Local tax proposals would raise millions

Fri November 12 2004
Posted Nov 11, 2004
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[Want trails? This may be the way....] By TIM HIGGINS REGISTER STAFF WRITER November 12, 2004 Separate plans to raise two taxes and direct the money to Des Moines-area arts and cultural attractions would capitalize on growth in the western suburbs and plow new ground for sharing money in the state. The proposals face significant hurdles, including voter approval. The proposals: • The sales tax in Polk, Dallas and Warren counties would be raised 1 percentage point, if voters approve. The increase, on average, would cost each person in the three counties about $147 each year. The Greater Des Moines Partnership, the metro area's chief economic development group, is pushing the plan because civic leaders believe that cultural and arts activities are a key to economic development. • A separate plan pushed by an arts group and the League of Cities would raise the state cap on hotel room taxes by 2 percentage points, which would allow communities to increase their rate. Changing the cap, now 7 percent, would require legislative approval, and increases in individual cities would require public votes. Together, the plans would generate millions of dollars in the first year for Des Moines-area projects such as the Principal Riverwalk and regional bicycle trails, and for attractions such as the Science Center of Iowa and Living History Farms in Urbandale. Supporters of the sales-tax increase also suggest using some of the money to reduce property taxes. A university economist says the two-pronged idea represents a new approach to sharing money. "We have regional approaches to things, but not like this," Iowa State University's David Swenson said. "This is much more focused, much more objective-driven." Supporters must not only run ballot campaigns but also get agreement from city and county elected leaders. "The first hope is that we can provide substantial property-tax relief" with the sales-tax increase, said Kent Sovern, senior vice president of government relations for the Greater Des Moines Partnership. He called the sales tax "the only stream that's untapped for local governments." The partnership has persuaded the Metro Advisory Council, a coalition of elected leaders from all three counties, to examine a sales-tax increase, which could raise $70 million in 2006. "The earliest this would come to a discussion is next year," said Indianola Mayor Jerry Kelley, chairman of the council. "There haven't been T's dotted." Most elected officials are reluctant to support either plan until more details come out. "It's an idea," Des Moines Mayor Frank Cownie said. "I don't even want to say it's a good idea." According to a partnership memo, the sales-tax proposal would be put on the ballot by next fall. Sixty-five percent of the new revenue would be divided among local governments to reduce debt and pay for capital projects, such as streets, sewers and other high-cost projects. The rest would be funneled into a "regional authority" of elected and business leaders that would dole it out to cultural activities. The state sales tax is 5 percent. Voters in Polk, Warren and Dallas counties in recent years have raised the tax 1 percentage point to pay for school construction. The partnership proposal would set the rate at 7 percent on most purchases in the three-county area. Among the many details that would need to be ironed out: • How would the authority be formed and who would serve on it? The authority would include two Polk County supervisors and one supervisor each from Dallas and Warren counties plus at least six additional local elected officials and five business representatives, according to a partnership memo. • How would the tax proceeds find their way to cultural activities? Initial plans call for the authority to use 25 percent of its money for cultural and arts programs, 35 percent for trail construction and maintenance, and 40 percent for operating public facilities. There are two ways to get a sales-tax proposal on the ballot in 2005: • With a petition signed by 5 percent of eligible voters in each county (about 7,000 signatures in Polk and about 800 each in Dallas and Warren). • With motions passed by governing bodies that represent at least half of the population in the affected counties. Supporters say they plan to try the latter route. They hope to have elected leaders' support by next spring. The idea is rooted in the partnership's "Project Destiny" recommendations, which were touted in 2003 as a way to attract and retain businesses. The plan included, among other things, a half-percentage point sales-tax increase. At this point, it is unclear how money generated from the tax increase would be divided, although it has been suggested that Des Moines receive the largest share. Initial plans call for using a formula based on population, property-tax rates and the number of tax-exempt properties to divide the money among cities and counties. Under such a formula, early calculations show that Des Moines could receive $24 million and West Des Moines could receive nearly $4 million. Part of the goal is to address conventional wisdom that Des Moines' financial problems are in part because of the city's large number of tax-exempt properties, such as hospitals and state government buildings. Polk County Supervisor Robert Brownell, a Clive Republican, said he knows of the proposal but hasn't taken a position. "I think it will be a tough sell," he said. "But if you make the case that it will reduce your property taxes, people could get behind it." The Iowa League of Cities and Bravo Greater Des Moines, an umbrella group for cultural and arts interests, are at the forefront of the proposal to increase the hotel-motel tax. If lawmakers approve the change, and voters support it at the polls, it would provide a more concrete way to pay for attractions associated with Bravo, such as the Des Moines Arts Center and the Blank Park Zoo. A hotel-motel tax increase of 2 percentage points could raise an additional $2 million annually in the metro area, officials figure. Now , $7 million is collected by cities, and Bravo has already sought more money from that pool. The tax-sharing proposals "will help the attractions in terms of funding, and it would certainly be expected that people in those areas will appreciate and enjoy the facilities, which they can consider their own," said Susan Judkins, the League of Cities' director of government affairs. Bravo Chairman Steven Zumbach, a Des Moines lawyer, said the important thing "is to view cultural and arts as a regional asset that needs regional support." "As part of fundamental fairness, the region ought to be paying for these things," he said. "It shouldn't be the responsibility of one community." REACTIONS Would you support a sales-tax increase if it was guaranteed that the proceeds would be used to lower property taxes and help pay for local cultural attractions? "No, it's not guaranteed that you'd recoup. It sounds like something to boost up the prices. Half the property around here in the suburbs doesn't have tax for the first 10 years. I'll save my penny per buck." - Lydel Lockman, 26, Ankeny "We think we'd probably do that. We came from the East Coast, so more cultural activities sound great." - Ryan Rippin, 32, and Melanie Rippin, 32, Clive "Definitely. I don't get much Social Security, but a penny isn't going to hurt anyone." - Eloise Anderson, 80, Des Moines "I see that as hitting a double whammy for Des Moines city residents because they already pay higher property taxes. At this point I'm against it. Not that I'm against supporting cultural activities, but there must be a better way. If I knew more about it, I might change my mind, though." - Jan Ramsay, 55, Des Moines "It's not a good idea for me. There's no reason to do it." - Kai Vang, 26, Des Moines