Cedar Rapids Mayor Ron Corbett says that I’ve “beat up the streets” in Cedar Rapids, so he wants me to help pay for repairs. He’s turning my commute from Marion into a guilt trip.
“That’s really the fundamental question,” Corbett says. “There is a burden to repairing our streets. What tax is going to absorb that burden? Is it going to be property taxes … or this (sales) tax? ”
Over the past 18 years, the city has borrowed more than $140 million for street projects, including $7.7 million this fiscal year. That bonded debt is paid back using property taxes. Of the $15.22 per-$1,000 in taxable property value that Cedar Rapids citizens pay in city property tax, $1.20 goes toward paying back street debt.
If the 10-year, local-option sales tax extension on the ballot Nov. 5 fails, the borrowing will continue, debt service will take up an increasing share of the city budget and the entire burden for all that will be carried by property owners.
BONDING CAPACITY IMPACT
If the tax passes, providing roughly $18 million annually for road work, city leaders say the borrowing will stop, street work becomes pay-as-you-go street, debt service costs will slowly shrink and the city will begin rebuilding its bonding capacity. That bonding capacity could become important for future needs, such as flood protection. Although street borrowing would cease, city leaders pledge that new option tax dollars will be spent on top of existing state and local funding for streets.
City leaders make it clear that they are not promising that property taxes will go down if the sales tax passes. But if it doesn’t, the property tax rate, which has remained steady over the past three years, could rise.
“Without some additional revenue to help with streets, and assisting us in reducing the amount of borrowing, potentially, taxes will go up,” City Manager Jeff Pomeranz said. “We need to take care of our infrastructure, and if we don’t have additional revenue to do that, it’s going to put more pressure on the property tax rate in the future.
“Without significant additional revenue for streets, we’re going to see significant and continued deterioration of our roads,” Pomeranz said.
VISITORS WOULD PAY
And if it passes, commuters and visitors, like myself, who stop and shop while we regularly roll across Cedar Rapids-funded pavement, will have to foot some of the bill.
The city figures that a big chunk of the sales taxes paid in Cedar Rapids are paid by folks who live elsewhere. Take Iowa’s per capita sales tax payment average and multiply it by Cedar Rapids’ population, you get about $85 million. But total sales taxes collected in the city add up to $175 million annually. So the additional bucks have to come from somewhere else.
According to U.S. Census estimates, Cedar Rapids’ population rises by about 29,000 people, or about 23 percent, during the daytime when thousands of people drive in to work. An option tax will capture street money from those street users.
As much as I like freeloading, this is a compelling argument. Probably the best one deployed by sales tax extension backers. Borrowing money to pay for streets is expensive and isn’t sustainable. Pay-as-you-go is more fiscally responsible. Spreading the burden to residents and incoming outsiders alike seems fair.
I have yet to hear the counter argument that completely refutes it. But that doesn’t mean there’s no thoughtful opposition.
IMPACT ON THE POOR
District 3 City Council candidate Robin Cash argues that the sales tax burden falls disproportionately on the poor, including plenty of folks who don’t use the streets. District 1 candidate Clark Rieke has similar concerns about tax progressivity, although he’d favor a tax extension to pay for flood protection.
Cash and Rieke each think it would be better if Statehouse types raised the fuel tax or other fees that flow into the Road Use Tax Fund, of which cities get a 20 percent cut.
But it’s been 24 years since the fuel tax was increased, and there’s no sign that it’s going to happen again anytime soon. There’s precious little political will to make Iowans pay more for roads. While the city waits for the state to act, borrowing continues, maintenance gets deferred and city streets get worse.
“It’s a tough call, no doubt about it,” Kash said.
The regressive nature of sales taxes is a definite downside, especially with stagnant personal income growth that isn’t keeping up with the cost of living. It’s a legitimate beef.
But state reluctance, and local reluctance to boost property taxes, paints cities into a corner. Cities with aging streets and residents who don’t want to pay higher and higher property taxes don’t have a lot of good options. They can borrow, cut services or keep putting off repairs and maintenance. That’s why so many of them have local sales taxes to fill the streets gap.
Without a tax extension, Cedar Rapids will continue falling behind on repairs and reconstruction. And I’ll just keep beating up the streets, free of charge.