Despite a well-funded campaign to extend the 1 percent local option sales tax for another 20 years, voters in the Cedar Rapids metro area (Cedar Rapids, Marion, Hiawatha, Robins and Fairfax, vote breakdown here) rejected the May 3 ballot measure by less than a 1 percent margin.
The defeat will be a blow to Mayor Ron Corbett, the City Council and a long list of the city’s largest and best-known employers. Those employers contributed to a fund-raising effort that raised nearly $500,000 to get the message out to the community that the city needed to help fund its own flood-protection system.
Corbett was hoping to head to Des Moines on Wednesday to tell lawmakers face-to-face that Cedar Rapidians had agreed to its part in flood-protection funding.
The “yes” campaign on the local option sales tax raised more than 100 times as much money as its opponents. The “no” campaign was a grassroots effort, lacking the funds for radio or television commercials.
Half of the funds raised over 20 years via the 1 percent sales tax were to be used for a flood prevention system protecting both sides of the river in Cedar Rapids. Corbett had argued that extending the sales tax would improve prospects for the city to receive state and federal funds for the project, estimated to cost approximately $375 million.
Legislation pending in the Iowa House and Senate would allow Cedar Rapids to use $200 million in state sales tax revenues for flood prevention over the next 20 years. The bill cleared the Senate Appropriations Committee last week, and a House Appropriations subcommittee advanced a companion bill on May 3. I doubt the Iowa House and Senate will pass this legislation now that Cedar Rapids area voters have rejected the local option sales tax–unless Cedar Rapids officials have a “plan B” up their sleeves.
Peter Fisher of the Iowa Policy Project and Iowa Fiscal Partnership has argued that creating a “state sales-tax-increment financing district” to fund flood prevention is a “gimmick.” In Fisher’s view, this method conceals real state spending (see also here). On the other hand, Cedar Rapids Gazette columnist Todd Dorman notes that hundreds of small businesses in neighborhoods near downtown will be hurt if the flood prevention plan fails to materialize.
On a related note, the future of the $75 million Cedar Rapids Convention Complex project is uncertain. City officials and Governor Terry Branstad’s administration have not resolved differences over a project labor agreement signed a month before Branstad issued an executive order banning such labor agreements on state-funded projects. On May 3, the Central Iowa Building and Construction Trades Council and the Cedar Rapids/Iowa City Building Trades Council filed a federal lawsuit seeking to force Branstad to honor project labor agreements for construction projects in Coralville and Marshalltown.
The trades councils’ lawsuit said that the governor and the state have breached their contract with the labor councils by eliminating project labor agreements is place before the governor took office. The lawsuit also states that the governor’s action violates the Iowa Constitution regarding separation of powers, Iowa’s Home Rule law and federal law.
The outcome of that lawsuit could determine whether the Branstad administration is able to withhold $15 million in state I-JOBS funds for the Cedar Rapids Convention Complex project. The Iowa Finance Authority threatened to do so in February, and the governor rejected compromises Corbett proposed to honor the project labor agreement as well as the spirit of Branstad’s executive order.
UPDATE: More reaction to yesterday’s vote is after the jump.
The state sales tax bill is going nowhere, according to the Democrat who chairs the Senate Appropriations Committee:
Sen. Robert Dvorsky, D-Coralville, whose district includes Linn County, said today it’s likely the state legislation is dead for this year’s session. The legislation would have established a statewide flood mitigation board and any city in Iowa could have sought state financial help, but the only city immediately requesting assistance was Cedar Rapids
“I would assume there won’t be a bill,” said Dvorsky, who chairs the Iowa Senate Appropriations Committee. Without of the support of local voters to match the proposed state assistance, it’s difficult to persuade state lawmakers to pass the bill, he said.
“If there were three or four cities working on this, maybe it would have been different. But Cedar Rapids was the main driver” of the legislation, Dvorsky said.
“Without that vote, we’re not going to consider the bill anymore,” said Rep. Jason Schultz, R-Schleswig, who co-chaired a House-Senate working group that crafted a plan to make as much as $30 million a year in state sales tax revenue available to match local and federal funds that communities would spend on flood protection projects. “We’re going to listen to the taxpayers of Cedar Rapids and I think the bill is dead. For this session, the issue is closed I believe.”
Not everyone was willing to pull the plug on flood mitigation efforts as the Legislature works to shut down the 2011 session, but even the most optimistic backers called Tuesday’s decision by Cedar Rapids voters to reject a 20-year extension of the city’s local-option sales tax to protect against future floods and to fix its streets a major setback.
“That was one of the things that the Legislature was waiting for to see what the decision was on that. I don’t think a final decision has been made but to a large extent the outcome of the vote is probably what was going to happen to the bill. So I don’t hold out much hope that the bill will move at this point,” said House Speaker Kraig Paulsen, R-Hiawatha. “The driving force behind it was the city of Cedar Rapids and the decision was not to extend the match money there.”
Cedar Rapids officials say they will keep working to find a way to finance flood protection for both sides of the Cedar River. Meanwhile, activists who opposed the local-option sales tax extension plan to “push their own flood-protection plan different from the city’s $375-million ‘preferred’ plan.”
Todd Dorman writes in his latest column for the Cedar Rapids Gazette:
I asked the mayor if he thought this result would lead to a renewed public discussion of what sort of flood protection citizens want. He contends that it would take years for the Army Corps of Engineers to study a new plan. Corbett doubts that’s feasible. So I gather we’re not going back to the drawing board.
The corps east-side-only recommendation remains, protecting downtown and east bank industries while leaving the west bank as-is. I expect there will now be pressure on the council from business leaders to move forward with that plan and come up with the local match needed to fund it. Biz leaders will say, “You made a nice try for both sides, now do what has to be done.” Approving that plan, knowing that it could lead to higher water on the west if another big flood comes, will be a very tough vote.
Or maybe there’s a re-vote in November on the sales tax, with a different plan. Maybe a 10-year tax, flood protection only. I know the road improvement piece was supposed to sweeten the pot, but I can’t help but wonder if it wasn’t also turn-off for some voters. It opened up the city to criticism of its streets record and complaints that it can’t handle even this basic need.
But nobody seemed ready to talk about re-votes Tuesday.
So what we have to swallow along with this wafer-thin mint served up by the voters is a lot more uncertainty. We’ll see it city leaders were right when they said defeat would discourage vital investment in the city’s core.
SECOND UPDATE: The state sales tax bills will remain eligible for consideration next year:
House Study Bill 240 that would have allowed Cedar Rapids to capture a portion of future sales tax revenue growth in Linn County to pay for flood protection has been placed in a legislatively induced coma until the 2012 session.
[…] it will remain in committee and can be resuscitated when the Legislature convenes in January 2012, Wagner said.
If it is not assigned to a subcommittee within seven days of the Legislature convening, it will die, he said.
A similar bill, Senate Study Bill 1209, won approval by the Senate Appropriations Committee. If no action is taken it likely will be placed on unfinished business for consideration in 2012.