Council has dispensed little in LOST revenue; by year's end may have spent more than taken in

CEDAR RAPIDS - The City Council expects it will have spent more revenue from the local-option sales tax for flood relief by the end of the year than it has taken in by then.

To date, the city has spent $243,441 of the $16.6 million it has collected for flood-relief since April 1, 2009, the date that voters agreed to put the tax in place. It will be collected through June 30, 2014.

Ninety percent of the tax or about $16 million a year goes to flood relief, and in particular, the acquisition and rehabilitation of flood-damaged property. The other 10 percent of the tax revenue goes for property-tax relief, which the council has used to fund budget items that property taxes otherwise would need to be used to fund.

In a council Budget Committee meeting on Wednesday, Drew Westberg, special assistant to the city manager, told the committee that the council-approved allocation of local-options sales tax funds in late March for the renovation of flood-damaged rental units will accelerate the spending of the sales-tax tax revenue.

In March, the council estimated that payments to fix rental units could require the use of $30 million, or about 38 percent of what is estimated will be a $78-million sales-tax pot fvor flood relief over the 63 months in which the tax is collected. Nearly half of the city's flood-damaged properties were rental units, and landlords have not had similar access to state Jumpstart housing-rehabilitation funds as those who occupy their own homes.

At Wednesday's meeting, Mayor Ron Corbett called it a good thing that the city was getting sales tax revenue “on the street,” even if it meant the spending would come faster than the tax collection.

Council member Kris Gulick wondered if the city could borrow from its own investments to cover the temporary revenue gap because the city's investments are earning such a low rate of interest. Otherwise, the city would need to cover the revenue gap by selling bonds, which come with a higher interest rate, Gulick noted.

The council committee struggled with the idea of using local-option sales tax revenue to buy out 35 homes with less than 50 percent damage that sit outside the greenway zone near the river and the levee construction area beyond the greenway. Federal buyout funds aren't available for the 35 homes because of location and damage level.

However, those homes do qualify for state Jumpstart renovation money, but the owners want a buy out at 107 of pre-flood value, not renovation. Buyouts will require the city to use local sales money for purchase and renovation, which council members didn't like.

The committee also wondered about buying out vacant lots that had been vacant before the flood. One advantage would be to get the lots in city hands so the city could steer new-home construction on to them, the mayor said.