Mitchell staff warn ballot measure could cut $1.4M'$6.9M from city sales-tax revenue; council urged to set aside reserves

City staff told the Mitchell City Council that an initiated ballot measure set for the November election could reduce the city's sales-tax revenue by anywhere from about $1.4 million to roughly $6.9 million, and urged councilors to prepare now rather than react later.

In a midyear budget briefing, a city finance presenter said the city is about 67% through the fiscal year and that "our contingency is almost 100% committed," leaving limited flexibility for new projects or unanticipated losses. The staffer said earlier state guidance had estimated a narrow grocery-only exemption that would affect roughly 10% of local sales tax, producing the $1.4 million scenario. But later analyses from the Legislative Research Council and related legal opinions suggest a broader "human consumption" reading that could eliminate tax on many items and raise the exposure to about 48% of sales tax collections, which staff estimated could be a roughly $6.9 million hit to the city.

Why it matters: sales tax accounts for a majority of Mitchell's tax revenue, so a large loss would force either substantial service reductions or new revenue tools. The staff presentation laid out specific pressures: funding for law enforcement, parks, the rec center, the hockey arena and other amenities could be cut; in a worst-case scenario the city would need to consider layoffs or shifting costs to property taxes or user fees.

Council members pressed staff for options. One councilor asked whether a legal challenge could delay enactment; staff replied that initiatives typically go into effect after the election but staff could not guarantee how a pending legal action would affect implementation. To avoid a reactive scramble, the presenter recommended designating about $6.5 million of the city's reserves to provide a one-year buffer if the broader revenue loss materializes, then using that time to plan service reductions, alternative revenue sources or structural changes.

Council discussion also focused on public outreach. A community representative working with area chambers and business groups urged an education campaign and described coordinated video messages and short commercials featuring local officials to explain the measure's potential local impacts. That representative said early voting was imminent and warned the city had a short window to reach voters.

Staff told the council it had already moved general-fund subsidy dollars into contingency and that the city had more than $1 million in new subsidy requests for the coming year. To give the council time for detailed review, staff scheduled a budget Q&A work session and a separate subsidy review meeting; staff will circulate calendar appointments for sessions on the coming 16th and the 30th.

The council did not take a formal vote at the meeting. Staff said the next steps are to consider a reserve designation before the books close for the year, finalize follow-up work sessions to craft scenarios and to coordinate with outside groups on voter education.

"We don't have the ability to rely on contingency for any more projects through the end of 2024," the presenter said during the briefing, and later warned that if the broader definition is applied "that's going to be closer to a $6,900,000 hit to the city."