The Winona County Board is moving forward with a possible three-percent increase in next year’s property tax levy and a potential new sales tax to pay for the county’s $28 million in jail construction debt. 

The proposed sales tax would require both authorization from the state legislature and county voters in the form of a November 2022 referendum. However, county officials are keen on the idea because, they argue, a relatively slight increase in sales tax could cover the jail debt, whereas paying back the debt with property taxes — which is the norm — would require a more substantial tax hike.

County Board members Chris Meyer and Steve Jacob expressed support for the idea, and even board member Greg Olson — who voted against the county’s existing half-cent sales tax for road repair — was agreeable. In contrast to the open-ended, possibly never-ending road repair sales tax, Olson said a sales tax for the jail debt would be for a specific purpose, a specific amount, and a limited period of time. “I did some community outreach, specifically with the landlord group … and they were in favor of it versus the property tax increase,” Olson said, referring to the Winona Housing Association.

Whether the proposed sales tax comes to fruition doesn’t depend on the County Board alone, Meyer noted. “If the voters don’t want it, it won’t be,” she said.

Meanwhile, on Tuesday, County Administrator Ken Fritz presented the draft 2022 budget to the County Board. In planning next year’s budget, the county faces questions about whether to use one-time COVID relief funds to minimize taxes now or spread the funding out over multiple years to avoid a sharp jump in taxes when it runs out. Last year, which was also an election year, the County Board adopted a zero-percent tax increase, saying that with businesses and families struggling during the pandemic, the county had to keep taxes down.

Wages and benefits are the largest factor driving increases in expenses for the county in the current budget, Fritz said. However, hefty debt payments on the jail are just around the corner and will add hundreds of thousands of dollars to the county’s annual expenses for years to come.

The draft budget includes a roughly $1-million deficit, which would require an approximately 5.5-percent property tax hike to balance. Alternatively, the county could utilize some of its over $3 million in federal COVID relief funding — from the American Rescue Plan Act (ARPA) — to avoid a tax hike next year. However, Fritz proposed a middle way, utilizing some of the ARPA funds to balance the budget but also raising the tax levy by three percent. If county leaders use all of the one-time ARPA money to plug holes in its budget now, they will be left with large gaps to fill in future years when the funding runs out, he noted. Fritz estimated as much as a 7- or 10-percent hike could be needed in 2023. If a jail-funding sales tax doesn’t pass, it could be even higher. So Fritz proposed spreading the ARPA funds out over the next two years and adopting a comparatively modest tax increase now, partly to make future tax increases more gradual.

“I don’t think anyone wants all of a sudden a large increase in the property tax in one year,” Fritz said. “It’s always better to raise things incrementally. In this situation, I think even though we have the reserves to cover the deficit, you’re just going to build up a larger deficit in the future.”

“No,” County Board member Marcia Ward said when asked if she would support a three-percent property tax increase. “We’ve got all this ARPA money coming in. We’ve got to figure out what we’re doing with that … We’ve got a lot of money to spend. Why are we asking for more?”

“As a preliminary proposal, I think it is palatable,” Olson said. “It’s a preliminary number that we can always work on,” he added, alluding to the fact that the County Board could lower that tax hike when it finalizes the 2022 budget in December.

Asked for her opinion on the proposed three-percent increase, Meyer said, “We didn’t increase the levy at all last year, and to the extent things could change and we have ARPA money coming in, honestly, I think we’re doing well.”

The County Board will vote to set the preliminary 2022 property tax levy at its September 28 meeting. An in-depth discussion of the possible sales tax is planned for either that meeting or October 12.