ATTENDEES City Council Members: Mayor Ron Case, Council Members Kathy Nelson, Mark Freiberg, PG Narayanan, and Lisa Toomey City Staff: City Manager Rick Getschow, Public Works Director Robert Ellis, Community Development Director Julie Klima, Parks and Recreation Director Amy Markle, Police Chief Matt Sackett, Fire Chief Scott Gerber, Administrative Services/HR Director Alecia Rose, Communications Manager Joyce Lorenz, City Attorney Maggie Neuville, and Recorder Sara Potter WORKSHOP AGENDA Heritage Rooms 1. Local Option Sales Tax Discussion Getschow stated many neighboring cities have received approval for a Local Option Sales Tax (LOST) for large projects. Today’s discussion will be focused on how a LOST works and what it could mean for the City. Markle explained a LOST is a sales tax collected within the geographic boundaries of a City or County. Hennepin County and many peer cities have one. It’s applied to the same items as the general State sales tax. The State legislature authorizes the implementation of the tax. During a general election residents will vote on individual projects to fund. LOST funding can only be used for projects of regional significance such as parks, community centers, and water quality improvements. Markle explained the typical LOST rate is 0.5 percent for 20 years. Narayanan asked if the tax rate reverts to zero after the 20 year period. Markle confirmed that is correct. Narayanan asked if the City would have to apply to the State to implement the tax again. Markle confirmed that is correct. Markle explained the LOST automatically ends once the funds for the project are collected or the time period has ended, whichever occurs first. Markle noted the legislature enacted the LOST in 2017 as a trade off for declining Local Government Aid. A moratorium was placed on LOST in May 2023 to study the topic and make recommendations. The moratorium has now expired, and Counties and Cities may now submit requests for the next legislative session. Over 40 cities have a LOST or will be including it on the ballot in 2026. Narayanan asked if LOST tends to be approved by voters. Markle confirmed most projects tend to be approved by voters. LOST has funded projects like Bloomington’s community center and ice garden remodel. Toomey asked if all projects are constructed at once. Markle confirmed it is the City’s decision, often depending on if the City is waiting on other funding. Bloomington is constructing all projects at once. Case asked if Cities issue bonds for the project and then uses the LOST cash flow to pay the bond proceeds back. Getschow confirmed that is a frequently used method, and there is no impact to the tax levy. Markle detailed other City projects funded by LOST, including Chanhassen’s community center project and an additional sheet of ice at Edina’s Braemar Arena. Case noted an unfunded project with regional benefit would be the Highway 4 and 5 interchange. Toomey asked why the County or State isn’t funding the project. Ellis noted ideally the County and State would fund it, but its not currently a priority for them. Narayanan asked if multiple projects could be combined into one vote. Markle explained each project would need to be considered on its own, such as one building or one park. For example, a Miller Park renovation would count as one project, but it could include turf baseball fields, a cricket pitch, an inclusive playground, and water quality improvements. Projects should be designed to positively impact the most residents possible, ideally connecting with multiple groups including seniors, youth, new families, etc. Case stated ideally LOST would be used to help fund projects that would have otherwise been levied for. Markle explained the need for data to help guide LOST decisions. Cities and Counties have hired the University of Minnesota Extension to perform a LOST analysis to determine estimated sales tax proceeds and understand what proportion of dollars would be paid by residents vs. non- residents. During the analysis Cities and Counties determine priorities and vision for potential LOST-funded projects and their regional significance. Other potential ballot measures are considered, such as if the school district is introducing a referendum. Narayanan asked if LOST could fund a project that already started, such as the police remodel. Markle confirmed LOST can only fund future projects. Markle detailed the 12 to 18 month statutory process to adopt LOST. The first step is the City Council adopts a resolution proposing the tax. The resolution must include a tax rate and a length, guided by the University of Minnesota Extension’s research, and documentation supporting the project’s regional significance. The resolution and supporting materials are submit to State tax committees. Once legislative authorization is granted, the City Council adopts a Resolution accepting the new law. An education campaign is held to educate residents on the tax and the proposed projects. The project must be on the ballot within two years of receiving legislative authority. Once approved, an ordinance is passed to impose the tax. Markle noted residents vote on each project individually. The City would need to educate voters that passing only two projects out of four would only impact length of the tax, not the rate. Markle added typically, all projects are passed. The City would notify the Commissioner of Revenue 90 days before the first day of the calendar quarter the tax would be imposed. Narayanan asked how much money would be invested in LOST before the tax would be collected. Markle noted hiring the University of Minnesota Extension would be a few thousand dollars. Narayanan asked if there was incremental overhead once LOST is collected. Getschow confirmed there is not. Getschow explained the importance of creating a timeline by working backwards from the election year residents would vote on the LOST funded projects. As this workshop is only to introduce LOST, projects have not yet been identified. Markle described needs commonly voiced by residents, including an field house to play sports indoors during the winter and an opportunity for outdoor aquatics. Narayanan asked for the dollar amount of total sales in the City. Getschow stated that would be quantified by the University of Minnesota Extension. Narayanan asked if there is an estimate of how much a LOST tax would raise. Getschow noted it would likely be similar to the amounts noted in the Edina or Richfield studies. Getschow noted projects in the Capital Improvement Plan (CIP) all have a cost whether its debt, the CIP levy, or transfers from other funds. If these projects were funded by LOST instead, there would be savings to the levy. Getschow noted similar projects within a short distance of each other cannot be pursued by multiple cities. There is discussion on automatically preapproving certain projects such as parks and trail systems, removing the regional benefit requirements, allowing LOST to support general operations, and requiring revenue sharing between cities. These items being discussed will likely not be decided for years. Getschow asked the Council Members to provide general feedback. A decision does not need to be made tonight. Case stated the next logical step is hiring the University of Minnesota Extension to perform a LOST analysis. The City could collect data, plan for projects, and run a public education campaign before the 2028 general election. Case noted his interest in pursuing projects that would have a direct decrease to the tax levy. Freiberg asked how expensive it would be to hire the University of Minnesota Extension to perform a LOST analysis. Markle estimated the cost at around $6 thousand. Toomey asked if the City’s bond rating is affected by issuing bonds for projects that would be paid back with LOST income. Getschow answered the debt and bond rating would not be affected by projects repaid with LOST revenue to the extent of his knowledge. Narayanan noted his approval and his interest in the numbers such as the expected revenue. The Council Members thanked staff for their presentation. Council Chambers 2. Open Podium 3. Adjournment