We’re LOST on state sales tax disbursements

Opinion

The Fort Madison city budget has hit the skids.

Despite an increase in county valuations of almost 23%, the city is staring at a loss of almost $330,000 in sales tax in this current year alone. That’s $4.7 million dollars on sales that didn’t take place in Fort Madison this year…that did last year.

What the hell, people? You took your shopping elsewhere to the tune of $4.7 million? Or did you just buy it online?

If you bought it online, you’re paying the tax now, but will that help the city find “greener” pastures?

It’s yet to be determined. The State of Iowa eerily keeps sales tax disbursements close to the vest. City Manager David Varley and City Finance Director Peggy Steffensmeier have both said, and I’ve confirmed, that the state won’t break those figures down.

Time to make some calls.

How that isn’t public information is beyond me. The only argument we can fathom is that it may be proprietary and give competitors an advantage from one retail outlet to the next. But I don’t buy it, everyone knows it’s 1 percent. They know that 1 percent of that respective purchase should go to the city. Well, actually it would appear that it doesn’t work that way.

The disbursements aren’t even based on sales. The state collects the 1 percent tax and then distributes it based on this formula – copied from the Iowa Department of Revenues Q&A on Local Option Sales Tax.

“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 in the State Department of Management. Only population and property tax levies of the jurisdiction imposing the tax are used in figuring percentages.

The actual distribution is computed as follows:

D = (.75 x P x Z) + (.25 x V x Z)
D = distribution for the taxing jurisdiction
P = jurisdiction percentage of the population
V = jurisdiction percentage of the property tax levied
Z = the total collections for the county in which the jurisdiction is located.

Examples of an actual distribution are in 701 Iowa Administrative Code § 107.10.”

So…it would appear the 1% is put into a pool of money distributed by the state based on that formula. Per a conversation I had with Steffensmeier and Varley, the state isn’t real forthcoming about how and why those figures dropped so dramatically, it’s happening all around the state.

The sales tax revenue dropped in the 2017-18 year, as well and some thought that maybe it was a byproduct of the fertilizer plant being completed and the workers that made Fort Madison home for several years artificially inflated our sales tax outlook.

I’m no economist, but in theory, if they use that formula, these folks were counted in our population and most didn’t buy property, so it shouldn’t have….again in theory…had an impact.

I’m no scientist either, but you have a control and variable in most experiments and if we look at it from that perspective, the control would be, I think, the formula, while the variable would be changes to the P, V, and Z. P and V are set by the formula so the change would be in total sales tax collection by the county.

So then if we’re to evaluate the problem and try to mitigate, the next step would be to call and see if we can find where qualifying purchases have fallen off.

The state may not tell you, but according to the Department of Revenue, two county employees can enter into an agreement with the state to see the actual figures, but those figures couldn’t be disclosed to say…the Pen City Current, because the state considers them confidential. Anyone leaking that information is subject to severe criminal penalty.

I would argue those numbers are public record. (I’ve argued with a lot of people lately on what should be considered public and what isn’t). The levy amounts are public record, the census is public record, why would an amount that was allocated to the state pool by election of the voters be protected due to confidentiality?

It could, in theory, be troublesome if they broke it down by individual business, but couldn’t the state look at sectors: e.g. restaurants, gas stations, furniture stores, auto services (auto sales do not collect the 1%, but repairs and services are subject to the tax)? At least then cities, chambers, and other business advocacy groups could target marketing efforts and campaigns.

We can analyze it until the cows come home, but in the end, the state isn’t doing much to help local governments stay in the black. At least they could provide information to help us help ourselves.

And by the way, is it just me or would Shopko be a perfect place for one of those outdoor stores. Wal-Mart and Target are too close, but where’s the closest Bass Pro Shop or Cabella’s….But that’s Beside the Point.

About Chuck Vandenberg 5071 Articles
Pen City Current and pencitycurrent.com are products of Market Street Publishing, LLC, a multi-platform media company delivering hyper-local news, sports and advertising information to Fort Madison, IA and surrounding communities.

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