Why I support the local option sales tax

A government that does not provide adequate services is more regressive than a sales tax, writes Des Moines City Council member Josh Mandelbaum in this case for Polk County residents to support the measure on the March 6 ballot. -promoted by desmoinesdem

There is a cliché that the start of one’s term in public service is like drinking from a fire hose. My experience the last few months definitely shows the merit of the cliché. More comes at you quickly than you can possibly absorb. The budget is a perfect example of this, but in the case of the budget, I don’t have the luxury of time because local budgets must be certified by the end of March. I want to share with all of you some of what I have learned.

In examining the budget, one thing becomes clear quickly: the city will not be able to maintain its current service levels without new revenue or significant increases in property taxes.

The Capital Improvement Program (also known as the CIP budget) has identified projects for this fiscal year and the next five fiscal years. This includes planned street improvements, library projects, park projects, investments in fire equipment and stations, funding for the Neighborhood Development Corporation and Neighborhood Finance Corporation and many other items. The CIP budget is just the projects that are currently identified. There are a number of additional large projects that will come up in the future that are not currently included in the budget.

Simply to fund the street improvements, park projects, library improvements and other projects identified in the CIP budget will require a $1.50 (see p.3 of the summary) property tax rate increase over the next five years. In addition, we know that there will be increases in the city’s operating budget as we provide cost of living increases for employees and health care costs continue to rise.

Without additional revenue the city will be forced to significantly raise property taxes, cut services, or do both.

The Basics on the Local Option Sales Tax and Public Measure A

That’s where the Local Option Sales Tax comes into the picture. Raising the sales tax 1 percent will generate an estimated $37 million annually for the City of Des Moines. 97 of the 99 counties in Iowa have already adopted the local option sales tax. If Des Moines residents visit or shop in other parts of the state (including Jordan Creek mall starting July 1), we already pay this tax.

It is estimated that 30 to 40 percent of this tax will be paid by visitors to Polk County. One of the great things about Des Moines is that our attractions (e.g. Wells Fargo Arena, Art Center, Science Center, Principal Park, Civic Center, etc.), our institutions (Mercy, Methodist, state government, county government, Drake, Des Moines University, etc.) and our infrastructure (airport, Des Moines Water Works) serve the entire metro and beyond. All of those entities are tax exempt and do not pay property taxes. The local option sales tax is one of the few sources of revenue where people who come to our community and use our services will pay a significant portion of it.

These are some of the reasons why the Council put the Local Option Sales Tax on the ballot as Pubic Measure A. The ballot language for Public Measure A specifies how this revenue will be allocated. 50 percent of the revenue will be allocated towards property tax relief. The other 50 percent of the revenue would be used for the city to invest in key priorities that have been insufficiently funded for too long. These areas are roads, neighborhood revitalization, and public safety.

Making Major Improvements in Our Roads

If you drive around Des Moines at this time of year, you are acutely aware of the problems with our roads. As a Council member, improving the condition of our roads is a priority. I hear from folks all over the city about the need to improve our roads, and they are right. According to an assessment from the Department of Public Works, 5 percent of our roads are in excellent condition, 17 percent are in good condition, 35 percent are in fair condition, 35 percent are in poor condition, and 8 percent are in very poor condition. We need to do a better job on our roads, and that requires funding.

The Public Works Department has developed a long-term plan to improve our roads. The plan starts with spending our street improvement dollars differently. Instead of simply pouring a layer of asphalt over structurally deficient streets, we will prioritize replacing deficient streets. Eventually, we’ll have more roads in good condition, and it will be easier to maintain our roads.

The Council has already started down the path of improving the condition of our roads and that is reflected in the CIP budget. If we keep funding levels at the proposed CIP level, by 2030, 25 percent of our roads will be in excellent condition, 40 percent will be in good condition, 20 percent will be in fair condition, 9 percent will be in poor condition, and 6 percent will be in very poor condition.

Without the local option sales tax, to stay on this path will require that $1.50 increase in property taxes. With the local option sales tax, we could get to this level by 2024. The local option sales tax will allow us to go even farther by 2030, and 25 percent of our roads will be in excellent condition, 48 percent will be in good condition, 22 percent will be in fair condition, 5 percent will be in poor condition, and none of our roads will be in very poor condition.

The local option sales tax and Public Measure A will mean a significant improvement in Des Moines streets.

Investing in Our Neighborhoods Through the Blitz on Blight

Our neighborhoods need investment. There are blighted and abandoned properties scattered throughout the city. Based on current information, the city estimates at least 1,000 blighted and abandoned properties. The city code enforcement staff is so short-staffed that we essentially respond on a complaint basis. That means that there are likely many more properties that could be added to this list.

At current funding levels, the city can remove between five and ten blighted properties per year. More properties become blighted than the city can address, and we fall further behind each year. The local option sales tax will allow us to conduct a blitz on blight. Instead of tearing down five to ten condemned properties a year, for the next seven years we will have the ability to tear down 150 properties per year. Tearing down nuisance properties will have an immediate impact on neighborhoods.

We will also look to rehabilitate properties and not just tear them down. At our January 8 meeting, the Council adopted a new policy for a Blighted Property Rehabilitation Program. This program provides assistance to rehabilitate blighted and abandon homes throughout the city, and it will be an important tool for revitalizing our neighborhoods We currently have $100,000 per year allocated to this program in the CIP budget. That’s enough to address a small handful of homes each year. If the local option sales tax passes, we can provide a more significant investment in this program and in turning around properties that could be rehabilitated.

The local option sales tax will provide for much needed investment in revitalizing our neighborhoods.

Improving Public Safety

When I ran for city council last year, I emphasized the importance of giving our first responders the resources that they need to do their job. The local option sales tax will help provide critical resources to support our first responders.

For example, earlier this year, I attended the graduation ceremony for the Des Moines Fire Department’s 94th Recruit Academy. Sixteen firefighters graduated. Thirteen of those firefighters were funded by a federal SAFER grant. In order to keep those firefighters on the street, the city must find funding for them in our operating budget as the grant runs out.

The city has also identified a need for a new fire station in the northeast part of town. This station will also need to be staffed and properly equipped. When we don’t have adequate fire stations, services throughout the community are impacted as fire engines and ambulances have to travel farther to cover calls.

Another example is our police radio system. Des Moines is still using the same analog radio system that we have had since 1974. This system has been kept cobbled together for many years, but it means we are using older technology with a greater risk of failure, and in some parts of town, we have spotty coverage. Updating our police radio system will improve service and allow for better interoperability with other law enforcement.

The local option sales tax will improve public safety by supporting our first responders.

Property Tax Relief and Property Tax Cuts Are Not the Same Thing

Under Iowa law, property tax relief is not the same thing as property tax cuts. Property tax relief includes anything that avoids the need for expending property tax dollars. The majority of the property tax relief will come from avoiding that $1.50 plus property tax increase that I described above. In addition, in December before I was sworn in, the Council passed a resolution providing that part of the 50 percent property tax relief would be used to reduce the property tax rate by $0.40 for every $1,000 valuation.

It’s important to put that property tax reduction in context. The $0.40 reduction in property tax rates would make Des Moines’ tax rate lower than it has been in over a decade, but if the assessed value of your home goes up, you may not even notice the $0.40 reduction. That $0.40 reduction is about $3.2 million dollars annually spread over all the property in the city. That’s less than 10 percent of the revenue generated from the local option sales tax. If 30 percent of the revenue from the local option sales tax comes from outside of Polk County (a conservative estimate) than 1/3 of the 30 percent of the sales tax generated by visitors to Polk County would be used to reduce the tax rate.

The vast majority of the local option sales tax dollars will go to maintaining and improving city services and not property tax cuts.

A Sales Tax is Regressive, a Government that Does Not Provide Adequate Services is More Regressive

I have heard concerns about the regressive nature of a sales tax from a lot of people whom I respect. I agree that a sales tax is regressive, but I think the alternative is even more regressive. Iowa takes steps to limit the regressive nature of a sales tax by exempting groceries, prescriptions, medical devices, gas, and utilities from the sales tax, but I recognize that there are still many items from school supplies to clothing and more that are subject to the sales tax. An average family of four is estimated to see a $4 per month increase from the sales tax.

The impacts of inadequate government service are significantly more regressive than $4 per month. I’ll give you a few examples. We all know that there are consequences to the poor conditions of our roads. I’ve heard from constituents who have spent $140 on a new tire after driving through a pothole or $160 for an alignment after rattling down our streets. For some households that is an inconvenience, but for other households, those expenses could mean falling behind on rent and utilities or doing without a meal.

We have 78 parks in Des Moines. Our current funding levels allow us to renovate the playground at a park a year unless we get private donations. Private donations are directed to specific parks creating a reality where the kids who have the most options outside of our park system also tend to live closest to some of our nicest parks. Or think about the family that relies on the library for internet access. Our current operational budget has each library branch closed one day per week, which means the family that relies on the library for internet goes without at least one day per week.

I know that there are other ways to fund government services besides the sales tax. The city essentially has one other option and that is to raise property taxes. Des Moines already has the highest property tax rate in the metro. If the local option sales does not pass, property taxes will go up. I doubt they will go up the $1.50 plus needed to maintain service levels. Instead, there will be road improvements delayed, park renovations that do not happen, reduced hours at our libraries, fewer inspections of rental homes, etc. These reductions in services will harm all residents, but they will have a disproportionate impact on our poorest residents.

For all of these reasons and more, I will be voting for Public Measure A on March 6. I hope you’ll join me.

OFFICE HOURS THIS SATURDAY

The budget and the referendum on the local option sales tax are critically important for our city and community. I want to make sure that you have an opportunity to talk to me about both of these items. I’ll be holding office hours this Saturday from 2pm to 5pm at Caribou Coffee at 3220 Ingersoll Avenue. I communicate on these and other issues via newsletter and Facebook. If you would like to here from me directly sign up at www.joshmandelbaum.com or follow me on Facebook.

  • Honestly

    You know the right move, you just don’t want to do it. Raise the damned property taxes.

    • Economically, it isn't that simple

      Yes, raising the property tax would ideally apply the tax burden in a much more progressive way. But there are three real-world problems with that for Des Moines.

      (1) The property tax ends up being a somewhat inefficient tax because Des Moines bears a disproportionate share of tax-exempt property — government, hospitals, large churches. In fact, as Josh points out, for some large non-profit properties that do not pay property taxes but serve/are used extensively regionally or state-wide, a sales tax is one of the few lawful ways to get revenue from those venues commensurate to their cost in city services.

      (2) Des Moines is in a highly competitive market for population and commercial investment — raising property tax in Des Moines, if West Des Moines or Johnston or Ankeny (for example) do not follow suit makes those places comparatively more attractive in a fairly compact metro area, which may make increased property tax less effective or even a net loss.

      (3) Relying on increased property tax both for revenue in general and to be more progressive is more of a gamble as the legislature has shown a willingness to legislate rollbacks that are beyond the control of cities. While they could also legislate reductions in sales tax, they have shown much less willingness to do so.

      Sales tax increases are less than ideal due to their regressive incidence. But when the house is on fire, you worry about putting it out first, and figure out how to best pay the water bill later. Services and infrastructure in Des Moines are a burning house. The sales tax is the only feasible way to get the fire out in anything approaching a timely way. The wealthier areas will have the money and attention regardless; their parks can be built on donations if need be. It is the under-invested areas that will suffer most when services are cut for lack of funding.

      The energy on the left against the LOST, while understandable, would be better spent on how those revenues are used, making sure none of it goes to yuppie river trails, hipster regional skate parks, or downtown corporate relocations/renovations until lower-income neighborhoods are revitalized and basic infrastructure and safety services are at an acceptable level city-wide.

  • Two different issues

    The councilman approaches his argument as proponents of other tax initiatives have done in recent years. Two of those initiatives, by the way, are being promoted in the poll testing survey for County Supervisor Mauro that Bleeding Heartland provided information about in another post.

    The first question is if there is a need for more revenue. Several opponents of Ballot Measure A are arguing Des Moines, at least, has sufficient tax money but spends it unwisely. The second question is if there is more need for revenue, is a one-cent sales tax the best way to raise it.

    The Polk County Courthouse vote that passed, one of the Mauro bragging points, was a clear example of this two-questions argument. Proponents were saying we needed a new courthouse so vote for whatever we put before you. Opponents were not necessarily saying they did not agree something was needed to be done, but they did not think the plan was the best that could be devised.

    There are many things I could say both about the persistent attempt to get the sales tax revenue, the proposal for how the money would be used, and if it is needed, but I do not have time or space to get into those discussions here. I will say, though, I want to run far away every time I hear the argument Polk County should pass the tax because almost everybody else has it. Isn’t that the same ideology that we should be giving massive tax credits or breaks to bring in development, because if we don’t somebody else will?

  • Regressive is as regressive does

    Luv ya, Josh, but I have yet to find a sales tax I’ll support and I’m not about to start next Tuesday. Any tax that takes a bigger chunk of your income the lower your income happens to be is inherently unfair. Now, if lower income folks received an offsetting tax credit, that’d be great, but that’s not the case. So, as always, I’m a “no” next week.

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