Council reducing taxes by using sales tax fundsWhat started out as a campaign to use a portion of the 1 percent sales tax to fund repairs to the sanitary and storm sewer systems bordering the river has turned into a decision to use the funds for reducing city-wide special assessments.
What started out as a campaign to use a portion of the 1 percent sales tax to fund repairs to the sanitary and storm sewer systems bordering the river has turned into a decision to use the funds for reducing city-wide special assessments.
The City Council in February voted 4-1 to take half of the 1 percent sales tax presently dedicated to economic development for city infrastructure and to extend the sales tax until 2022. Now an ordinance is going through the process to turn the resolution into law.
The lone opposing vote was Councilman Ken Schulz. The other four said this week they were comfortable taking the funds despite the fact that less than a month earlier Mayor Clarice Liechty was the sole proponent of such an action.
What started the campaign was an informal petition initiated by former council member John Grabinger in August. It asked the City Council to take up to half of the 1 percent sales tax to use for necessary city infrastructure issues and was signed by 1,100 people. The four council members were among those signers, but only Liechty said she circulated it. She said she did it as an individual and not as mayor.
“My understanding is the petition wanted to replace the sanitary and storm sewer systems brought to light by the flood,” said Jeff Fuchs, city administrator. “My concern was by using it for valley infrastructure were we being fair to other property owners?”
Rather than simply taking the half of the 1 percent tax, the council opted to work with the Jamestown/Stutsman Development Corp. Board on a compromise. In early September the council, formed a subcommittee made up of JSDC and City Council members to look at options. Liechty voted against forming the subcommittee, calling it a stalling practice as “JSDC didn’t bring anything to the committee.”
Fuchs presented various scenarios to the subcommittee on using a portion of the sales tax revenue to help offset costs in improving the city’s infrastructure. The subcommittee tentatively agreed to the city taking 30 percent of the sales tax and the JSDC retaining a $280,000 payment on the wastewater treatment plant loan. That proposal made the JSDC portion closer to 45 percent.
Later the JSDC Board offered a quarter of the sales tax for the city to use in any way it chose. An additional 25 percent would be set aside for economic development infrastructure.
“At the special meeting where we voted on this, the City Council didn’t even consider the subcommittee proposal or the JSDC recommendation,” Schulz said. “We should have at least discussed those.”
Councilwoman Kelani Parisien said the JSDC “basically allocated 50 percent to infrastructure in its recommendation.” It was that offer that changed her mind about how much the council should take.
“The best use for the half-cent would be associated with infrastructure,” she said. “My main concern was the sewer systems and the huge amount of money needed there. For me, it was the driving factor behind finding the revenue. At the same time, we must do something about getting control of property taxes and special assessments.”
The most equitable way, according to Fuchs, is to use the revenue from half of the 1 percent sales tax to cover the city’s share of special assessments. The city’s property owners would no longer have to pay a portion of the cost on infrastructure projects in the city.
“The city assumes 10 percent of the cost of infrastructure improvements,” Fuchs said. “It’s paid for out of a mill levy that runs between 10 and 14 mills every year and is a part of your property tax (statement).”
Fuchs said the levy to pay the city’s share last year was 11 mills, which comes to about $49.50 on a $100,000 home.
The money from the sales tax would eliminate the need for that mill levy. And it would also mean the city would pick up a higher percentage of the cost of an infrastructure project — up to 25 percent. That would reduce the amount benefiting properties in the special assessment district would have to pay.
Without that extra funding, the cost in long-term repairs to the city’s infrastructure, primarily the sanitary and storm sewer systems, Fuchs said “would grow from 11 mills to 47 mills in 2021” for city property owners.
At issue now is not a reduction in taxes, but whether the City Council should take half of the 1 percent sales tax and extend the tax to 2022 without voter approval. There are residents who feel that because this is not after all an emergency situation, voters should make the decision.
“Are we doing this to appease the people who brought forth the petition?” Schulz said. “I’ve talked to some of the people who signed it and their intention was to put it on the ballot.”
Councilman Charlie Kourajian said the City Council has the option to take the funding. Liechty said the council did the JSDC a favor with its vote.
“The JSDC should say ‘thank God the council is extending the funding out to 2022,’” she said.
Parisien and Councilman Pat Nygaard see the decision as the council’s responsibility.
“It’s time for the City Council people to step up and be proactive and forward thinking,” Parisien said.
“People have elected us to lead and not defer everything to the voters,” Nygaard said.
Sun reporter Toni Pirkl can be reached at (701) 952-8453 or by e-mail at