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Legislative Issues for 2004MEMORANDUM October 30, 2003 TO: FROM: SUBJECT: The Honorable Mayor and City Council Members Michael C. Van Milligen, City Manager City of Dubuque State Legislative Issues for the 2004 Session I respectfully recommend adoption of the City of Dubuque State Legislative Issues for the 2004 Legislative Session. Michael C. Van Miliigen MCVM/jh Attachment cc: Barry Lindahl, Corporation Counsel Cindy Steinhauser, Assistant City Manager City Of Dubuque State Legislative Issues For The 2004 Session State Budget In response to a revenue shortfall during last session the State of Iowa implemented across-the-board cuts in expenses. Some of these cuts reduced revenues to cities, with no relief to cities for state-mandated programs. Concerns remain over the impacted of the reduced revenue to cities and that similar action will be taken in the 2004 session. Requested Action: The state should restore revenues to cities that were cut last year in an effort to make cities whole. Funding of Major Transportation Projects The State of Iowa has used a strategy of allocating funds for completing the major transportation projects in the state as opposed to using a piecemeal approach. This strategy has been successful with extensive work being completed on major corridors. The same strategy should be used for major projects in larger cities, which require significant funding commitments for completing the projects in a reasonable amount of time. Examples include the Southwest Arterial, the Julien Dubuque Bridge and U.S. 20/Dodge Street. Requested Action: Support efforts to continue the strategy for funding major transportation projects throughout the state. Fully Funding Enrich Iowa Program Enrich Iowa is a state aid program for Iowa's libraries. Until recently, Iowa was one of 8 states without direct state aid to libraries. Currant state funding is at $1 million statewide versus the recommended $3 million for full funding. If Enrich Iowa were fully funded, the Carnegie-Stout Public Library could realize at least $100,000 a year in state aid. Requested Action: Support efforts to fully fund the Enrich Iowa program at $3 million statewide. Set the rate for State Tax on Gaming Revenues A recently ruling by the Supreme Court determined that Riverboats can be taxed at a fiat rate of 20% while land-based casinos and other gaming operations are taxed at an increasing rate up to 36% regardless of the size of the facility. During the 2003 Legislative session a graduated tax concept was put forth by the Governor's Gaming Task Force to create an equitable rate system. RequestedA¢fion: Support the graduated tax concept put forth by the Governor's Gaming Task Force including the recommendation to exempt some table game revenues from the tax if the three pari-mutuel facilities in the State are allowed to offer table games. Rescind House File 324 Reporting requirements In the 2001 General Assembly House File 324 (HF 324) was enacted. This law set up numerous new requirements for cities concerning bidding for street, bridge and culvert projects involving construction, reconstruction and improvements costing over $25,000 ($50,000 for cities over 50,000 in population). One requirement was a new report that is labor intensive and taxing to city public works departments. In addition to the report that cities currently submit on street receipts and expenditures using road use tax funds, the new report requires cities to provide detailed cost accounting for all projects within 90 percent of the bid threshold. The report also includes a statement of the cost of purchasing, leasing, or renting construction or maintenance equipment. Since the reports are extremely detailed and some cities do hundreds of street projects annually, this new requirement will entail a city needing additional resoumes. HF 324 did not charge the Iowa Department of Transportation to use this new report for any specific state purpose, resulting in 950 cities expending resources that could be used elsewhere. This becomes particularly onerous for small cities that publicly bid the majority of street projects. Requested Action: Support effort to reduce the reporting requirements for HF 324. Enterprise Zone Incentives The Enterprise Zone legislation was written to promote private investment in economically distressed areas of a city or county. To assist new employees of companies locating in enterprise zones, the legislation provides for employers to establish a capital fund for down payments or rental subsidies. The business funds this program through a credit from state withholding taxes, based on the wages paid to the participating employees. An amount equal to 1.5 percent of the gross wages paid by the employer is credited from the payment otherwise withheld, and used to capitalize this fund. This feature of the legislation has not been utilized to date. One reason is that the credit produces so little capital for the housing assistance program. For an employee earning $10 per hour, the credit equals approximately $300. Typically, down payment assistance programs offer $3,000 to $5,000; rental subsidy programs average $2,500 to $3,000 annually. In order to make this program effective, the credit for withholding should be increased. Another option is to allow the credit to be "pooled," to be made available to all eligible employees. As the legislation currently is written, the 1.5 percent credit is made available on the basis of withholding from individual employees - for the benefit of only that employee. If the credit could be aggregated, a larger capital fund could be established, from which all employee purchasing or renting housing in the enterprise zone could access funds for their housing needs. Another reason for lack of employer participation in this program is that the legislation requires the employer to choose between use of the tax credit for job training or for providing a housing assistance program. Employers to date have chosen to use the credit to pay for training new employees. Requested action: The legislation should be amended to provide the credit for both job training and employee housing assistance and to "pool" the funds. This will increase the tax credit and increase interest in the program by employers. Property Tax The current tax structure for state and local governments is a mix of tax laws, rates and policies that do not provide for a fair and consistent tax system. During the 2003 session, legislation was passed to establish a new property tax system. The legislation changes the current market value of property assessment approach to a square foot approach for the valuation of houses and other buildings. The initial valuation will be determined by dividing the current value by the square footage. The property is only revalued when the structure is sold or improvements are made that change the square footage. Requested action: Rescind legislation that determines the valuation of property based upon square footage and design a tax structure that provides tax equity and policies that are consistent with an overall direction for state and local government taxation. Place a freeze on the residential rollback at no lower than 50% during the review, ensure full funding of state property tax exemption and update the sales tax distribution formula. Military Tax Credit The State of Iowa provides for veterans to receive a military tax credit on their property taxes. The credit reduces their City property tax by the levy rate of the City, which is $10.76 per $1,000 of valuation. The State, however, reimburses the City at a much lower rate, which potentially will be reduced again. This leaves a substantial deficit for other property owners to pay. Requested action: Enact legislation to fully reimburse cities for the State of Iowa's military tax credits. Expand Cities' Extraterritorial Jurisdiction Cities have extraterritorial jurisdiction (ET J) for up to two miles from their corporate limits for subdivision review and approval only if the County has zoning for the rural areas. Extending the cities' ETJ to include review and approval of zoning changes would facilitate planned and managed growth. Legislation should provide incentives for governments to voluntarily plan together, and identify recommended land use impact to be considered during the planning process. The League supports legislation that expands land management practices such as ETJ of cities to include review and approval of zoning changes. Requested action: Support legislation enabling cooperative planning and effective land management practices. Eliminate the "20% Objection Rule" for Rezoninfls Section 414.5 of the Iowa Code requires a favorable vote by three-fourths of the City Council members - a 6 to 1 vote - to approve a rezoning request over the written objections of 20 percent or more of the owners of the property being rezoned, or 20 percent or more of the property owners within 200 feet of the subject property. The concepts that nearby property owners have a say in rezoning cases is valid; however, this must be balanced against the needs of the entire community. At 20 percent, a minority of property owners can dictate the outcome of community development, especially when one property owner with a large tract of land can constitute the entire 20 percent. Requested action: Raise the "objection percentage" of owners of property within 200 feet from 20 percent to a simple majority (51%); or require a favorable vote by two-thirds of the City Council members, or a 5 to 2 vote, when the objection threshold is reached. Property Owners on Historic Preservation Commissions Section 303.34 of the Iowa Code requires that: "At least one resident of each designated area of historical significance shall be appointed to the commission." This requirement is problematic for the City of Dubuque's Old Main Historic District, which is primarily commercial. It would be beneficial for the City in the recruitment and retention of commissioners to be able to appoint property owners to represent historic districts. Furthermore, since historic preservation regulations apply to the rehabilitation, renovation and restoration of property, allowing property owners to serve on the commission would be appropriate. Furthermore, some Iowa cities are experiencing burgeoning commissions as historic districts are designated and representatives of each district are appointed. To avoid "over-populating" a commission, allowing a majodty of the districts to be represented on a historic preservation commission would be appropriate. 4 Requested action: Enact legislation allowing property owners to represent historic districts on the Historic Preservation Commission. Appeal of Actions by Historic Preservation Commission Section 303.34 of the Iowa Code states that an aggrieved party may appeal the action of a historic preservation commission to the City Council, and then to district court. The City Council, like the court, has to consider whether the commission exercised its powers and followed the guidelines established by law and ordinance, and whether the commission's action was "patently arbitrary and capricious." This process places the City Council in the difficult and uncomfortable position of interpreting technical guidelines and determining their appointees "arbitrary and capricious." The City Council would support an alternative process. Requested action: Consider legislation providing an alternative appeals process regarding an action of the historic preservation commission. State Mandates Cities are often faced with implementing mandates from the state and federal governments without receiving the necessary funds for implementation Requested action: Enact legislation that exempts local government from providing any new service or engaging in any new activities mandated by the state if the state does not provide full funding. IOWA LEAGUE OF CITIES 2004 LEGISLATIVE PRIORITIES Efficient Government Priority: Seek financial and legislative incentives that encourage regional planning and service sharing arrangements among governments including cities, counties, schools and state government. Background: While making reductions to cities in 2003, legislators called for increased efficiency of local governments. Cities must proactively demonstrate efficiencies in place and seek legislative incentives for future sharing and consolidation. For example, land management legislation should offer financial incentives for regional planning. Barriers to service sharing should be removed to allow for more flexibility between local governments. City Revenues Priority: Support legislation expanding Home Rule options for city revenue sources to cover critical services to ensure safety and quality of life for residents. Revenue alternatives contribute to reduction of reliance on property taxes and include but are not limited to municipal fees, local income taxes, increased sales and hotel/motel taxes and new funding options for public safety. Background: As legislators focus on property tax reform in the upcoming year, some interest groups will advocate that reform should result in reduction. State funding to cities and counties was permanently reduced by approximately 25 percent in the 2003 session. To avoid greater dependence on property taxes, alternative revenue sources should be explored. Alternatives will allow cities to provide the services requested by or mandated for citizens. Mandate Relief Priority: Support legislation calling for relief from mandates that negatively impact the ability to provide city services. Examples include but are not limited to setting a percentage for taxation of residential property, increasing the public bid threshold, streamlining the municipal bond financing process, reducing publication costs and addressing rising employee benefit costs. Background: The costs of providing city services are exacerbated by unfunded mandates. In 2004, legislators should address the increased flexibilities for cities that were proposed for but not included in the 2003 "reinvention" process. Economic Development and TIF Priority: Support initiatives that provide tools for cities to serve as economic catalysts for Iowa. This includes enhancement of tax increment financing (TIF) through minimal changes, and continuation and expansion of the Community Attraction and Tourism (CAT) program beyond 2004. Background: This priority includes agreement to change TIF law to gradually eliminate the state appropriation that reimburses the $5.40 per $1,000 uniform levy to schools. The Community Attraction & Tourism program will end in 2004 unless additional funding is appropriated. 7