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Itasca debates home-rule option

Itasca officials met Tuesday to discuss becoming a home-rule community, a move that would allow the village to access thousands of dollars in tax money for efforts like infrastructure improvements.

Village Administrator Evan Teich explained the village is considering the idea partly because its largest revenue source, sales tax, has dropped to $4.4 million per year after the fallout from the recession. He added that revenue declined $2.8 million in the last three years and the current trend is flat.

As a result, Itasca cut services such as its $1.5 million per year road improvement program and, instead, spends about $560,000 annually on road overlays and milling. The village’s general reserve fund also dropped to $2.5 million; leaders say it ought to be about $6 million to cover six months of operating expenses.

Teich said home rule would allow Itasca to keep its sales tax rate at 7.75 percent — below all neighboring communities — but still collect more money since more items would be eligible for taxation under the new structure.

“This could mean several hundreds of thousands of additional revenue while keeping your taxes the same rate,” said Teich. “It’s just a quirk in the law, but a very big quirk.”

Home-rule status would also allow Itasca to access about $980,000 in annual hotel tax revenues, which currently can be used under state statute only for events and projects that generate tourism. These include events such as Itasca’s Fourth of July fireworks and Itasca Fest, as well as downtown development and events or projects at the Spring Brook Nature Center.

“It is a fund that is very restrictive by state law, and under (home rule) that could be used very differently,” Teich said. “We could use it for stormwater, public safety, or any activity the community feels is appropriate.”

Residents would have to approve a change to home-rule status during an election referendum, and Village President Jeff Pruyn said he hopes to have the question on the ballot in next spring.

But all trustees acknowledged the issue is complicated, and several residents in the audience also voiced concerns about home rule giving Itasca the power to exceed the property tax cap without a referendum.

With that in mind, Pruyn said the next step is to create a committee of trustees, residents and business leaders who can explore pros and cons of home rule and help decide whether to put the measure up for a vote.

Rule: Status would let village use hotel tax money differently