Senate Taxes Committee hears multiple sales-tax exemption requests for local construction projects; bills laid over for omnibus tax bill

The Minnesota Senate Taxes Committee on Feb. 20, 2025 heard nearly a dozen bills asking for refundable sales-tax exemptions for construction materials used on local public projects, from a permanent PFAS water-treatment plant in Woodbury to school renovation and new-build projects, county government centers, a regional exhibition center and an airport capital program. Most bills were laid over for consideration in the omnibus tax bill.

Committee members said the requests, which ask the state to appropriate refunds from the general fund, are intended to lower project costs for local taxpayers and to preserve planned project scopes that have been reduced because of inflation and supply-chain pressures.

The committee heard extended testimony on a handful of projects that committee members and witnesses described as among the most time-sensitive or costly. Senator Nicole Mitchell said Senate File 13 would exempt materials and supplies used in construction, reconstruction, upgrades, expansion, renovation and remodeling of Woodbury’s water treatment facility, water tower and associated pipelines; the bill would make those taxes collected and then refunded and directs an appropriation to the Department of Revenue. Mary Van Milligan, identified in the hearing as Woodbury’s public works director, said the city has built temporary treatment facilities to address PFAS contamination and is moving forward with a permanent treatment plant, a water tower and roughly 17 miles of pipeline. She said the city expects a funding gap of up to $35,000,000 after the 3M settlement fund is used. “Therefore, on behalf of the city of Woodbury, I humbly ask that you pass SF 13, which provides a refundable exemption for these construction materials,” Van Milligan said.

School districts also sought the exemption because construction management procurement practices can make material purchases ineligible for the ordinary school sales-tax exemption. Superintendent Jeremy Schmidt of Becker Public Schools described Senate File 70, as amended, seeking a refundable exemption for Becker district projects and said the district’s $43,000,000 bond passed in November 2021 has seen costs rise by more than 25 percent in some areas; the exemption would restore elements the district cut because of higher-than-expected costs. Big Lake and Redwood area school districts and Becker’s municipal and other district projects were presented with similar explanations: bond or referendum-backed projects whose scope was reduced because of inflation and higher material costs.

Delano’s multi-season Spirit Park expansion (Senate File 11 55) drew discussion about differing construction-material estimates. Phil Kern, Delano city administrator, said the city now estimates about $4,500,000 in materials within an overall $7,200,000 project; he said the Department of Revenue’s estimate of $2,900,000 appears to reflect an earlier project design and the city will follow up with the department to update the record.

Benton County presented Senate File 957 for a new Benton County government center in Foley. County Administrator Montgomery Headley said the estimated project cost is roughly $29,100,000 with about $9,300,000 in materials; he told the committee the county considered renovating older buildings but concluded a new facility is the better option and that reuse plans for the 1903 courthouse are under discussion.

Rochester officials described an update to the city’s water-reclamation plant (Senate File 10). Rochester City Council President Randy Schubert said the multi-year upgrade is expected to yield annual energy savings of about $230,000 and chemical cost savings of about $70,000; Deputy Public Works Director Aaron Luckstein was available for technical questions.

Olmsted County’s regional exhibition center at Graham Park (Senate File 782) and Stearns County’s new justice center (Senate File 1077) were also presented; Olmsted County witnesses described roughly $42,000,000 in planned work with about $15,000,000 in materials (a roughly $1,000,000 sales-tax impact), and Stearns County officials described a proposed justice center to address courtroom and detention capacity, funded in part by a local-option sales-tax referendum the county’s voters approved.

Senator Hochschild’s bill to increase state aid for soil and water conservation districts (Senate File 1089) drew broader policy discussion about whether those ongoing funds are better provided through the general fund or legacy/dedicated funds; Sheila Vanni of the Minnesota Association of Soil and Water Conservation Districts said predictable state aid allows districts to plan staffing and leverage federal grants.

Mitch Killian of the Metropolitan Airports Commission testified on Senate File 1184, which would exempt construction-material sales tax for airport projects at Minneapolis–St. Paul International Airport. Killian told the committee that the commission finances projects with airport revenue bonds; exempting state sales tax would reduce bond borrowing and interest costs, freeing capital to be reinvested in airport projects and regional air service.

Committee action: the committee adopted several author amendments (recorded as adopted by voice vote) and laid each bill over for possible inclusion in the omnibus tax bill. Committee members noted the cumulative possible state cost of numerous one-time exemptions and said prioritization will be required when the committee prepares its omnibus language.

Votes at a glance

- SF 13 (Woodbury water treatment/PFAS) — laid over for consideration in omnibus tax bill - SF 945 (Redwood Area Schools refund/exemption) — laid over for consideration in omnibus tax bill - SF 67 (City of Becker — city hall/police station materials) — laid over for consideration in omnibus tax bill - SF 69 (Big Lake Schools renovations/replacements) — laid over for consideration in omnibus tax bill - SF 70 (Becker Schools; amended to extend eligibility dates) — laid over for consideration in omnibus tax bill; A1 adopted (author's amendment changing date) - SF 220 (Fairmont — UV biosolids/disinfection, storage tank, public works building; amended) — laid over for consideration in omnibus tax bill; A1 adopted (author's amendment) - SF 957 (Benton County government center, Foley) — laid over for consideration in omnibus tax bill - SF 1155 (Delano Spirit Park/ice arena) — laid over for consideration in omnibus tax bill - SF 10 (Rochester water reclamation plant; amended) — laid over for consideration in omnibus tax bill; A1 adopted (author's amendment) - SF 344 (Chanhassen Bluffs Sports Complex; amended) — laid over for consideration in omnibus tax bill; A1 adopted (author's amendment) - SF 782 (Olmsted County Exhibition Center at Graham Park; amended) — laid over for consideration in omnibus tax bill; A1 adopted (author's amendment) - SF 1077 (Stearns County Justice Center; amended) — laid over for consideration in omnibus tax bill; A2/A1 adopted (author's amendment) - SF 1089 (Soil & Water Conservation District aid increase; amended) — laid over for consideration in omnibus tax bill; A1 adopted (author's amendment correcting appropriation amount) - SF 1184 (Metropolitan Airports Commission capital projects; amended) — laid over for consideration in omnibus tax bill; A1 adopted (author's amendment correcting dates/amounts)

What happened next

Committee staff will incorporate amendments agreed on the record and continue to work with authors and the Department of Revenue on updated revenue estimates where witnesses identified discrepancies. Most sponsors asked for the exemptions as refundable credits or refunds, and each bill includes language appropriating funds from the state general fund to the commissioner of revenue to make refunds where applicable.

The committee chair said members will need to prioritize among one-time exemption requests when constructing the omnibus tax bill because of the aggregate state cost of multiple requests.