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State lawmakers preview 2013 session, Storm Lake priorities

Wednesday, December 12, 2012

Commercial property tax reform, educational reform and an increased gas tax could potentially surface again during the state legislature's upcoming session, but representatives have expressed uncertainly about potential outcomes.

With the 2013 session set to begin Jan. 14, Sen.-elect Mark Segebart, R-Vail, and Rep. Gary Worthan, R-Storm Lake, discussed issues and priorities with city officials Thursday morning at King's Pointe.

COMMERCIAL TAX REFORM

Disconnect between the Iowa House and Senate has sidelined progress on a commercial property tax bill.

"The House sent four bills to the Senate that went into a committee chairman's bottom drawer, then the Senate tried to pass its own bill and couldn't," Worthan said.

Iowa has one of the highest commercial property rates in the U.S., with properties taxed at 100 percent of their assessed valuation. Multiple versions of the bill varied, with different timelines for phasing in rollbacks or relying on a state-funded multi-million dollar backfill to make up for cities' lost revenue.

"Last year, I said I was not real wild about the governor's backfill situation," he said. "The House had a better proposal---phasing in rollbacks over 14 years---and why it might be too long, it allows cities and counties time to adjust."

Segebart agreed with an extended rollback schedule. "It needs to be done slowly," he explained. "It's a system we have been refining for 100 years, and if we jerk it around, it (commercial property tax reform) will be too big of a shift to change quickly without drastic results."

Relying on the backfill to make up for lost tax dollars is a risky gamble, Worthan said.

"The state has proved time and time again it can't be relied on to fill tax credits," he explained. "When the budget gets tight, it will be the first place the legislature will look for money."

Special consideration needs to be given for funneling a portion of tax relief back into communities.

"A lot of tax reform puts money back in corporations' pockets who don't have any investment in Iowa," Councilman David Walker said. "It doesn't generate new jobs, research and development or benefitting where the money came from---if we can get they money to benefit locally, that would due great."

City officials suggested an inclusive approach to reform should be taken to avoid shifting a major tax burden onto residential property owners.

"It's a complicated issue," City Manager Jim Patrick said. "Yes, we need to reform taxes, but when it

comes to not looking at a comprehensive relief package, it presents significant problems for cities."

He continued, "Cities in general are skeptical of the promise of backfill, because the legislature can't commit future legislators and doesn't have a strong track record of keeping its word."

Municipal budgets have difficulty keeping pace with cost of living increases, especially when it comes to healthcare reform.

With major tenets of the Affordable Care Act coming into effect in 2014, the City of Storm Lake will be faced double the cost of providing health insurance for its part- and full-time employees, Patrick said.

"With healthcare alone having a substantial hit on the budget, property tax reform becomes more critical to us," he said.

EDUCATIONAL REFORM

Although a signature issue of last year's session, little has happened in terms of K-12 educational reform.

Representatives "nibbled around the edges" of improvements, Worthan said, but did not accomplish anything substantial in the bill that was passed.

"While our kids aren't scoring any worse than 25 years ago, half the states have raised their scores and are scoring better than we are," he said. "We've done nothing other than throw money at the situation for the past 25 years."

Passing merit pay or pay for results remains a challenge with educational lobbyists.

"I go back to my time in seventh grade, where you know who the good teachers are, and the ones who are just there for a paycheck," Worthan explained. "If we can't quantify that in an objective way, then there's something wrong."

FUEL TAX

Without backing from the governor for an increased fuel tax, Worthan is skeptical about the issue's advance.

"If we would have had this meeting a month ago, I would have been more optimistic on the fuel tax," he said. "The lukewarm 'I won't veto it' statement the governor made this week is not going to fire anything up in the legislature."

If the Senate had swung to Republican control, Worthan said he believed the fuel tax would be a campaign issue for "years to come."

Following the November primary, Democrats hold a Senate majority, while Republicans control the House, making Iowa one of three states where the two major parties each control one legislative chamber.

"I'm concerned that last year was the last chance to do it for awhile," Worthan said, regarding the fuel tax increase. "It's going to take some leadership, but I've heard the new chair of the transportation committee in the House is supportive of a fuel tax increase."

Pre-session indications point to support for a nine cent increase over three years. Each extra cent of increased fuel tax has been estimated to generate an extra $22-23 million annually.

Per gallon, gas in Iowa is currently taxed 21 cents, and ethanol blends are taxed 19 cents, a tax that has remained unchanged since 1989. Neighboring states Illinois and Wisconsin charge 50.6 cents and 32.9 cents per gallon, respectively. In 1989, cars averaged 15-18 miles per gallon, paying a little over a cent for every mile driven. Today, the average car gets nearly double the gas mileage, but is only paying two-thirds of a cent for every mile on the road.

The Iowa Department of Transportation has reported Iowa's 114,000 miles of roads rank 13th worst in the nation, its 27,999 bridges 17th worst and urban interstates seventh worst. But state revenues for roadway repairs continue to fall short, by $215 million per year, which means repairing 5,4000 structurally deficient bridges and completing 135 highway projects will be put on hold.

The estimated cost for those projects alone is $7 billion.

As a four-term Crawford County Supervisor, Segebart understood the shortfalls of road funding.

"As a Supervisor, I've been encouraging representatives to do something about the gas tax," he said. "I will encourage and promote it as much as possible."

LAKE RESTORATION

A decade into the lake restoration project, Storm Lake is a third of the way to meeting its goal of deepening 50 percent of the lake's water clarity to four meters, and continues to work towards removing itself from the impaired waters list.

When the project began, clarity consistently measured at less than six inches, Mayor Jon Kruse said, but has now increased to 26 inches.

Primary funding for the project is allocated by the Department of Natural Resources, at approximately $1 million per year.

"It's obviously a funding stream we need to see continued, but there are a lot of competition for the dollars," Kruse said. "People have seen what has been accomplished here and the impact it has had on the community."

Dredging has also staved off a potential mess for the City this year: drought-imposed fish kill.

"Our fishing numbers are up incredibly," said Lake Preservation Association President Gary Lalone. "We are a well-known walleye lake that a lot of people have been visiting---our tourism and retail dollars are now up."

The project is estimated to twilight in five years, since the new spoil site has been estimated to hod 2.5 million cubic yards of silt, which will take approximately five years to pull from the lake.

"If we can find another site after five years, great, but we think we are limited there," Lalone said.

ECONOMIC GROWTH

With two Storm Lake companies considering expansion and another outside company considering relocation, preservation of Tax Increment Financing is crucial.

"Please don't throw out TIF," Patrick petitioned. "It's the only tool we have for expansion."

In addition to Storm Lake, cities across the state rely on the economic development tool, which gives businesses inventive to construct new facilities, funded by property tax generated by added value of new construction.

TIF is typically used to finance direct grants or loans for the business, offset the cost of improvements or provision of utilities to serve the development or provide a local match for state or federal development assistance programs.

After Coralville used the program to heavily subsidize its Iowa River Landing commercial project, which attracted a Von Maur department store as an anchor, legislators began to scrutinize the TIF program.



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