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News analysis: Additional sales tax needs explaining

By Staff | May 7, 2008

There could very easily be a lot of misunderstanding about the 1-cent sales tax that Excel! Estherville would like voters to decide upon. The earliest the election could be held would be Aug. 26. Estherville would receive an additional $475,000 with the extra penny tax.

In 1997, Armstrong approved the tax by a vote of 85-62, Ringsted 63-40, Dolliver 17-11, and Wallingford 32-14. Armstrong and Ringsted still have the extra penny tax while Dolliver and Wallingford repealed theirs. The Iowa Department of Revenue under state code determines how sales tax revenues are distributed. Property assessment levels and population factor into distribution of tax receipts.

The proposed tax and its distribution needs some explanation.

First of all, every area of the county which does not have the additional penny sales tax would vote Aug. 26, rural areas included. When Estherville voters turned the tax down by a vote of 876-377 in 1997, they essentially turned over a lot of money to the cities in Emmet County that did pass the extra penny tax during the same election. As a result, Armstrong, which would now be receiving $68,700 if Estherville had approved the sales tax in 1997, is now receiving $170,000. Ringsted, which would be currently receiving $30,762 if Estherville had approved the tax in 1997, is currently receiving $76,000.

It is because Estherville residents turned down the tax in 1997 that Armstrong and Ringsted have so hugely benefitted. If Estherville residents approve the extra penny Aug. 26, Estherville will not really be taking money away from Armstrong and Ringsted. The fact of the matter is that Armstrong and Ringsted will be receiving the amount of tax receipts they would have received all along according to the state-mandated distribution formula had Estherville initially approved the sales tax when it came up for a vote in 1997. Armstrong and Ringsted have essentially been receiving a windfall because Estherville did not approve the tax.

If a majority of rural residents vote against the tax, they will still be paying sales tax when they go to a town that has approved the tax. However, if rural residents do indeed vote as a majority against the tax, they will not receive the $290,000 in yearly property tax relief that they would receive if they approve the tax.

Every government entity will determine how the extra penny is spent. That means that Estherville will determine how Estherville’s tax dollars are spent, Armstrong will determine how its money is spent, and rural residents, by making their wishes known to the Emmet County Board of Supervisors, will have a voice in how their share is spent.

Excel! Estherville is asking that the City of Estherville allocate 60 percent of the city’s extra revenue toward community development. They’re asking the county to contribute 60 percent toward a revolving loan fund or other means to promote county development. That percentage will be determined by the supervisors, however. According to the supervisors’ discussions, their idea of county development could include county roads, rural law enforcement, the Nature Center, county parks, or whatever they deem as county development. In short, if rural residents approve the extra penny tax, they will be voting to give themselves $290,000 in property tax relief since the tax burden will be shifted from property to sales tax.

It’s a complicated issue and requires that a person look not just at what the tax will do now if approved Aug. 26, but what it would have done had it been passed 11 years ago.

It also makes you wonder where Estherville would be today had voters decided they wanted to give themselves another $5 million over the past 11 years.

Out-of-towners pay sales tax. Plain and simple. If Excel! Estherville’s efforts succeed, our guests will be helping to pay for the improvements in our cities and county that both they and we will enjoy.

The extra penny tax will not help just Estherville. It will help other communities in our county and the rural areas too. But it will help them only if they vote for it.