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 June 18, 2019 1

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) 2

Downtown Taxing Area (p (per r St State St Statute) (Applies to City’s downtown liquor and restaurant taxes) 3

History of City’s Local Sales Taxes Net $’s Received From MN Department of Revenue (millions of $) 100.00 90.00 80.00 70.00 60.00 50.00 40.00 30.00 20.00 10.00 0.00 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Sales Liquor Lodging Restaurant Entertainment 4

Appli licable State & Local Sale les Tax x Rates in in Min inneapoli lis 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. 5

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 6

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 7

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) 8

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 9

Revenue In Inclu luded in in SMG Contract (Source: MSFA 2018-2019 Budget & City Estimates) 60.00 50.00 40.00 City Sales Taxes for Millions of $ Operations (a) 30.00 Vikings Operating Payments 20.00 Event Revenue 10.00 0.00 MSFA Budget City Estimate City Estimate FY 2018/19 FY 2019/20 FY 2020/21 (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. 10

Transfers & Non-Operating Revenue to MSFA (Source: MSFA 2018-2019 Budget & City Estimates) 12.00 10.00 Millions of $ 8.00 Miscellaneous 6.00 City Sales Taxes for Benefit of MSFA 4.00 Transfers from SMG 2.00 0.00 MSFA Budget City Estimate City Estimate FY 2018/19 FY 2019/20 FY 2020/21 11

MSFA Operating Expenses & Net In Income (Source: MSFA 2018-2019 Budget & City Estimates) 5.75 4.75 Millions of $ 3.75 MSFA Operating 2.75 Expenses MSFA Net Income 1.75 0.75 -0.25 MSFA Budget FY City Estimate FY City Estimate FY 2018/19 2019/20 2020/21 12

Sources of f Revenue for Stadium Capital Im Improvements (MSFA 2018-2019 Budget & City Estimates) 8.00 7.00 6.00 Final Four 5.00 Millions of $ Contributions 4.00 City Sales Tax for 3.00 Capital Imp. (a) 2.00 Vikings Capital Imp. Payments 1.00 Net Transfers From 0.00 Other Accounts MSFA Budget City Estimate City Estimate FY 2018/19 FY 2019/20 FY 2020/21 (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. 13

Projected Account Balances on 6/30/19 (Source: MSFA 2018-2019 Budget) 5 4.5 4 3.5 Millions of $ 3 2.5 2 1.5 1 0.5 0 Operating Account Capital Reserve Concession Capital Account Reserve Account 14

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 on MSFA Board informed of our perspective 15