6.1. SR 05-07-2018 - Laserfiche WebLink

Home Browse Search

Local Option Sales Tax Analysis for Elk River, MN 3 EXECUTIVE SUMMARY University of Minnesota Extension recently conducted a study to estimate overall tax proceeds and the proportion of tax proceeds generated by Elk River residents. Comparing these results to non- residents using the most recent sales and use tax data available from the Minnesota Department of Revenue (MN Revenue), Extension estimated that non-residents account for 45.5% of taxable sales. This equated to $177 million out of a total of $388.7 million in taxable sales in 2015. The intent of this report was not to make recommendations to city officials about what actions to take but rather determine the estimated sales tax proceeds from a local option tax program and what proportion of those dollars will likely be paid by year-round city residents versus non- residents. Extension generated a trade area analysis comparing actual taxable sales, based on Minnesota Revenue sales tax data 1with a calculated estimated sales amount. This amount was determined by multiplying the Elk River population by the Minnesota average per capita sales and then adjusting for income and typical pulling power of similar-sized cities. Doing so provided an estimate of retail and service purchases made by year-round Elk River residents. For each merchandise group, the estimates for two types of purchasers—year-round city residents and others—were considered and adjusted considering the area economy. These adjustments were also informed by interviews conducted with retail operators in the city. Assumptions and calculations are shown for major retail and service categories so decision makers can adjust totals to accommodate local considerations. Several key factors and features in the Elk River economy helped frame our analysis of the different merchandise categories: • A significant proportion of residents are employed outside the city which facilitates out- shopping for retail goods and services (see Figure 1), however an equally large number of individuals commute into Elk River for work which facilitates in-shopping. • Elk River is situated near large retail concentrations in greater Minneapolis/St. Paul which compete for shoppers. Maple Grove and Albertville in particular are in close proximity and have a wide mix of retail and service providers. • Interviews with local retailer managers pointed to difficulty identifying whether shoppers are local or non-local due to high volume of traffic and mobility of workers and residents in this area of competing retail centers. • Industries other than retail and services are a significant portion of total taxable sales in the city (32% in 2015). This mix of industries includes construction, manufacturing, wholesale trade, and agriculture. It is reasonable to assume a sizable portion of sales from these industries are to customers outside of Elk River, but the proportion is difficult to measure. • Elk River is the largest retail concentration in Sherburne County, and, as such, pulls in shoppers from nearby communities. 1. MN Sales Tax Statistics. (2015). Minnesota Department of Revenue. Retrieved from http://www.revenue.state.mn.us/research_stats/Pages/Sales-and-Use-Tax-Statistics-and-Annual-Reports.aspx