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Proposed local option sales tax casts ripples

By Staff | May 14, 2008

An Aug. 26 election for a proposed additional 1-cent local option sales tax for Estherville, some other Emmet County communities, and rural areas is putting some wrinkles into plans by other local governments.

The tax was approved by Armstrong, Ringsted, Dolliver, and Wallingford in 1997 but defeated in the rest of Emmet County. The tax was later repealed in Dolliver and Wallingford.

Since the tax is based on population and assessments, Armstrong and Ringsted have kept their full share of the tax.

However, if approved in Estherville Aug. 26, Ringsted will lose $45,238 and Armstrong will have a $101,300 shortfall in revenues from the tax. Since they already have the tax, Ringsted and Armstrong voters will not vote in the Aug. 26 special election.

The Armstrong City Council met in special session on the matter Monday night.

“It looks like we would lose $100,000,” said Connie Thackery, city clerk. Beyond that, the impact on Armstrong would be nothing short of severe — nearly 10 percent of the city budget which has current year revenues of $1,103,484.

Each community determines by the ballot language where the money will be spent. For Armstrong, 60 percent goes for streets, 10 percent each recreation and public safety, 8 percent economic development, 5 percent each to the library and Community Center, and 2 percent to senior citizens.

Armstrong had planned a $330,000 storm sewer project for this year which will be pared down to $250,000 by delaying street repairs.

“In our eyes, it’s unfair the way it’s collected and we don’t get to keep it,” Thackery said. “There is no other means to collect for it to make it up.”

Thackery said the City of Armstrong has already set its fiscal 2009 budget which would be directly impacted with reduced local option sales tax revenues starting Jan. 1. “That comes right out of what we’ve budgeted for this next year,” she said.

The Emmet County Board of Supervisors Tuesday morning wrangled with language for the local option sales tax on the ballot. The major difference among the supervisors was how much should go to county development. County Auditor Bev Juhl said she needed to have the supervisors determine how the tax would be allocated by June 20.

Supervisor Randy Beaver said he had no problem with 60 percent of the tax going to countywide betterment.

“I do,” said Supervisor Jim Jenson, noting that he would favor 40 percent going to county betterment. Supervisor Ron Smith split the difference, saying he could go for 50 percent going for countywide betterment. Board Chair Alan Madden said rural areas would buy into the tax more if 60 percent went to police, fire, and county services with 40 percent for county betterment.

Madden also noted that property tax relief does not mean property tax reduction. He suggested that the local option sales tax might delay increases in property tax bills three to five years.

Juhl said whatever the supervisors set the percentages at for spending the tax, those percentages need to remain in place as long as the tax is in place.

The board decided to continue its discussion of the tax at its May 20 meeting when they hope to have an Iowa Department of Revenue representative on hand to explain the local option sales tax distribution formula.