Editor’s note: An interesting piece about Burlington, Iowa which discusses the pro’s and con’s of the local option sales tax there. Burlington, about the size of Mason City, will be voting on their local option sales tax this Tuesday. Mason City is looking to set a vote on the local option sales tax soon, as it is set to expire here as well. The item may show up on this November’s ballot. Do you support the local option sales tax?
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Penny tax up for renewal in Tuesday vote
Michael Anderson, The Hawk Eye, Burlington, Iowa –
As voters ponder the local option sales tax renewal this Tuesday, opinions abound about the penny tax’s vitality, or lack thereof, to the city’s ailing finances.
Set to expire this year, the local option sales tax is a 1 percent tax on purchases in Burlington and West Burlington amounting to about $4.1 million in revenue budgeted for the next fiscal year. With a budget deep in the red, city council members not surprisingly support the tax, which ends Tuesday unless it is renewed at the special election.
“No. 1, I don’t look at this as a tax, per se,” Councilman Christopher Reed said. “The local option sales tax affects everybody, and not just the people in Burlington. It’s affects anybody who purchases anything in Burlington.”
He is optimistic voters will choose to keep the tax in place.
“People see the big picture on how much it helps the citizens of Burlington,” he said.
Tax relief vs. tax reduction
Leon Shahan has another perspective.
About half of the penny tax’s $4.1 million estimated revenue for this fiscal year has been allocated for property tax relief, but Shahan, a persistent city hall critic, takes issue with the phraseology surrounding that description.
“If anyone can show me where we ever got anywhere close to 50 percent property tax relief in any one year, I’ll pay $100,” he said.
Shahan said it’s disingenuous of city officials to describe the local option sales tax as bringing about a reduction in property taxes. He points to the total amount of funds collected from the city’s property tax levy in 1994, the year the local option sales tax was implemented. About $6.7 million was collected that year.
Against Shahan’s expectations for what constitutes a tax reduction, the amount of funds collected from the property tax levy increased the following year to about $7.1 million.
“Somewhere in this range, property taxes should have gone down $1.4 million to $1.3 million. It never happened,” Shahan said.
Shahan also contends the main use of revenue generated by the local option sales tax goes to pay off previous debts. The city recently allocated $447,642 from the economic development portion of the penny-tax fund to pay off 80 percent of the debt left from the agreement to purchase the Dresser-Rand complex.
What Shahan’s main argument boils down to is the implementation of the local option sales tax never resulted in a “property tax cut,” as the words “property tax relief” might suggest. While he doesn’t doubt the money generated by the tax is spent on the city’s expenses, he just doesn’t think it’s appropriate to call it a property tax relief when property taxes aren’t being reduced.
Pennies a day
While the penny tax hasn’t resulted in regular tax reductions, City Manager Jim Ferneau said property taxes nonetheless are relieved in the sense that half the revenue generated by the local option sales tax automatically is injected into the general fund.
Property owners may not receive rebates or notice a regular reduction in their taxes, but local option sales tax revenue effectively lessens the burden on their property tax dollars, he said. By keeping the local option sales tax in place, the city can continue to function without having to increase the property tax levy to meet the rising costs of operation.
As one of the few funds in the city’s budget carrying a positive balance, the local-option sales tax has become the source to fund a variety of city operations and functions. Losing such a significant source of revenue would force the city council to consider cuts in services and raise property taxes to offset the $4.1 million hole in the budget.
“You either reduce services or you increase property taxes by that much,” Ferneau said. “And that’s a huge amount to change it by.”
Ferneau said the local option sales tax saves the owner of a home valued at $100,000 about $191 a year in property taxes. He added that doing away with the tax would result in a $3.35 increase in the tax levy rate, raising it from $15.05 to $18.40.
“We choose not to do that,” Ferneau said. “We choose to use the local option sales tax to cover that $3.35 levy.”
“If we don’t vote that in, it’s going to affect other things,” Councilman Shane McCampbell said. “We’re going to have to cut other things to make up for that money.
“The last thing I want to see people do is lose their jobs.”
Since its last sunset in 2002, the economic development portion of the fund has been used for a number of projects, including a $30,000 donation for the Capitol Theater and $80,000 toward the three-year permit and feasibility study for the proposed hydroelectric plant at Lock and Dam 18.
This year, about $656,000 from the penny tax will pay the salaries of eight police officers, and an additional $110,000 for two squad cars. Some of the city’s engineering costs also will be paid for with $50,000 from the fund, and $41,200 has been allocated to pay for the city’s geographic information system.
About $205,000 will go toward economic development projects, including $50,00 for the maintenance of Community Field, and an additional $50,000 for computer equipment. Street projects will draw about $648,000 from the fund, $120,000 for street equipment and $40,000 for the city’s housing demolition program.
The parking ramp at Third and Washington streets requires about $31,400 for a resealing project, and the city’s sidewalk improvement program will draw another $18,000 from the fund.
Mayor Jim Davidson pointed out that doing away with the penny tax in Burlington will not affect West Burlington and the rest of the county, which also implement a one percent tax on purchases. More importantly, with the city’s budget having seen better days, Davidson said the continuance of the penny tax is crucial to correcting the course of the city’s financial trajectory.
“We have, as a council, put ourselves on a path to get our financial house in order,” Davidson said. “And we’ve committed ourselves to finding over $1 million in the next budget cycle somehow to try to make this right-sized. So if we don’t have the local option sales tax, then that’s another $2 million in property tax relief that we’d have to come up with somewhere in the general fund.”
The $1 million Davidson referred to is a portion of $10 million Ferneau projected as the necessary amount to put the city on the path to correcting its negative fund balances over the next five years. Ferneau has said those funds likely will need to be generated through a combination of tax increases and service reductions.
Despite the doubts of nay-sayers like Shahan, McCampbell remains optimistic voters will pass the tax for another 10 years.
“I actually feel like the citizens realize we need it at this point,” he said.
Burlington residents can vote on whether the tax should be renewed at one of three designated polling places from 7 a.m. to 8 p.m. Tuesday.
…keep in mind that when this “tax” was first presented, the city fathers said it would “only” be used to pay down the city debt…but within months they came up with all sorts of new programs to spent the money on…
I guess we need to keep this local option tax BUT it must be used as intended, for property tax relief and NEEDED projects. Not BS like the statues or $3.2 million safe room at the high school.
Joe, don’t be a fool.
I guess we DON’T need to pass this tax on ourselves.
Wise is the taxpayer that takes money away from the Bureaucrats so they stop spending us into oblivion.
Nobody in their right mind would vote to tax themselves for any reason. We can not trust elected officials with our money. When their lips move they are lying.
If you vote for this tax you’re dumber than I thought!!! It’s just gives the powers that be another chance to blow your money…and they will probably attempt to hike the property taxes anyway…just as they already have been and will continue to be despite the fact that few properties are worth was they used to be.
But then you followed Miss CofC down the library path….
DUH! It needs to be passed. You have a LOT of people from out of town who will pay more of this tax than people in Mason City will. This is a gift horse for whatever project is voted on. Rockwell, Sheffield, Northwood, ANYTOWN residents who come to Mason City to shop WILL pay this tax… It’s a no brainer, pass it!
No kidding been to Wal-Mart on a weekend? They must have the whole population of Britt in there.
Reading that last comment from Anonymous, August 6, 2012 at 9:02 am:
The guy wants to shit in their hat and don’t mind shitting in in own hat.
Now that is stupid!
So you think it’s great to shit in your own nest while your are taking money from your neighbors.
What a piss poor attitude.
Money must go on trees in your world and you could care less that you have a government that is wasteful and out of touch with the electorate.
I once heard a fellow say, “Stupidity is fatal.” You need to be extra careful.
So lets see, everyone else comes to Mason and shits in our hat!!! Then they return to their own peaceful small town. We pay taxes to keep the police at wal mart for shoplifters etc., accidents that happen in town and hey half or three quarters of this is from out of towners!!!!! Yep I say lets shit in their hat and tax em!!!!!!!
The way it sounds that money should be used for another police officer. Sculptures can’t catch the bad guy’s. They might need a another cop anyway just to guard them from the vandals.
Nice story about Burlington, but what about Mason City?
Can anyone tell us why we should support this?
What exactly is going to be done with the money? We’ve already spent enough money on crap that I could care less about…and now they want those ugly sculptures…
I think it’s a good idea, if its spent on something worthwhile. I would like to see a reduction in my utility bill…but I doubt that would be affected in anyway.
I don’t know if the voters of Mason City are smart enough to go vote this sales tax down.
It the taxpayers of Mason City had any sense they would vote this sales tax down and tell their elected leaders to stop spending money and work to reduce property taxes.
Mason City has nothing to show for the millions and millions in tax dollars they have used on economic development projects.
Where are the jobs?
Sorry Annonymous, you are wrong. UNLESS there is a sunset cause in the LOST tax that was passed, it will not end until you revote for whatever reason.
http://www.iowa.gov/tax/educate/78601.html
Q. How long does a local option sales tax remain in effect once it is imposed?
A: If a sunset clause is part of the ordinance, the tax remains in effect until that date. If no sunset clause, it stays in effect for an unlimited period. It may also be repealed by election.
Why set them to expire?
State law requires That it e renewed periodically
I stand corrected. The last time it passed in Mason City it had a sunset on it. Don’t know why but it did.
Have to pay for those art sculptures somehow.