The Ottumwa Courier

January 24, 2013

Tax reforms likely

Commercial property tax rollback, gas tax increase probable this legislative session, city officials say

CHELSEA DAVIS
Courier Staff Writer

OTTUMWA — Three city officials got a taste of what could come out of the Iowa Legislature this spring and how possible tax reforms could bruise Ottumwa’s bottom line.

Councilmen Jeremy Weller and Bob Meyers, as well as City Administrator Joe Helfenberger, attended the Iowa League of Cities’ Legislative Day this week in Des Moines.

Based on the League’s three-day conference last fall, they developed six legislative priorities: responsible property tax reform; increase road and bridge funding; fair and sustainable public pension systems; local decision making; hometown economic development; and assist communities with water infrastructure.

“Even though it’s early [in the legislative session], they gave us indications of what they thought would occur and major issues coming out of the Legislature this year,” Meyers said of state Rep. Mary Gaskill, D-Ottumwa, and state Sen. Mark Chelgren, R-Ottumwa.

Weller said commercial property tax reform could happen this year, which would significantly impact city revenue.

“The last couple years they talked about doing something and never got anything done,” Weller said. “This year it’s on the Democratic agenda as well as the Republican agenda to get something done in that area. I really do anticipate something coming down.”

Commercial property tax rollback is inevitable, he said.

“Is it totally a bad thing? No. But it could be a bad thing if they wanted to knock 40 percent off of commercial property tax over a short amount of time,” he said. “If we had to cut 10 percent a year for four years to get down to 60 percent, that could be very drastic and could hurt Ottumwa.”

There are ways to make it “hurt less,” though, Weller said, such as a smaller rollback over a longer period of time.

In his Condition of the State address, Gov. Terry Branstad proposed a 20 percent cut to commercial and industrial property tax over four years.

“Now you’re talking 5 percent a year is maybe a little more doable,” Weller said. “The state has said it would backfill anything we lose at 100 percent. Our concern is will they actually fund that and how long does it last? Forever? Two years? Six years? There are still a lot of working pieces that need to be hammered out and discussed.

“I would like to see it in the six- to 10-year range so it’s just a couple percent a year. If it drops 20 percent over 10 years, that 2 percent is easier to swallow every year than 8 or 10 or 5 percent.”

Meyers said the state has to stop spending more than it has and realize that it can’t keep taxing people in order to raise revenue.

One idea thrown out this week was to equalize taxes across the board on agricultural, industrial, commercial and residential property.

“That seems fair and yet then someone speaks to you from an ag point of view about, wait a minute, if you’re taxing based on production, [ag land] doesn’t have roads or infrastructure in that farmland area that you have in towns,” Meyers said.

Helfenberger is concerned about the future consequences of corporate property tax rollback.

“This Legislature can’t bind future legislatures, so if they backfill these amounts to cities, it’s not guaranteed,” Helfenberger said. “If they say they’ll backfill, it doesn’t mean they will and it doesn’t say how long they will.”

An increase to the gas tax is in the legislative running again this year.

“The gas tax is something I think more people would be OK with as opposed to a couple things they presented,” Weller said of a presentation by transportation committee members on alternative options to a gas tax increase. “One option is something Oregon is trying to implement, where you pay per mile that you drive every year. They would put a GPS on everybody’s vehicle. There were some real radical options.

“After listening to them talk, really, the gas tax might be the simplest way to do it.”

But with an increase in hybrid and electric cars on the road, Meyers said they’re still using roads and infrastructure, but “they’re not paying, then, through the gas tax.”

Meyers said he believes legislators are aware of how much funding the state’s transportation and highway infrastructure needs.

Weller said for every penny the gas tax increases, it would generate $22 million.

“And approximately 20 percent of that would be paid for by out-of-state people traveling through,” he said.

He said this is comparable to the 1 percent Local Option Sales Tax in Ottumwa that is also paid by those traveling through the city.

“People come into your community to buy things; now they’re helping pay for the streets and sewers we need infrastructure improved upon,” he said. “I think that’s maybe the most reasonable solution offered yesterday.”

The gas tax has not increased from its current 21 cents per gallon of regular gasoline since 1989.

Iowa has more than 114,000 miles of roads and nearly 25,000 bridges, according to the Iowa Department of Transportation.

“We really do have lots of miles of roads and bridges to take care of in the state,” Weller said. “That money that’s generated is stretched more than it was 23 years ago.”