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Legislative Correspondence Oty Manager's Office Oty Hall 50 West 13th Street Dubuque, Iowa 52001-4864 (563) 589-4125 office (563) 690-6025 /", (563) 690-6678 TOO citypers@cityofdubuque.org www.cityofdubuque.org ~~~E ~c/k.~ r. .....i. '" January 21, 2005 '.'..' Representative Jeff Elgin State Capitol Building Des Moines, IA 50319 Dear Representative Elgin: This is in response to your letter regarding the proposed increase in IPERS contribution rate. It is my understanding that the IPERS Beneficiary Advisory Committee has recommended that the state legislature increase the contribution rate from the current combined rate of 9.45% to 13.45%. This increase would be accomplished by increasing the rate by a total of 1 % each year for the next four years. One of the alternatives being considered for increasing the contribution rate is to change the percentage contribution for the employer and employee from the current 60%140% split to a 50%/50% split. I believe it is appropriate that any increase in the contribution rate be shared equally between the employer and employee. The 50%150% split is a fair and reasonable approach to addressing this issue. Thank you for the opportunity to express my views on this important piece of legislation. If you have any questions. please feel free to call. since71~~ Michael C. Van Milligen City Manager MVM:bf Service People Integrity Responsibility Innovation Teamwork \ , f2. f.-':"D l-d 1. II 01 .. Jeff Elgin STATE REPRESENTATIVE Thirty-Seventh District Slatehouse: (515) 28J~3221 e.mail - jeff.elgin@legili.slate.ia.us APPROPRlA nONS SUBCOMMlTTEE Administration & Regulations COMMI'ITEES State Government, Chair Environmental Protection Transportation HOME ADDRESS 6940 Bowman Lane NE Cedar ilapids,lowa 52402 Home; 319.3.5C4KK17 Home Fax: 319-377-5636 HDme e~m.il- jc;280J@aol.oom JliDUBt Dr iRtprt5tntatiut5 State oflowa Eightieth General A.ssembly STATEHOUSE 1II.. S1Din....lluUJ. 50319 Dear IPERS Employer: J am again privileged to be the House of Representatives, State Government Committee Chainnan and as you are aware, all state pension bills are funneled through the State Government Committee. I have had the opportunity to floor manage the last two IPERS bills. Last year we attempted to increase the contribution rates for both the employees and employers. The Senate did not agree with the increas.e and this section of the bill was eliminated. Because the unfunded liability amount is a serious issue, I am willing to move another IPERS bill during this legislative session even though it is not considered an "JPERS Year". As last year's bill was being fonnulated in subcommittee, I presented several alternatives for increasing the contribution rates. Basically, all these alternatives revolved around the concept of changing the percentage of contribution from the current employee pays 40% and the employer pays 60% of the rate to a 50%/50% split. These proposals were met with opposition by several employee groups and the bill that was originally passed by the House retained the 40%/60% split for the proposed rate increases. The IPERS Benefits Advisory Committee, BAC, has again recornmended that we increase the contribution rate from tlle current 9.45% to 13.45% using the current 40%/60% split. This increase would be accomplished by increasing the rate by a total of I % for the next four years. I realize that you, as an employer, have representation on the BAC, but I am interested in hearing directly from the fifty largest employers as to their opinion on this matter. If the majority of you want me to continue to explore a contribution rate that is different than the 40%/60"10 split, J will be glad to do so. On the other hand, if the majority wants me to move forward with the BAC recommendation, I will do that. Weare currently having the IPERS bill drafted and I would like to know your position on this matter as soon as possible. Could you please either e-mail or mail your preference to Ms. Kelly Ryan, my State Government research analyst? Her e-mail addressiskellv.rvan@Jegis.state.ia.us. Her mailing address is, Republican Caucus Staff, House of Representative, State House, Des Moines, lA 50319. Thank you for your consideration of this important issue. Sincerely, 9#cr Jeffrey C. Elgin February 1, 2005 VIA E-mail and st 1 Class Mail «Email» «CompleteLOCALName_Address» Re: Franchise Fees Dear«Title» «Last»: Recently there has been discussion among State legislatures regarding the elimination of franchise fees. The ability for a municipality to charge a franchise fee on utilities has been allowed under Iowa law for more than 40 years. Currently the City of Dubuque charges a franchise fee on cable (5%), gas (2%) and electric (2%) utilities. Combined, these fees total approximately $1,792,000 annually (gas $440,000, electric $792,000 and cable $560,000) based upon projections for the Fiscal Year 2006 budget. While the cable franchise fee has been in place for over 20 years, the gas and electric franchise fees were implemented with the Fiscal Year 2004 budget. In 2003, the State legislature approved significant revenue cuts to communities after the City’s budget had been certified according to State law. As a result the City of Dubuque was forced to propose budget cuts, including layoffs of Police and Fire personnel, and look at other ways to collect revenue. These staff cuts would come after the City had eliminated 68 full-time positions since the early 1980’s. This necessitated a 5-hour public hearing by the City of Dubuque, attended by over 400 very unhappy people. The gas and electric franchise fees, which were established at 2%, provided additional revenue for the City of Dubuque and eliminated the need to layoff Police and Fire personnel, while there were still other position cuts. The City of Dubuque has a strong history of being fiscally responsible. As you look at the past 11 years, the City of Dubuque has had no new property tax increase for the average homeowner, and in five of these years has had a property tax decrease. The only exception was the State-initiated increase caused by under-funding the Homestead Tax Credit. In addition, user fees (refuse, water, stormwater and sewer) are some of the lowest fees for the nine largest communities in Iowa. When Dubuque implemented the gas and electric fees on October 1, 2003, it was after careful consideration of the February 1, 2005 Page 2 impact these fees would have on other taxing bodies and residents with limited means. Dubuque’s 2% franchise fee is not an additional fee on top of local option sales tax. This fee replaces the City’s 1% local option sales tax and the Dubuque Community School District’s 1% local option sales tax (the school district did not include a 1% local option sales tax on gas or electric in their revenue calculations) for those required to pay these taxes. In addition, the City of Dubuque ordinance allows sales tax exempt entities to receive a rebate of the full 2% of the franchise fee collected. As mentioned above, the ability to implement a franchise fee has been allowed under State law for over 40 years. Should the legislature approve language to eliminate the collection of franchise fees, cities are left with very few options to replace this lost revenue. Currently the City of Dubuque is considering a tax rate of $9.6991/$1,000 for Fiscal Year 2006. Should the ability to collect franchise fee revenue be taken from cities, the result would mean an increase in the recommended tax rate by over 11% to $10.7841/$1,000. If this fee change were to occur after the City budget is certified, I am sure the City could look forward to another 5-hour public hearing, and would be facing severe budget cuts. I encourage you to oppose any efforts to eliminate the ability of cities to collect franchise fee revenue. Thank you for your support in this matter. Sincerely, Michael C. Van Milligen City Manager MCVM:cs cc: Mayor and City Council Tom Bredeweg, Iowa League of Cities Susan Judkins, Iowa League of Cities Barry Lindahl, Corporation Counsel Cindy Steinhauser, Assistant City Manager Dawn Lang, Budget Director The Honorable Mike Connolly The Honorable Tom Hancock Iowa State Senator Iowa State Senator 2600 Renaissance Dr #3 310 E Main Street Dubuque, IA, 52001 Epworth, IA, 52045 The Honorable Roger Stewart The Honorable Pam Jochum Iowa State Senator Iowa State Representative 3936 317 Avenue 2368 Jackson Preston, IA 52069 Dubuque, IA 52001 The Honorable Pat Murphy The Honorable Thomas Schueller Iowa State Representative Iowa State Representative 155 N. Grandview Avenue 503 W. Platt Street Dubuque, IA 52001 Maquoketa, IA 52060 The Honorable Steven Lukan The Honorable Ray Zirkelbach Iowa State Representative Iowa State Representative 7365 Columbus Street 637 W. First Street New Vienna IA 52065 Monticello, IA 52310