Stadium sales tax? Why not for cops? Or transit?

State Rep. Frank Hornstein opposes the new Twins ballpark plan, yet calls it a "breakthrough."

Meanwhile, the Minnesota Chamber of Commerce, the state's largest business lobby, is neutral even though the ballpark sales tax appears to violate the Chamber's policy.

The stadium plan has already created some odd political bedfellows - and the ballpark's famed "three cents on your $20 purchase" might create more.

Hornstein, a Minneapolis DFLer, said Republican Gov. Tim Pawlenty and the business community have opposed past proposals to raise the sales tax for such things as transit. However, their acquiescence to the 0.15 percent stadium sales tax has advocates for education, affordable housing or transit spending asking "why not us?"

As Hornstein put it, "If it is good enough for a stadium, it is good enough for other things. We can have a discussion about priorities."

That's exactly the kind of thing that worries the Minnesota Chamber.

Tom Hesse, the Minnesota Chamber's vice president for government affairs, said his organization wants to limit the growth of local sales taxes, an added business expense. However, Hesse's group will not take a position on the new Twins stadium, he said.

"It is not that big of an issue. We have other issues to keep us occupied," Hesse said.

Awkward moments

Local sales tax proposals have created some awkward moments recently.

Earlier this year, the Minneapolis City Council passed a resolution asking the Legislature for a 0.5 percent city-specific sales tax as a last resort to restore police and fire services cuts. (In ballpark terms, that would be "10 cents on your $20" for cops and firefighters.)

However, the city's all-DFL legislative delegation rejected that tax hike - though some, such as State Reps. Margaret Anderson Kelliher and Paul Thissen, support the smaller ballpark sales tax. (It should be noted that the ballpark tax is also countywide and not limited to Minneapolis.)

Mayor R.T. Rybak supported sales taxes for both public safety and the ballpark - although he needed two at-bats on the latter. Initially, his staff said he was not taking a position on the latest ballpark plan and then later announced his support. (Similar to the Minnesota Chamber's Hesse, Rybak calls the ballpark issue a low priority.)

Stadium backers tout the sales tax as a great plan - but they don't want to put it to a referendum any more than they want to face a Roger Clemens fastball.

Now, the Minnesota Chamber is on the hot seat.

The Greater Minneapolis Chamber of Commerce, an independent affiliate of the Minnesota Chamber, supports the stadium plan as a business boon. Yet the Minnesota Chamber has its own reasons to oppose it.

Hesse said the state Chamber wants to reduce the sales tax's impact on business - and expanding local sales taxes could torpedo that effort.

He noted that Minnesota businesses pay 45 percent of the state sales tax, or $1.9 billion in this fiscal year.

"Most folks don't think of businesses as a major payer of the sales tax; they think of businesses as the collector," he said. "We do pay a lot of sales tax, whether it is computer equipment or office furniture and supplies. It all

adds up."

The Minnesota Chamber advocates exempting business-to-business sales from the sales tax, Hesse said. That would focus the sales tax on retail purchases.

However, such a change would punch a nearly $2 billion hole in the state's budget. That makes the Chamber's effort a tough sell. If the stadium plan makes it easier for other communities to pass sales taxes, the sell gets even tougher.

As more communities and more projects depend on a local sales tax, more people would have a direct stake in opposing the Chamber's efforts to exempt business-to-business sales, Hesse said.

When to tax

In 1971, the state passed what is known as the "Minnesota Miracle." The Miracle prohibited new local sales taxes, preferring to reduce local property taxes with Local Government Aid (LGA). The state collects the 6.5 percent sales tax.

The Miracle has flickered recently; the state has cut LGA and refused to raise state income taxes, which has pushed more spending onto the property tax. That has led cities such as Minneapolis city leaders to propose sales tax hikes as their only revenue-side alternative.

Hesse said if the state allowed cities and counties to issue their own sales taxes, it would create disparities between high-sale and low-sale communities - a key reason the Minnesota Miracle prohibited them. People would likely ask for a new formula to share the sales tax wealth, which would only add complications, he said.

Minnesota Chamber officials have met with a number of local affiliates to discuss when the state should approve local sales tax requests, Hesse said. The Chamber eventually recommended limiting any local sales tax to 0.5 percent, and then only for construction projects of regional significance.

The Twins stadium plan meets those two criteria but fails on two others.

The Chamber recommended holding a referendum on the project during a general election. The current ballpark legislation specifically rejects one.

The Chamber also recommended the local government only finance half of the project with sales tax. Other revenue, including private donations, would show community support, it said. In the ballpark's case, the sales tax is paying for two-thirds of the stadium construction costs and 75 percent of the bill when area improvements and financing costs are figured in.

In spite of the plan's apparent shortcomings, Hesse reiterated that the Minnesota Chamber would not take a position on the Twins stadium.

"You won't see us testifying one way or the other in any of the hearings on a Twins stadium," he said. "It is not something our board has asked us to get involved in."

The Chamber also recommends that bonds sold and backed by local sales tax, such as the Twins stadium, carry a warning to investors, he said. It should let them know the business community is working to eliminate certain business sales tax, and that could affect future sales tax revenue that would pay off the bonds.

Then again, the current legislative bill would let the county continue to apply the sales tax to certain items even if they are exempted in the future. Perhaps someone is thinking ahead.