FAIRMONT — For the past three years, Fairmont has been collecting a half-cent local option sales tax, and the coffer is filling up. Currently, there’s about $2.2 million sitting in the fund.

“We’re collecting quite a bit more than we anticipated, and it’s adding up,” said Paul Hoye, Fairmont finance director. “Initially, when we were looking at passing that referendum, we were looking at $600,000 a year.”

That number was based on a retail study done by the University of Minnesota Extension Service in early 2016. Since then, Hoye said, legislative changes in sales tax collection for online purchases have pushed up the original projection.

“Now you’re paying your local sales tax for any online purchase so some of the increase might be related to that,” he said. “With COVID, people have been buying things online instead of going to Mankato and spending their money there, where we wouldn’t see any sales tax revenue. I think that’s why we haven’t seen a big drop in that revenue.”

In 2019, the city collected $925,000, and Hoye predicts the 2020 sales tax income will be even higher.

The state collects the sales tax and issues a monthly check to the city for its half-percent share. That money is kept in a separate account that has only been tapped for two expenditures.

The council approved a $125,000 outlay for the community center committee to hire an architect, construction manager and others to do preliminary planning on the proposed facility. Another $50,000 was allocated to the Albert Lea Family Y to establish a YMCA presence in Fairmont, developing programming for all sectors of the population. However, less than half of this money was used before COVID paused the Y’s efforts. The YMCA has been the front runner to manage the community center if it is built.

Fairmont’s half-cent local option sales tax took more than a year to develop, going through several levels of state and local approval.

Local voters approved the tax by a 61 to 38 percent margin during the general election in November 2016, with the ballot question stating the funds would be used for local recreation amenities such as parks and trails and a possible community center.

The proposal, which added the half cent onto the state tax of 6.875 percent, then headed to the Minnesota Legislature where it was approved during a special session in 2017 and signed by the governor. The city then had to file with the Minnesota Secretary of State, notify the state Commissioner of Revenue, hold a public hearing and adopt the tax through a local ordinance.

The local option sales tax went into effect on Oct. 1, 2017, raising the percentage in Fairmont to 7.375. The tax will be in effect for 25 years, until 2042, or until $15 million is collected, but the city can request that the Legislature extend it.

On Sept. 24, 2018, Fairmont City Council members Tom Hawkins and Ruth Cyphers voted to allocate $600,000 of the tax money annually to the community center, while Wayne Hasek and then-member Jim Zarling voted no. In the absence of the fifth council member, Bruce Peters, Mayor Debbie Foster cast the deciding vote to approve the allotment.

At a council meeting earlier this week, members questioned what to do about the funds in excess of the annual $600,000 commitment and agreed to hold discussions at a later date.

Because of the wording on the 2016 ballot, the funds must be used for recreational amenities, which is a broad category.

“Whatever it’s used for, the money will be reinvested in the community,” Hoye said.