MARSHALL — Marshall’s local option sales tax could bring the city more than $1.8 million a year in revenue, according to forecasts in a recent University of Minnesota Extension analysis.

The analysis also said the majority of Marshall’s local sales taxes are being paid by non-residents.

“Kind of the bottom line is that 65-66% of the sales tax generated in the city of Marshall comes from people who do not live in the city of Marshall. But that’s consistent with Marshall as a regional center,” Marshall Mayor Bob Byrnes said of the analysis’ findings.

Marshall city staff went over the highlights of the Extension tax analysis at Tuesday’s city council meeting.

“We did contract with the University of Minnesota Extension to give us more updated numbers on local option sales tax, and who pays what, in terms of resident versus non-resident,” said Marshall City Administrator Sharon Hanson. The Extension completed its analysis in August.

The city is proposing to use its 0.5% local sales tax to fund construction of a new Aquatic Center in Marshall. In November, residents will vote on whether to extend the amount of time the sales tax is in effect to pay for up to $18.37 million in general obligation bonds for the Aquatic Center.

The Extension report included forecasts of future sales tax revenue, based on 2021 sales and use tax data available from the Minnesota Department of Revenue.

“In the actual report, there is some forecasts on future sales tax collections in aggregate, and also in different categories,” Hanson said. “So what the study did is, it actually looked at total sales tax collected in the state, and then took income levels from the city of Marshall and the county to figure out what would be paid for by residents and then by non-residents.”

The analysis estimated that non-residents accounted for 65.5% of taxable sales under Marshall’s local tax. The report noted that Marshall was a shopping hub in the region, and that more people came into the city for work than left it. According to 2021 data from the U.S. Census Bureau, more than 6,400 workers were commuting into the city, while about 2,000 Marshall residents worked outside the city. More than 4,500 Marshall residents worked in the city.

The Extension analysis gave sales tax forecasts for 2022 through 2025, with each estimate having an upper and lower bound. For example, sales tax proceeds in 2022 were estimated to be between an upper limit of $2.02 million and a lower limit of $1.62 million.

Forecasted sales tax revenues were more than $1.8 million a year for 2022-25. In 2024, the forecast was $1.86 million, with a lower limit of $1.54 million and an upper limit of $2.19 million.

In a presentation of the Extension report, Hanson also included data the city collected on the local sales tax. Actual data on Marshall’s local sales tax showed revenues of more than $1.5 million in both 2019 and 2020. Sales tax revenues rose to $1.76 million in 2021, and $1.93 million in 2022. Hanson said the city only has 2023 data on sales taxes collected through June, but this year Marshall is projected to generate $1.91 million in local option sales tax.

“It looks favorable in terms of meeting some of the projections from the University of Minnesota, and it looks favorable for that funding source for the Aquatic Center if it is approved,” Hanson said. Under the bonding schedule for the proposed project, the bond payment for the initial year was $1.7 million, Hanson said.

Byrnes said it was positive to have the information in the Extension analysis.

“This is really good data, and I think it’s good to have factual-based data that can be made available to the public,” he said.