The Cost and Tax Impact

Total Cost of the  Project

The Preserve. Play. Prosper. plan was designed to ensure that the upgrades, enhancements and renovations at Hamlet Park, Mississippi Dunes Park, and River Oaks Golf Course and Event Center can serve the region’s growing demands for recreational and outdoor activities while recognizing the need for effective and efficient use of taxpayer investments. 

On Tuesday, Nov. 5, 2024, the city is asking residents to consider a half-percent local sales tax to fund the proposed plan. If approved by Cottage Grove voters, the local sales tax is expected to generate $36 million spread over a 25-year period. The city would use collections from the local sales tax, if approved by voters, to make bond payments to finance the projects that were approved by voters.

Cost for Each Project

All three projects will be listed on the ballot this November as separate questions, allowing residents to vote on whether to support each project with the half-percent local sales tax individually. 

  • Hamlet Park: $17 million

  • Mississippi Dunes Park: $13 million

  • River Oaks Golf Course and Event Center: $6 million

If one, two, or all three questions are approved by voters, the city is only authorized to impose a half-percent sales tax for a maximum of 25 years or until enough sales tax revenue has been collected to pay for the cost of the voter-approved projects.

Impact of the Local Sales Tax

  • If Cottage Grove voters approve the plan, the half-percent local sales tax will be applied the same way as the state sales tax. Groceries, clothing, prescription and over-the-counter drugs, feminine hygiene products, and baby products will not be taxed. For more information, view the list of taxable items and most nontaxable items from the Minnesota Department of Revenue.

  • The half-percent local sales tax amounts to half of one cent for every $1 spent. For example, 5 cents would be added to a $10 purchase made in Cottage Grove if the half-percent local sales tax is approved by voters.

  • Each Cottage Grove resident is estimated to pay, on average, an additional $22.99 in sales tax per year ($1.92 per month).

According to an analysis by the University of Minnesota Extension Center for Community Vitality, 31.3% of the sales tax would be paid by nonresidents. This means approximately $11.3 million of the project costs would be paid by nonresidents who purchase goods and services within Cottage Grove’s city limits.

Why a Local Sales Tax?

  • The city council proposed a local sales tax instead of a property tax increase to spread the cost of the projects among residents and nonresidents who will benefit from activities and amenities and purchase goods and services from local businesses.

  • If the projects were funded through a property tax increase, the cost burden would fall solely on property owners in Cottage Grove. 

  • During Minnesota’s 2023 legislative session, lawmakers reviewed Cottage Grove’s plan to revitalize indoor and outdoor recreation and authorized the city to present a half-percent sales tax option to local voters. 

  • A local sales tax is not permanent. Collections from the sales tax will be in place for up to 25 years or until the bonds to finance the projects are repaid, whichever comes first. 

  • The city will use collections from the local sales tax to make bond payments to finance the project(s). This allows residents to take advantage of the improvements sooner while the bonds are being repaid. 

  • Local sales taxes have gained popularity across the state as an investment tool for cities and counties to fund public projects that benefit communities.

  • The University of Minnesota has analyzed the economic effects of a local sales tax in several Minnesota cities and found little evidence that overall sales growth of local businesses was impacted.

Did You Know?

You may already be paying a local sales tax when you purchase goods or services outside of Cottage Grove and might not even notice it. According to the Minnesota Department of Revenue, more than 40 cities and counties have announced a local sales tax since 2013 and about 100 cities and counties throughout the state are using some sort of sales and use tax. Some nearby cities with a local sales tax include Bloomington, Mounds View, Golden Valley, Edina, Maple Grove, and St. Paul.