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Minocqua Takes a Second Look at Premier Resort Area Tax

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Minocqua should join surrounding cities in enacting a new sales tax known as PRAT, or premier resort area tax, according to supporters who say the tax would reduce the local real estate tax burden or slow its growth.

The PRAT proposal calls for a half cent on the dollar (0.05%) tax on items that tourists or visitors typically purchase, lease or rent when coming to a resort area. The state Department of Revenue estimates Minocqua could collect over $640,000 annually from the PRAT.

The town’s broadband and business development committee has been studying the PRAT for more than a year. The committee met with the town board last December to outline the proposal. They were asked to do more research and to answer several questions.

Committee members Phil Albert and Pete Otis returned May 1 to ask the town board to forward the proposal to the voters.

The PRAT is a way to have tourists share in the costs of maintaining town roads, they said. In lieu of PRAT, real estate taxpayers would still have to pay for road repairs and construction. Minocqua has about 195 miles of town roads.

Other towns’ experiences

There are about six municipalities in Wisconsin currently collecting PRAT. The city of Tomahawk recently enacted a PRAT. Eagle River has had the tax for several years, and Rhinelander enacted it about a year ago. Rhinelander’s 2018 first quarter PRAT receipts were $177,000, according to Otis.

“It says to me that there’s not a negative effect of having this tax,” said Otis. “It’s not going to decrease sales in this area.” Nor has Eagle River had any problems, he added.

Even with the addition of a PRAT, Minocqua still would be lowest for local taxes (principally room tax) collected of any municipality within the state, according to town chairman Mark Hartzheim.

Albert characterized the PRAT as a “replacement of the taxes you’re going to pay one way or another.” He also said the PRAT would allow the town to reduce its road repair schedule by half. Public works director Mark Pertile said it costs $175,000 to put down a mile of new asphalt.

Change of heart

Supervisor Bill Stengl, who owns a boat business in Minocqua, apparently was swayed by the arguments that the board would earmark tax proceeds solely to upgrade and maintain town roads.

“When you first came before us, I was a clear ‘no’, Stengl told Otis and Albert, “but now I’m leaning toward learning more about it.” Stengl later acknowledged, “At some point we are going to have to raise more revenue (for future town operations).”

Although the state allows PRAT proceeds to be spent on other infrastructure such as beaches, parks and boat ramps, the town board was of one mind that if enacted it would be only used for roads.

Wisconsin Act 25 allows the PRAT to be as high as 1.5 percent (City of Wisconsin Dells and Village of Lake Delton both charge 1.25 percent), but the Minocqua panel is looking at the lowest 0.5 percent rate.

But the fact that town residents would also pay the tax didn’t escape the attention of supervisors.  Supervisor Billy Fried said on principle he opposed adding another tax. Supervisor John Thompson said he didn’t favor another tax, but saw “no harm” in letting the measure go forward to the voters.

Informing the public

With Fried’s dissention, the other four board members agreed to let the committee conduct an informational campaign, including public meetings, to explain the tax program and to answer questions.

The PRAT proposal would then come back to the town board, which would have to pass a resolution calling for a binding referendum by the town electorate, likely this fall during the November elections.

If the referendum passes, then the town board would have to pass another resolution declaring Minocqua a premier resort area. That resolution would be forwarded to the state legislature with a request to declare Minocqua a premier resort area and to allow it to impose the tax.

The proposal stands a better chance for approval if it’s included as part of the next state biennial budget bill, or a budget correction bill, according to committee members. A separate bill would face more intense legislative review. Under the most favorable path, the tax would not be implemented until sometime next year.

Road program loan

In a related road program issue, the board approved applying for a $2.3 million loan from River Valley Bank at a rate of 3.9 percent for 10 years. Two other financial institutions had quoted a rate of 3.99 percent. The loan would be used for road improvements. It was noted that the PRAT could be used to pay off the loan.

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