Spring Valley will have $265,423 available for economic development over the next two years under a widely praised proposal on how to distribute the portion of the Rochester sales tax to 17 area communities.

The Rochester City Council committee-of-the-whole on Monday, Dec. 17, reviewed a city staff recommendation from City Administrator Stevan Kvenvold and generally supported the proposal. Last year, the state Legislature approved Rochester's sales tax extension request with the condition that $5 million of the sales tax proceeds go to 17 area cities for economic development purposes.

At the meeting in Rochester last week, Kvenvold told the committee that the staff is recommending the following:

• The funding be allocated on a per capita basis, using the 2010 census to determine the population.

• That half of the funding be provided in 2013 with the remaining half in 2014.

• That the receiving cities determine how to best utilize the sales tax funds for the economic development projects of their choosing.

• That the receiving cities provide the city of Rochester with an annual report detailing how the sales tax funds have been used. At the meeting last week, the committee-of-the-whole asked that this be changed to a biannual report.

• That the receiving cities be responsible for compliance of any state requirements involving usage of the sales tax funds.

Spring Valley economic development director Cathy Enerson had earlier said the tax extension will provide a "helpful economic development tool for Spring Valley" and she felt the process proposed was a good one.

Chatfield is also one of the 17 cities and Chatfield City Clerk Joel Young said he reviewed the proposal prior to the meeting and "greatly appreciated this simplicity of the program." Their willingness to provide the funds in the first two years is a "great move as we can get more bang for the buck in this economy as opposed to waiting for a number of years."

The other 15 cities included in this proposal are Byron, Dodge Center, Dover, Elgin, Eyota, Hayfield, Kasson, Mantorville, Oronoco, Pine Island, Plainview, St. Charles, Stewartville, West Concord and Zumbrota. The money that is designated to these communities is to be used for specific capital projects supporting economic development and not operational expenses.

The total population of the 17 cities is 46,699, which was used to figure how the $5 million in funds would be divided. Spring Valley had a population of 2,479 in the 2010 census.

While the Legislature required this provision to share $5 million of the money raised by the half-cent sales tax, it didn't designate how the distribution of funds would be handled. Rochester city staff, in their proposal, noted that they felt the Legislature intended all 17 cities would receive a portion of the sales tax receipts and that local officials in those towns can best determine what economic development projects may benefit their community.

By distributing the money based on population, "this would ensure that each city is being treated equally and fairly in receiving a share of the funding," according to a memo from Assistant City Administrator Gary Neumann that included input from the city's finance director, deputy city attorney and bond counsel.

The staff also felt that it isn't equipped to oversee what could be more than 50 projects in the outlying communities and that staff in each of the 17 cities better understand the needs and requirements of their particular city.

Young said, "That makes sense to me. It just would not be appropriate to make Rochester liable for the actions of other individual cities and, similarly, the city of Rochester is in no position to pass judgment on development activity in any other city. The staff proposal did a nice job clarifying such responsibilities and that also demonstrated appropriate confidence in those cities."

Rochester city staff members also noted that they thought the sharing of a portion of the sales tax revenues raised by the city of Rochester to the 17 cities creates some "good will" towards Rochester from residents in the 17 cities and that if Rochester officials chose to "micro-manage" the usage of the sales tax allocations, "this good will may be diminished."

Jerry Williams, a retired Rochester superintendent who was chairman of the Common Cents Steering Committee that campaigned for the sales tax, also reviewed the proposal and he said in a memo to the council that "it is very well done and clearly covers all the necessary bases."

He noted that he was originally against sharing city sales tax funds with neighboring communities, "but then I got wiser." His mind changed as he talked to people during the campaign for renewal of the sales tax, he explained to the council in his memo.

"I believe that including the 17 surrounding communities in 'our' economic development effort makes us a stronger region - a 'we're all in this together' attitude - and puts us in a position of being inclusive rather than exclusive," he wrote in his memo. "We have much to gain, economically as well as in positive feelings toward Rochester that this will be good for all of us. This agreement puts into place the safeguards to help make that happen."

Enerson agrees that the sharing aspect is good for the entire region.

"Sharing the tax with rural neighbors who pay into the fund with their purchases makes sense," said Enerson earlier this year. "These economic development dollars will strengthen the rural communities and, after all, sharing creates healthy, strong, vibrant neighboring communities and these communities are the gateway to Rochester."

Young noted that there is a "symbiotic relationship" between all the cities in the region since Rochester employers draw so many workers from the smaller communities.

"Without the job opportunities in the regional center, the health and vitality of these smaller cities would be jeopardized, naturally," he said. "At the same time, without vibrant communities to provide a strong, quality workforce, other problems would arise."

Although some individual council members, meeting as the committee-of-the-whole, expressed different ideas last week, the majority tended to favor the staff's recommendation. The Rochester council will review the program in January.