Archived Story

Arena sales tax on target

Published 6:31am Thursday, October 18, 2012 Updated 8:32am Thursday, October 18, 2012

By Ryan Howard

Daily Journal

The second skating season in the Fergus Falls Community Arena has already begun, and as year two begins, city officials have some good financial news about year one.

Through Aug. 31, the city has collected about $704,000 in local option sales tax funds to pay for the ice arena. The city gets its sales tax payments two months after they are collected by businesses and sent to the state.

The city originally estimated that the sales tax would collect about $1.3 million a year, enough to pay off the city’s five-year project bond of $4 million plus interest before the bond is up. Though Finance Director Bill Sonmor said it’s too soon to know whether the $1.3 million mark will be hit by the end of the calendar year (net collections have ranged from about $55,300 in January to $110,800 in July), he believes the city is on good financial footing with the tax dollars and will likely be able to pay off the bonds in five years or less.

“By the rate that we’re collecting, we’re in good shape,” he said.

He noted that the city will likely get a sales tax boost when holiday shoppers hit stores in November and December.

“I’m feeling good about the numbers,” he said, but, he was quick to add, “It all fluctuates with the economy.”

If the city was to suffer an economic crisis and the sales tax revenues decreased, the city would need to pay back the difference on the bond between what was owed and what taxes had been collected, but the tax would continue to be collected until the city was reimbursed in full. After the bond amount is collected, the tax is required to end and a new local option sales tax cannot be reauthorized for any purpose for one year.

The other factor in paying for the ice arena is the approximately $3.5 million pledged by private donors to the project. Sonmor reported that so far, the city has collected about $1.7 million from private sources – just about half of the money.

“The fundraisers have just done, I think, a fantastic job,” he said.

Most of the pledges were set to come in over a five-year period (businesses could pledge over 10 years), and Sonmor said the city is encouraged to have half that money already in before it pays the first bond payment of $1.4 million at the end of this year.

“We have the money in the bank already to make the bond payment,” said Sonmor, adding, “(Fundraisers) have been paying like they said they would and paying ahead.”

  • doctipster

    I would love to hear the answer to this beautiful question.

    What happens in three years when the city has paid for our portion of the Arena ? and the Hockey Association has not paid in full for their portion ?

    I will tell you a likely scenario. We will continue with a sales tax because the bond has not been paid in full, by which case we will be paying off their portion of the hockey arena. Then when they get the rest of their money do you think we as taxpayers will see our money back. Don’t be silly, they can’t possibly reverse charges and give people their money back, because it was part of a sales tax, so either the city will get to keep it in their coffers or the Hockey Association will get their accounts padded.

    In any sense, it is with great regret that i inform you that we will continue to see this sales tax around much longer than we expected and we will pay far more than what we are supposed to. As the article says, Pledges were made for 5-10 years, so those people that pledged money to the hockey association can give it to them in 7 years, we will have paid for the arena ourselves, and basically given it to them.

    Love our politicians.


  • Richard Olson

    As many people said before,that was the plan all along.

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