Legislative Priorities 2003MEMORANDUM
TO:The Honorable Mayor and City Council Members
FROM:Michael C. Van Milligen, City Manager
DATE:October 28, 2002
SUBJECT:Legislative Priorities 2003
Assistant City Manager Cindy Steinhauser, with input from staff, has coordinated an
extensive list of the City's legislative issues for the upcoming session. Additionally,
Cindy has been in contact with the Iowa League of Cities and has included the Iowa
League's Legislative Priorities. Both lists are attached.
I respectfully recommend Mayor and City Council approval of these priorities for
presentation to Legislators.
Michael C. Van Milligen
City Manager
MCVM/ksf
Attachment
cc: Barry Lindahl, Corporation Counsel
Cindy Steinhauser, Assistant City Manager
CITY OF DUBUQUE
STATE LEGISLATIVE ISSUES
FOR THE 2003 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. The first
round of cuts reduced tax credits, replacement funds and shared revenues by
4.27%, which reduced City of Dubuque revenues by $89,865. The second round
of cuts announced in May of 2002 impacted revenues to the City for FY 2003 by
an additional $78,000. This loss of $167,865 equates to a 1% property tax
increase for our taxpayers. Concerns remain over the impact of the reduced
revenue to cities and that similar action will be taken in the 2003 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.
Set the rate for State Tax on Gaming Revenues
A recently ruling by the State determined that Riverboats, land-based casinos
and other gaming operations are equal and should be subject at an equal rate as
opposed to a fiat rate for riverboats and an increasing rate for land-based
casinos. Concerns remain over the State's approached to revenue shortfalls by
tapping into gaming revenues by increasing the fiat rate of 20%.
Requested Action: Enact Legislation that sets the tax rate at a lower
percentage (as close to 20 % as possible) for small gaming operations like
Dubuque Greyhound Park and Diamond Jo Casino and a graduate tax rate for
larger gaming operations.
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Increase the public improvement bid threshold
For over 20 years, the state bidding law has required that if a public
improvement's estimated cost is over $25,000, the governing body must
advertise for sealed bids by publishing notice to bidders. Like any other
construction project, the cost of most city projects has increased greatly over the
past 20 years. Based simply on the consumer price index, inflation would have
increased the $25,000 public bidding threshold requirement set in 1980 to
$54,400 in 2002. The cost for publication has also increased over the past 22
years, for these reasons, the League supports an increase in the public
improvement bid threshold.
Requested Action: Enact legislation to support an increase in the public
improvement bid threshold.
Rescind House File 324
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
resources. 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.
RequestedAcfion: Support effort to rescind HF 324 and allow cities to use
own workforce on public improvements.
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
wagers 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.
]3
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 Reform
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. It is
the result of many years of adopting tax changes that may or may note be
consistent with previous laws or tax policies. Often, the tax policies are
contradictory, such as the residential rollback's shift of tax burden from
residential to commercial and industrial property owners, and the elimination of
machinery and equipment tax, which shifts the tax burden from industrial to
residential and commemial property owners.
Requested action: Perform a comprehensive review of the entire tax structure
of the State of Iowa 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
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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 Rezonings
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.
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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 majority of the
districts to be represented on a historic preservation commission would be
appropriate.
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 altemative 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 if the state does not
provide full funding.
An example of this is additional retirement benefits granted to public safety
personnel in the 411 state retirement system. These new benefits, combined
with lower earnings on investments and depressed market prices for the pension
portfolio, has caused an increase in the City's contribution rate from 17% to 22%
(estimated). This will result in additional expense of $425,600 to the City of
Dubuque property taxpayer in Fiscal Year 2004.
IOWA LEAGUE OF CITIES
2003 LEGISLATIVE PRIORITIES
Priority: Call for a review of Iowa's state and local tax structure and pursue
legislation equitably distributing property tax burdens and sales tax
revenues,
A) Call for a comprehensive review of Iowa's state and local tax structure
and freeze the residential rollback at no lower than 50% during the study.
B) Ensure full funding of state property tax exemptions.
C) Update the sales tax distribution formula.
BACKGROUND: Iowa's tax system is very complex. Recent efforts to study or
make changes to the system have met with little success. Current and projected
economic constraints indicate this effort needs to be undertaken now. The future
of Iowa and its economic progress will hinge on the willingness of state leaders to
work toward a state and local tax structure that promotes economic growth and
prosperity for the state and its businesses and residents.
A) Support a comprehensive review of Iowa's state and local tax structure
with a commitment to enact recommended changes and freeze the residential
rollback during the study.
Previous studies of Iowa's state and local finances have been dominated by
political objectives. In order to effectively address all relevant issues, policy
oversight must be balanced by both technical objectivity and adequate time and
resources.
The process should involve establishment of a commission to follow a proposal
from the Iowa Department of Revenue and Finance that recommends
consideration of many issues, including:
· Stability, dependability and adequacy of revenue sources, considering
variance in local capacity;
· Equity in the distribution of responsibility for financing government
programs and services;
· Effect of government fiscal policy upon economic decision-making by
individuals and businesses;
· Costs imposed on individuals, businesses and levels of government
associated with administering and complying with tax laws and
regulations; and
· Enhancement of government accountability.
Attempts to further limit city resources while reviewing the state and local tax
system will be resisted by the League. During the study, a floor should be set on
the residential rollback at Fiscal Year (FY) 2003 levels or no lower than 50
percent. The residential rollback is the percentage of the assessed value of a
home subject to taxation and is currently 51.6676 percent. This number has
consistently dropped, resulting in a shift in the property tax burden to commercial
and industrial property owners. Because the residential rollback has declined,
more communities have needed to increase levy rates to simply maintain the
same level of services. This has created a disparity in the property tax burden
recognized by commercial and industrial property owners who must pay almost
100 percent of their property's assessed value on the increased levy rates.
Bringing more balance between classes of property and sharing the property tax
burden proportionately is essential to a property tax system that works.
Establishing a floor on the rollback provides a stopgap measure against further
erosion of the property tax base, which is hampering local governments from
providing necessary services, and will freeze the shift in the property tax burden
to commercial and industrial property owners at its current level.
B) Require full state funding of all mandated property tax exemptions and
credits.
Because other states provide higher levels of state funding and shared sales tax
revenue to cities, their municipalities are far less reliant on property taxes than
are cities in Iowa. This fact was demonstrated in a recent study commissioned by
the League comparing Iowa's municipal tax structure to other states. At the very
least, cities should be able to rely on the state to fully fund all state-mandated
property tax exemptions and credits. In FY 2003, the following were funded at
less than 100 percent:
· Homestead Tax Credit funded at 90 percent;
· Military Service Tax Exemption funded at 97 percent; and
· Elderly & Disabled Tax Credit funded at 80 percent.
C) Update the sales tax distribution formula and establish a mechanism for a
rolling average of property tax levied to more accurately distribute local option
sales tax (LOST).
Legislation passed in 1985 allowing cities and counties to collect LOST provided
the following distribution formula:
Each county's account is distributed on the basis of population (75 percent)
and property tax levies (25 percent). The population factor is based on the
most recent certified federal census. The property tax factor is the sum of
property tax dollars levied by boards of supervisors or city councils for the
three years from July 1, 1982, through June 30, 1985. The property tax data
is compiled from city and county tax reports available from the Iowa
Department of Management. Only population and property tax levies of the
jurisdiction imposing the tax are used in figuring percentages. The
computation is as follows:
D: (.75 x P x Z) + (.25 x V x Z) where
D = distribution for the taxing jurisdiction
P = judsdiction's population percentage
V = jurisdiction's percentage of property tax levied
Z = total collections for county in which jurisdiction is located
Today, the Iowa Department of Revenue and Finance is still using the property
tax levies from the three-year period of 1982-1985 to calculate "V" in the above
formula. This period no longer reflects current taxing capacity throughout the
county.
Priority: Support economic development initiatives that provide necessary
tools for cities to serve as economic engines for the state of Iowa.
A) Protect tax increment financing (TIF) as an economic development tool.
B) Support continued or renewed funding of state development incentives
including the Brownfield Redevelopment fund, Resource Enhancement and
Protection fund (REAP), historic preservation tax credits, Vision Iowa and
the CAT program, and others.
BACKGROUND:
A) Protect TIF as an economic development tool.
Tax increment financing (TiF)is an indispensable tool in community economic
development. As Iowa competes nationally and internationally for businesses
and other development, it is vital TIF be preserved to aid city officials in their
efforts. Increasingly, cities are called upon to provide economic development
to the state. Without the necessary tools such as TIF, the entire state loses
out on the opportunities provided by city government.
Often confused with another economic development incentive, tax abatement,
the two operate very differently. Tax abatement allows for an exemption from
property taxes for a limited period of time as defined in Chapter 404 of the
Code of Iowa. With TIF, the full taxes assessed on the property are collected,
but the increased value of the property (or increment) is earmarked for use
within an urban renewal district established by a city or county. The increment
is determined by the property value increase from the base year (as of
January 1 prior to establishment of a TIF) and current value. Taxes received
on the base value continue to be disbursed among all taxing jurisdictions,
while taxes on the increment remain with the city or county for use within the
urban renewal district.
TIF revenues are often used to supply infrastructure to a development. For
example, water and sewer lines and roads may be paid by TIF funds as an
incentive for a developer to build in the district. Sometimes they are used as
an incentive for a new or expanding business.
A recent League survey indicates the average length of a TIF district is 13
years. This is significant considering urban renewal districts used for
residential development are limited to 10 years, districts founded under an
economic development purpose are limited in duration to 20 years, and
urban renewal districts classified as a slum or blight have no time limit for
existence.
B) Support continued or renewed funding of state development incentives.
State funding was reduced or eliminated for several important economic
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incentive programs for FY 2003, including the Brownfield Redevelopment
Program ($1,000,000 elimination) Resource Enhancement and Protection
($8,000,000 reduction) Aviation Assistance ($600,000 reduction) and Local
Housing Assistance Program ($800,000 reduction.)
Cuts to libraries and other cultural development initiatives impede
programs that add to the quality of life for Iowa residents. Important
progress gained through the Vision Iowa and Community Attraction and
Tourism (CAT) programs will come to an end if these programs are not
continued. Less than $10 million remains for the large projects supported by
Vision Iowa. The CAT program is slated to end by FY 2004.
These programs are cdtical in enabling cities to help reach the state's goal of
improving the view that Iowa is a great place to visit and live by the year
2010.
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Priority: Pursue legislation that provides for a more equitable distribution
of the road use tax fund and other transportation funding.
BACKGROUND: The tragic events that faced this nation have presented
legitimate concerns regarding the safety of our nation's infrastructure. Today,
maintaining and protecting the roads and airports not only means economic
vitality for Iowa, but providing the security citizens expect and deserve.
The Road Use Tax Fund (RUTF) is the master read fund where net revenues
from the taxes and fees paid by highway users are held until distributed to the
subsidiary fund that finances state, county and city read projects. The last
change to the formula was in 1990.
Subsidiary Funds Current %
Primary Road Fund (IDOT) 47.5
Counties 24.5
Farm-to-Market 8
Cities 20
As state revenue has decreased over the past few years, the attempts to transfer
monies from the RUTF to supplement the state general fund have become a
matter of contention. Any transfer from the fund for non-transportation programs
detracts from the purpose for which the fund was created - investment in Iowa's
infrastructure.
Although over the years there has been a tremendous effort to return non-
construction diversions that result in an increased per capita share for cities, the
current formula is inadequate for maintaining, upgrading and constructing city
streets.
Although 77 pement of Iowa's population lives within incorporated boundaries of
a city, the formula provides the least amount of revenue to cities. Citizens expect
their city to maintain and upgrade residential and commercial streets. Cities are
often fomed to subsidize read funds with tax dollars to meet citizens' demands.
But, simply changing the formula will not solve the problem.
Iowa's roads are interconnected, and cities recognize that safe highways outside
incorporated boundaries are just as important as the streets their citizens use
every day. Because a change to the current allocation will result in one or more
entities losing funding, the League supports an increase in overall funding to
keep those entities at existing levels.
Equally important to funding the state's road infrastructure is funding for airports.
Many economic development projects depend on available air transportation
within close vicinity, making a state investment in airports important for the future
development of Iowa. State budget shortfalls have significantly impacted
programs on which municipal airports depend for safety and improvement
projects.
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In the 21st century, both air and land transportation play a crucial role in keeping
communities competitive and vital. The League believes in the protection of
monies in the RUTF, encourages an increase in the formula allocation to cities,
and also supports sufficient funding for other transportation programs.
Priority: Support legislation to increase the public improvement bid
threshold to a figure that reasonably reflects current project costs.
BACKGROUND: For over 20 years, the state bidding law has required that if a
public improvement's estimated cost is over $25,000 the governing body must
advertise for sealed bids by publishing notice to bidders.
Like any other construction project, the cost of city projects has increased greatly
over the past 20 years. Based only on the consumer price index, inflation would
have increased the $25,000 public bidding threshold requirement set in 1980 to
$54,400 in 2002. Publication costs have also increased during that time.
Priority: Support legislation authorizing the use of impact fees for
improvements related to developments.
BACKGROUND: In Home Builders Association of Greater Des Moines v. City of
West Des Moines, the Iowa Supreme Court ruled that charging developers for
park development is illegal since it is not currently authorized by the Code of
Iowa, The Court found no legislative authority in Iowa for cities to impose an
excise tax on developers or builders.
Both the Home Rule amendment to the Iowa Constitution and Code Chapter 364
require express authorization by the general assembly for cities to levy a tax.
Since the service provided by the park was not dedicated to the property being
charged -- but to the public at large, the court found West Des Moines was
levying a tax, not a fee.
The court, however, found "practical and sound reasons for allowing a city to
require a monetary exaction from a developer in lieu of a dedication of parkland."
But the court determined, "the decision to extend that power to local government
is for the legislature, not this court."
The American Planning Association defines impact fees as "payments required
by local governments of new development for the purpose of providing new or
expanded public capital facilities required to serve that development. The fees
typically require cash payments in advance of the completion of development,
are based on a methodology and calculation derived from the cost of the facility
and the nature and size of the development, and are used to finance
improvements offsite of, but to the benefit of the development."
The APA states impact fees are being increasingly used by local governments
throughout the country to finance a wide variety of public facilities including
sewer and water facilities, parks, roads, schools and libraries. Approximately half
of the states have enacted enabling legislation for impact fees. Iowa should join
that group, enacting legislation that authorizes impact fees to be used for street,
traffic control and infrastructure improvements needed to support developments
and for other public facilities including parks and other recreation, convention,
cultural or entertainment facilities.
Priority: Support legislation enabling cooperative planning and effective
land management practices.
A) Support incentives for cooperative planning between §overnments,
including planning for effective land management practices.
B) Support legislation enabling cities to plan for and develop open
spaces including parks and trails.
C) Support local input on siting of animal confinement facilities.
BACKGROUND:
A) Support incentives for cooperative planning between governments.
Regional strategic planning has emerged since the 1990s as a major decision
making tool according to the Local Officials Guide: Shaping a Region's
Future, a Guide fo Strategic Decision MakinE for Regions, published in 1995
by the National League of Cities. An interest in providing services demanded
by citizens efficiently and economically encourages local governments to
cooperate in a myriad of ways, evidenced by the many 28E agreements on
file with the Iowa Secretary of State. Land management is one decision
requiring significant planning that affects residents of multiple jurisdictions.
Legislation should provide incentives for governments to voluntarily plan
together, and identify recommended land use impacts to be considered
during the planning process.
B) Support legislation enabling cities to plan for and develop open spaces
including parks and trails.
The Governor's Strategic Planning Council recommended in the Iowa 2010
report that by the year 2010, Iowa be known as "a recreational destination,
featuring the country's best network of trails...and a healthy lifestyle focusing on
exercise and sports participation as a central part of community life." Trails and
parks add significantly to the quality of life in Iowa for residents and are an
attraction for visitors and future residents. Legislation passed in 1999 changing
sections of Code of Iowa Chapter 6A regarding condemnation of agricultural land
has hindered trail development and should be changed. The League supports
continuation and expansion of funding sources for trail and open space
development.
C) Support local input on siting of animal confinement facilities
During the 2002 session, the Iowa legislature passed SF 2293 regulating animal
agriculture. The criteria for a decision matrix regarding construction of
confinement units will be developed before the end of 2002. Final siting decision
authority rests with the Department of Natural Resources. The League supports
local participation in the decision process.
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Priority: Pursue legislation-enabling funding of fire and emergency medical
services and other homeland security protections.
A) Support reasonable allocation of state and federal funding for homeland
security.
B) Support expansion of training opportunities related to homeland
security.
BACKGROUND:
A) Support reasonable allocation of state and federal funding for homeland
security.
The federal government is allocating funds to states for use at the state and local
levels to implement stronger homeland security measures. Financial constraints
at the local level will inhibit preparedness without a reasonable allocation of state
and federal funding.
B) Citizens have increasing service expectations of local fire departments, but
fewer volunteers are available to serve (especially during the day) and funding
and training are perennial concerns. Fire departments report state training can be
inaccessible and inconvenient; state officials say the demand for training
exceeds their supply capability. Legislation should expand opportunities and
funding for homeland security-related training.