03-13-2024 Workshop Packet - Laserfiche WebLink

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STAFF REPORT TO: Mayor Fischer and Members of the City Council FROM: Corrin Wendell, AICP, Community Development Director Chris Heineman, City Administrator DATE: March 13, 2024 RE: Metro Area Sales and Use Tax for Housing Discussion ACTIONS TO BE CONSIDERED Review and discuss the new 0.25% Metro Area Sales and Use Tax for Housing and consider potential uses for this funding in the City of Little Canada. BACKGROUND The Metro Area Sales and Use Tax for Housing was adopted by the 2023 Minnesota legislature. The Minnesota 0.25% sales tax, which started on October 1 of 2023, applies to retail sales made in Anoka, Carver, Dakota, Hennepin, Ramsey, Scott, and Washington Counties. This dedicated sales tax revenue is earmarked specifically for housing initiatives, and will enable municipalities to fund affordable housing projects, combat homelessness, and enhance housing stability within their communities. It is the state’s first ongoing funding stream dedicated to housing. Based on the attached estimates from House File 2335, it is anticipated that Little Canada will receive approximately $160,000 each year from the 0.25% dedicated sales tax. The final amount is based on the city distribution factor, which is the number of cost-burdened households in the county divided by the total number of cost-burdened households in eligible cities. The definition for a cost-burdened household is one in which the gross rent or homeownership costs are 30 percent or more of household income. Data used for preliminary distributions were based on May 1, 2023 estimates provided by the American Community Survey of the United States Census Bureau. The 2024 calculations will be the most recent estimates as of May 1, 2024. The goal of allocating a fraction of the area sales and use tax to housing is to enable municipalities to strategically invest in programs that foster inclusive and accessible housing solutions and contribute to the overall well-being and vitality of the community. The tax demonstrates a long- term commitment to addressing housing challenges and underscores the importance of creating thriving and equitable communities across the state. The dedicated sales tax will be a pivotal financial resource to address pressing housing needs, enhance affordability, and contribute to the overall well-being of residents.