Gruenhagen bill would provide tax break to Watertown for water tower construction

Minnesota Senate Taxes Committee on Wednesday reviewed a bill authored by Senator Glenn Gruenhagen (R-Glencoe) that would provide a sales tax exemption to the city of Watertown for construction materials used to build a new $6.5 million water tower.   

The bill, Senate File 3618, would exempt from Minnesota sales and use taxes all materials, supplies, and equipment purchased between May 1, 2024 and January 31, 2026 for the water tower project. The taxes would be paid upfront but the city would receive a refund. 

The exemption aims to reduce the financial burden on the small community of about 4600 residents as it undertakes this major infrastructure investment. 

“Like any small community, funding major infrastructure projects like this are incredibly challenging, especially for low-income and fixed-income residents,” Senator Gruenhagen said. “Watertown desperately needs this water tower, and a construction materials sales tax exemption will ease a significant burden on local residents.” 

Watertown Mayor Michael Walters testified that an additional water tower is critical to meet growing residential demand and ensure adequate fire protection services. 

“This city’s second water tower is needed to keep up with current demands and ensure that we have capacity for our fire service to protect our Watertown residents and businesses and the surrounding townships that are within our fire district,” Walters told the committee. 

Construction is scheduled to begin this fall after over a decade of planning. The state provided $3 million in capital investment money last year toward the total $6.5 million project cost. 

The sales tax savings would provide relief as the city also funds a $25 million wastewater treatment facility expansion mandated by the state.  

ADDITIONAL MATERIALS