Local Option Sales Tax Info 1987 and 1989LOCAL OPTION SALES AND SERVICE TAX INFORMATION SHEET
;:TOTAL YIELD FOR CITY = $3,100,000 BASED UPON LATEST ESTIMATES.
AVERAGE ANNUAL* IMPACT ON A FAMILY OF (4) EARNING:
$20,000 = $ 63
$30,000 = $ 85
$40,000 = $105
*from 1986 Federal Income Tax Optional State Sales Tax Tables
December 28, 1987
AN ESTIMATED 25% OF TOTAL REVENUE WOULD COME FROM OUTSIDE THE CITY OF DUBUQUE.
Groceries, prescription drugs, gasoline and other special motor fuels, and new and
used automobile sales would not be taxed.
State law guarantees that the distribution and uses stated on the election ballot are
legally binding on the City and can only be changed by vote of the citizens in a public
election and that the citizens can repeal the tax by a public election.
State law provides that a city can enact a local option sales and service tax in its
own jurisdiction without relying on the approval of the entire county as in the case
of a wheel tax.
The proposed distribution does not enable new or expanded City services or permanent
employment increases. It will help maintain current, necessary services.
SPECIAL STREET ASSESSMENTS:
30% yields $930,000. This amount would enable at least a 75% reduction of special
street assessments.
COMMUNITY PROPERTY UPKEEP:
20% yields •$620,000. Designated uses would be for repair and maintenance of storm
sewers, sidewalks, steps and walls, and curbs on City property; traffic signals and
signs; bridges; and buildings and facilities (e.g. airport, parks, swimming pools, Five
Flags Center, library, fire stations, Law Enforcement Center, City Hall); for transit
equipment; for riverfront and wetland development; and for economic development.
DIRECT PROPERTY TAX RELIEF:
50% yields $1,550,000. A direct reduction of approximately $1.75 per thousand dollars
of assessed valuation in property taxes based upon FY 1988 valuation.
Sioux City enacted the local option sales tax in September of 1986 and already this
year has reduced property taxes by $2.24 per thousand.
ESTIMATED BENEFIT TO THE DUBUQUE HOME OWNER WITH A MARKET VALUE OF:
$35,000 = $42 reduction in property taxes plus #
$53,748*= $69 reduction in property taxes plus #
$75,000 = $100 reduction in property taxes plus #
#Additional reduction in property taxes due to reduced borrowing for community property
upkeep. To this savings must be added the impact of having street special assessments
reduced by at least 75 percent.
*Average value of Dubuque home.
December- 28,-1987
CITY OF DUBUQUE
.QUESTIONS AND ANSWERS ABOUT THE LOCAL OPTION SALES AND SERVICES TAX
1. What is a local option tax?
A local option tax is a tax imposed by the city, county, other local govern-
ment, or combination of local governments, after the local voters have
approved such a tax Examplesof local option taxes include: (a) a sales
and services tax; (b) an earnings or payroll tax on wages of those working
within a jurisdiction; (c) an income tax on those living within 'a jurisdic-
tion; (d) a wheel tax on vehicles within a jurisdiction; and (e) a tax on
hotel/motel rooms. In Iowa, authority to impose a local option tax comes
from the State legislature, but the "option" or decision to impose such a
tax rests with the local voters. A simple majority is required to pass a
local option tax.
2. What local option;taxes are permitted in Iowa?
Prior to 1985, Iowa allowed two forms of local option taxes.- One was the
income surtax for local school districts and the other the hotel/motel tax.
(A 5% hotel/motel tax was approved by Dubuque voters on November 7, 1978.
This tax generates approximately "$450,000 per year.)
In 1985 the Iowa legislature authorized three additional, broadbased local
option taxes (Chapter 422B, 1985 Code Supplement). These were local sales
and services tax, local earnings tax and local vehicle tax.
An amendment to the Iowa Code on local option taxes was -adopted by the 1986
General Assembly deleting the local earnings tax from the list of authorized
local option taxes.
Current State law does not permit a local option income tax for citizens,
nor is the State legislature likely to approve such a tax for citizens.
3. What is the local option sales and services tax?
The local option sales and services tax is a tax imposed by a city or
county on goods and services sold within the city or county. The tax is
calculated as a percentage of the retail price of the particular purchase.
The local option sales and services tax may not be imposed on any
transportation not subject to the State sales tax.
By State law the local option sales and services tax cannot exceed 1% of
the total retail price of goods and services purchased. The local option
sales and services tax proposed for the City of Dubuque County is 1%.
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. What_.items _are _exempt from the local option sales and services tax?
Any items exempt from the State sales tax are also exempt from the local
option sales and services tax.
Generally, goods and services exempt from the local option sales and services
tax include: food items; prescription drugs; medical and dental services;
new and used automobiles and trucks; farm machinery and equipment; industrial
machinery, equipment and computers used in the manufacturing process; gaso-
line and special fuels; and lottery tickets.' In'addition, in the City of
Dubuque,hotel and motel room charges are also exempt since they are subject
to a -local hotel/motel tax:
The sale of automobiles and trucks is subject' to the State use tax; not the
State sales tax. Therefore, the sale of new and used'automobiles and trucks
is not subject to the local option sales and services tax.•
5. Who will
pay the local
option sales and services tax?
Each person making 'a purchase will pay the local option tax at the time of
purchase in the same way as the State sales and services tax is paid. The
State will collect the 1% local option sales and services tax in addition
to the State sales and services tax. The 1% local option tax will be
returned to the city and county governments according to a formula set by
State law.
6. How will revenue from the local sales tax be used?
The Dubuque City Council and other city councils, as well as the Dubuque
County Board of. Supervisors, must designate the use of local option tax
money in their jurisdiction.
The Dubuque City Council has designated that the revenue received from the
local option sales and services tax shall be used as follows:
• 50% or approximately $1,550,000 will be used for direct and immediate
property tax reduction.
• 30% or approximately $930,000 will be used for (a) the reduction by at
least 75% of street special assessments and (b) the maintenance and
repair of streets
• 20% or approximately $620,000 will be used for (a) upkeep of City -owned
property such as sidewalks, steps, storm sewers, walls, curbs, traffic
signals and signs, bridges, and buildings and facilities (e.g., Airport,
parks, swimming pools, Five Flags Center, Library, fire stations, Law
Enforcement Center, City Hall); (b) Transit equipment such'as buses; (c)
riverfront and wetland development; and (d) economic development projects.
The above distribution will not restore previous personnel and/or budget
cuts nor provide for expanding City services. The local option sales and
services tax is intended to help keep the level of service we now have;
reduce property taxes; reduce street special assessments by at least 75%;
and provide for•the maintenance and repair of City properties, buildings
and facilities as described above. The dollar estimates are based on a
full year's anticipated receipts.
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. Can the percentages and_purposes be.changed by future city councils?
No, the percentages and purposes :for which the revenue from the local
option sales and services tax can be spent are set by the election and can
be changed only by another election.
8. Can the local option sales and services tax. be blocked by County voters?
No, the local option sales and services tax does not have to pass County-
wide. This is different than the requirement for the vehicle tax. If the
voters in Dubuque, Asbury and Sageville, voting as a unit because they are
contiguous cities, approve the -sales tax, it will be implemented in the
three cities regardless of how the vote turns out in the rest of the County.
However, only those communities ithat approve their own local option sales
tax will share in the money generated.
9. How does this proposal differ from the sales and services tax proposal voted
on in November 1986?
• The primarydifference- is that instead of '30% being used to replace'a
portion of future City borrowing for capital improvement projects, the
300
for thelmaintenance
to reduce street special assessments by at least 75% and
and repair of streets;'
The 50% to be used -for direct property tax reduction remains the same;
• The 20% to -.be used to replace lost General Revenue Sharing Funds for the
upkeep and maintenance of City facilities and property has been clarified
by spelling out specifically the types of projects for which the money
can be spent and expanded slightly to include job expansion and retention.
10. How much revenue will be generated as a result of the tax?
Based upon the latest available sales tax information form the Iowa
Department of Revenue, it is calculated that- a County -wide 1 cent local
option sales tax would generate approximately $4,900,000. The City of
Dubuque share will be approximately $3,100,000 (63%). The remaining
$1,700,000 will distribute $1,227,500 (25%) to Dubuque County and $572,500
(12%) to the remaining cities in the county.
11. How will the sales tax revenue be divided between the cities and the county?
Local option sales tax revenue will be divided: (a) 75% on a per capita
basis using the most recent certified federal census and (b) 25% based on
property tax levies for three prior years (Fiscal Years 1983, 1984 and 1985).
12. If approved by the voters on February 2, 1987, When would the tax become
effective, when would jurisdictions begin receiving revenue and when would
property tax relief take effect?
If approved, the.State would:begin collecting the local option sales tax on
April 1, 1988 and would begin distributing revenue to local jurisdictions
. on October 1, 1988. The bill for property taxes due September 30, 1988 and
March 31, 1989 would reflect the reduction in property taxes.
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13. Why is the local option sales :and services -tax important to our community?
There are seven primary reasons why the sales tax is important:
• To reduce property taxes;
• To reduce street special assessments by at least 75%;
• To maintain and repair City streets, sidewalks, walls, storm sewers,
building. and facilities;
• To replace lost Federal and State funds;
• To maintain City services, facilities and jobs;
• To preserve Dubuque's sound fiscal condition and credit rating;
• To reduce future City borrowing.
14. How will .the local option sales and services tax affect property tax?
In Dubuque, 50% or approximately $1,550,000 of the revenue from the local
option sales tax will be used for rdirect and immediate property tax
reduction. In addition, sales tax revenue will be used to eliminate a 13.5
cent ,propertytax per $1,000-valuation.used for capital- improvements. This
represents a direct and immediate property tax reduction of approximately
$1,670,000 representing 13.5 percent of the Fiscal Year. 1987-88 property
tax requirement of.$12,402,423
and
If the 1 cent local option sales and services tax had been in effect for
preparing the Fiscal Year 1987-88 budget, property taxes and the property
tax rate would have been 13.5% less. On a house with a taxable value of
$41,580 this represents a property tax savings of approximately $69 from
what was actually approved. In this example, you would have to purchase at
least $6,900 in taxable items to net out paying more taxes. To this
savings must be added the savings resulting from having street special
assessments reduced by at least 75%.
In the long run property taxes should be further reduced by using sales tax
income to reduce future borrowing requirements for capital improvements and
thereby reduce future property taxes to pay back the borrowed money plus
interest.
15. Would the local option sales and services tax be deductible from income
taxes?
No, under recent federal and state law changes, the local option sales and
services tax, like all sales taxes, is no longer deductible from Federal
and State income taxes.
16. Is there a time limit after which the local option sales tax would expire?
No, it would stay in effect for an unlimited period unless it is again
placed on the ballot and voted out.
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17. Why is all of Dubuque'County `voting on the local option sales and service
tax?
State law requires a County -wide election for implementation of the local
option sales and services taxa Each incorporated area :and the unincor-
porated area state separately. on.the ballot their intended use of the sales
tax revenues.' The vote in each incorporated area. and the unincorporated
area can pass or fail independent of the results of other jurisdictions in
the County except Dubuque, Asbury and Sageville which vote as a unit because
they are contiguous cities. The local Option sales tax is implemented in,
and only benefits, those jurisdictions that pass the_tax.
18. Why has the City Council selected the local option sales and services tax
to again be placed on the ballot?'
A local option sales and services tax and_a, local option vehicle tax are
the only tWcy new local option taxes available, or likely to be available,
to local governments. Both options recently have been on the ballot and
both have failed to be approved. The local option sales and services tax
failed on November 4, 1986 and the vehicle tax failed on October 20, 1987.
The City Council believes it has taken the best from the two previous
unsuccessful elections and incorporated .them into the new local option
sales and services tax proposal. Specifically, direct and immediate
property tax reduction; reduction of street special assessments by at least
75%; and maintenance and repair of City streets, sidewalks, walls, .steps,
storm sewers buildings' and other facilities
The use of the sales tax revenue can be changed only by another election.
A significant portion of the sales tax revenue will be paid by out-of-town
shoppers, tourists and visitors.
The sales tax is easy to collect and easy to pay. Retailers and service
providers will collect the additional one percent and send it to the State
Department of Revenue and Finance along the with State's four percent. The
Treasurer of the State will send the one percent back to local governments.
19. Would the local sales and services tax save me money? What about the elderly
and low-income families?
It depends on how much your property tax is in relation to how much you
spend on taxable goods and services. The proposal should help those who
own or are buying their own home and do not spend a great deal on taxable
items. Many elderly fit this description. Low-income families, often
renters, usually spend a larger portion of their income on taxable items;
so they may pay more. The exemption from the sales tax of food and drugs
help this situation. The reduction in property tax should help keep rents
from increasing. ° The value of maintaining services such as police, fire,
library, recreation programs, parks and streets, should also be considered.
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20. Would the proposed sales and services tax help or hurt businesses?
Reducing property taxes should encourage businesses in general, and the sales
tax is not expected to harm business. Businesses paying large, property
taxes and not spending much of their budget on taxable items would be helped.
Businesses with small property taxes and relatively large expenditures for
taxable items could pay more. If the reduction in property tax encourages
economic growth, long-term impacts should help everyone.
It should be noted that the sales tax in both Wisconsin and Illinois is 5%
with an additional .5% local option tax available to communities in Wisconsin
and a 1% local option tax available in Illinois. This compares with Iowa's
4% sales tax and 1% local option. sales tax. Based on ,this comparison,
merchants shouldn't` realize a significant loss in customers to neighboring
states due to passage of a 1% local option sales tax.
2i. What happens if a City passes a sales and services tax and then cnanges its
Mind?
The local option sales and services tax may be repealed after an election
at which a majority of those voting favor the change. The question can be
placed on the, ballot either by a petition with enough signatures to total
5% of the number of citizens who voted County -wide in the previous general
election or by action of the governing bodies representing at least 50% of
the population of the County:
22. Has the City Government done anything to. solve its own budget. problems?
Yes, the City Government has reduced the number of full-time City employees
over the past eight years by 96 positions or over 16% from 597.50 full-time
positions in Fiscal Year 1979-80 to 500.80 full, time positions in Fiscal
Year 1987-88. The personnel cuts were in all areas; including police and
fire, management and supervisory personnel. The significant reduction in
City employees is an indicator that the City Government has taken action to
reduce its costs and respond to its budget problems; not just raise property
taxes and fees or wait for someone else to solve its budget problems as
some have claimed.
23. What are the implications and alternatives if the one cent local option
sales and services tax is not approved?
The answer to this question is divided betwen the Capital Improvements
Program budget and the operating budget.
If funds are not provided to maintain and repair City properties, -buildings
and facilities, the impact and alternatives would include the following:
- propose a CIP property tax levy to cover maintenance and repair needs;
- increase borrowing to provide funds for maintenance and repair needs;
- continue $13.5 levy for Civic Center operation allowing equal amount to
be transferred for capital improvements.
- increase and/or impose new fees and charges to cover maintenance and
repair needs;
defer maintenance and repair of City buildings and facilities;
- experience deterioration of City buildings and facilities.
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If flexibility is not found for the operating budget, the implications and
alternatives would include the following:
increase and/or impose new fees and charges;
- levy the 27 cents per $1,000 of assessed value emergency levy;
- propose a vote to exceed the $8.10 property tax levy limit;
- use $.135 levy for operating and maintaining the Civic Center;
transfer all possible Trust and Agency Fund, Debt Service Fund and Utility
Fund eligible expenditures from the General Fund to free -up General Fund
money for other purposes; transfer hotel/motel income to the General Fund;
- propose increasing hotel/motel tax from five percent to seven percent;
- cut or eliminate City services financed from property taxes.
The problem with most of the alternatives is that they involve either a
service .or maintenance cut or a further property tax increase. Neither is
desirable for maintaining quality of life in Dubuque.
The most likely result is a continuation of what is now becoming an annual
cutback in the level of services provided by the City government and annual
increases in user fees for most programs. The easy cuts have long since
been made. We cannot continue to make across-the-board percentage cuts and
expect no reduction in the level of service provided. It will become
increasingly necessary to eliminate entire areas of City services to provide
funds to maintain other areas of City services. Some areas of likely
future cutbacks if additional funds are not forthcoming include:
Park Rangers
Greenhouse and flowers on City property
Mowing 15 non -park green areas
Ambulance
Library hours
Nonself-supporting recreation programs (primarily involving young and old)
Close Municipal Pool
Close Fire Station
Expand use of two -person fire staffing -
Human Rights
Health Services
Ice Activity at Five Flags
Airport marketing program
Transit Saturday service
Transit mid-day service
Investigation of minor traffic accidents
Officer response to minor police calls
Centralized purchasing function
Street cleaning
Street lighting
Contracting out street maintenance
Contracting out portion of salting and snow removal activity
Contracting out refuse collection
Contracting out City Garage operation
Contracting out management of Water Plant operation
Contracting out management of Wastewater Plant operation
Greater use of part-time employees in all areas
W. Kenneth Gearhart
12/28/87
96 Regular Session,
of the Loan Agreement to remain in full
force and effect.
NOW, THEREFORE, BE IT RE-
SOLVED BY THE CITY COUNCIL OF
THE CITY OF DUBUQUE, IOWA:
Section L That the Mayor and the City
Clerk be and they are hereby authorized
and directed to endorse the acceptance
of the City of Dubuque, Iowa upon the
Amendment to the Loan Agreement
hereto attached, providing for the exten-
sion of the $150,000 loan to Dubuque
Stamping and Manufacturing, Inc., ac-
cording to terms specified therein.
Passed, approved and adopted this
20th day of February, 1989.
James E. Brady.
Mayor
ATTEST:
Mary A. Davis
City Clerk
Council Member Pratt moved adoption
of tbe Resointion. Seconded by Counail
Member Heckmann. Carried by the
following vote: Yeas--Mayor Brady,
Council Members Deich, Heckmann,
Kfuesner, Pratt, Simon, Voetberg.
Nays--None.
Communication of City Manager re-
questing approval of McAleace Park and
Recreation Complex Concession Agree-
ment with RJ's Concessions and
authorizing City Mgr. to execute agree-
ment, p~esented and read.
Co~mcil Member Voetberg moved that
the communication be received and filed
and concurred with approval for RJ's
Concessions. Seconded by Council
Member Ih-att. Carried by the following
vote: Yeas--Mayor Brady, Council
Members Iteckmann, Pratt, Simon,
Voetberg. Nays--Counall Members
Deich, Kluesner.
Communication of park and Recrea-
tion Commission recommending Agree-
ment with Oak Ridge Athletics,
presented and read.
Council Member Voetberg moved that
the conm~unication be received and filed.
Seconded by Council Member Pratt. Car-
fled by the following vote: Yeas--Mayor
Brady, Council Members Heckmann,
Pratt, Simon, Voetberg. Nays--Council
Members Deich, Kinesner.
petition of Attorney Donald Breitbach
February 20, 1989
on behalf of R.J.'s Concessions, contain-
ing approximately 27 signatm'es support-
ing the bid of R.J.'s Concessions for
McAleece Park and Recreation Complex,
and read.
Council Member Voetberg moved that
the petition be received and filed. Second-
ed by Council Member Pratt. Carried by
the following vote: Yeas--Mayor Brady,
Council Members Heckmann, Pratt,
Simon, Voetberg. Nays--Couneil Mem-
Council recessed at 8:56 p.m.
Reconvened at 9:09 p.in.
Coimnunicatten of City Manager sub-
'aitting report on Planning a~d Zoning
Commissions' discussion of Fceeway Cot-
~idor Planning project (referred from
meeting of 1-3-89), presented and read.
Council Member Pratt moved that the
communication be received and filed and
accepted timetable as recommended by
Planning and Zoning. Seconded by Coun-
cil Member Kinesner. Carried by tbe
following vote: Yeas--Mayor Brady,
Council Members Deich, Hackmann,
Kfuesner, Pratt, Signori, Voetberg.
Nays--None.
Communication of Corperatlon Coun-
sel submitting an Ordinance relating to
food and beverage vending machines,
presented and read.
Council Member Ih-att moved that the
received and filed.
Seconded by Council Member Heck-
nann. Cartied by the following vote:
Yeas--Mayor Brady, Council Members
Deich, Heckmann, Kinesner, Pratt,
Simon, Voetberg. Nays--None.
ORDINANCE NO, 4-89
~RDINANCE AMENDING THE
CITY OF DUBUQUE, CODE OF OR-
DINANCES, BY REPEALING OR-
DINANCE NO. 55-88, RELATING TO
VENDING MACHINES, presented and
read.
(OFFICIAL PUBLICATION)
ORDINANCE NO. 4-89
AN ORDINANCE AMENDING THE
CITY OF DUBUQUE, CODE OF OR-
DINANCES. BY REPEALING. OR-
DINANCE NO. 55-88, RELATING TO
VENDING MACHINES.
Regular Session
NOW, THEREFORE, BE IT OR-
DAINED BY THE CITY COUNCIL
OF THE CITY OF DUBUQUE, IOWA:
Section 1. Ordinance No. 55-88 of the
City of Dubuque Code of Ordinances is
hereby repealed,
Section 2. This Ordinance shall take ef-
fect immediately upon its publication as
provided by law.
Passed, approved and adopted this
20th day of February, 1989.
James E. Brady
Mayor
ATTEST:
Mary A. Davis
City Clerk
Published officially in the Telegraph
Herald newspaper this 27th day of
February, 1989.
Mary A. Davis
City Clerk
it 2/27
Council Member Pratt moved tl~s to
be considered the first reading of the Or-
dinance, and that the requirement that
a proposed Ordinance be considered and
voted on for passage at two council
meetings prior to the meeting at which
it is to be finally adopted be suspended
and further moved final adoption of the
Ordinance. Seconded by Council Member
Heckmanu. Carried by the following
vote: Yeas--Mayor Brady, Council
Members Deich, Heakmann, Kluesner.
Pratt, Simon, Voetberg. Nays--None.
Communication of City Manager re-
questing support of House File #93 deal-
ing with Iowa Department of Revenue's
remittance of Local Option Tax,
presented and read.
Council Member Heckmarm xnoved
that the communication be received and
filed. Seconded by Com~eil Member
Voetberg. Carried by the following vote:
yeas--Mayor Brady, Council Memi)ers
Deich, Heckmann, Kluesner, Pratt.
Simon, Voetberg. Nays--None.
RESOLUTION NO. 70-89
A RESOLUTION ENDORSING
HOUSE FILE NO. 93 WHICH RE-
LATES TO REMITTANCE OF THE
LOCAL OPTION SALES TAX TO
LOCAL GOVERNMENTS
WHEREAS, the voters of the City of
February 20, 1989 97
Dubuque on February 2, 1988, approved
a one cent local option sales and services
tax effective April 1, 1988; and
WHEREAS, the vote was 7,712 (80%)
in favor and 1,931 (20%) opposed; and
WHEREAS, the sales aud services tax
payment for the quarter ending June 30,
1988, was not received until November
4, 1988; and
WHEREAS, the saies and services ta~
payment for the quarter ending
September 30, 1988, was not received un-
til February 10, 1989; and
WHEREAS, it is anticipated that
there will be similar delays in receiving
future quarterly payments; and
WHEREAS, the City Council of the
City of Dubuque, Iowa, believes this is
too long a delay in receiving payments
and wishes to support a House bill filed
by Mike Peters relating to remittance of
the local option sales tax to local
government.
NOW, THEREFORE, BE IT RE-
SOLVED BY THE CITY COUNCIL OF
THE CITY OF DUBUQUE, IOWA:
Section 1. That the City Council of the
City of Dubuque, Iowa, does hereby en-
dorse House File No. 93 which relates to
remittance of the local option sales tax
to local governments.
Section 2. That the City Clerk is hereby
authorized and directed to transmit this
resolution to area legislators, members of
the House Ways and Means Committee,
the Governor, and the League of Iowa
Municipalities.
Passed, approved and adopted this
20th day of February, 1989.
James E. Brady
Mayor
ATTEST:
Mary A. Davis
City Clerk
Council Member Heckmann moved
adoption of the Resolutinn. Seconded by
Council Member Voetberg. Carried by
the following vote: Yeas--Mayor Brady,
Council Members Deich, Heckmann,
Kluesner, Pratt, Simon, Voetberg.
Nays--None.
Council Member Kluesner moved that
this be considered the second reading on-
ly of an ORDINANCE Amending Code