Cost and Financing Plan
Oak Park Heights is planning this investment with a focus on long-term value, public health and responsible use of taxpayer dollars.
The full cost of improving the water system is estimated at $41 million. The City is using a mix of funding sources to help reduce the tax impact on residents. State grants and settlement funds from a nationwide class-action lawsuit are helping cover early costs, but do not fully fund the project.
To close the remaining gap, the City is seeking legislative approval to place a half-cent sales tax before voters. If approved, the half-cent sales tax would cost the average resident about $5.62 per month, or $67.41 per year, based on 2023 data.
By comparison, if funded through water utility rate increases, the average residential water customer would see an increase of about $18 per month — or $216 per year.
Why a Local Sales Tax
A local sales tax allows the City to fund major water infrastructure improvements while sharing the cost more broadly. Unlike utility bills, which are paid only by residents and property owners, a sales tax collects revenue from visitors and others who make purchases in the City.
About 70% of the sales tax would be paid by nonresidents who regularly use City amenities, shop locally, or travel through the City, according to the University of Minnesota Extension.
If approved, an estimated $28.7 million of the total $41 million total for construction would be funded by purchases made by nonresidents.
Source: University of Minnesota Extension Office
The local sales tax would not be permanent. The tax would expire after 20 years or when enough funds have been collected to cover the approved projects’ cost, whichever comes first.
There are a wide range of exemptions for essential goods under a local sales tax, including groceries, clothing, prescription drugs, and baby products. That’s important because exemptions help limit the impact of a sales tax on families and people living on fixed incomes.