Cedar Rapids Sales Tax Oversight Committee says ballot doesn't allow $10,000 for 'unmet needs'

CEDAR RAPIDS – The very-specific ballot language of March 2009, which voters here approved to create a 1 percent local-option sales tax largely for flood recovery, does not allow for part of the revenue to be spent as the City Council has decided for the “unmet needs” of some flood victims.

That was the conclusion on a 6-1 vote last night of the City Council-created Local-Option Sales Tax Oversight Committee.

The intent of the committee is to report to the council when it thinks a council decision on the use of the sales tax revenue does not coincide with what voters approved back in 2009.

However, the council on its own 8-0 vote just last week approved the unmet-needs program to provide up to $10,000 for some 1,400 households to help cover losses of personal property not previously covered by federal funds.

Oversight Committee Chairman Gary Ficken noted last night that the council doesn't need to pay any attention to the committee's advice.

Back 16 months ago, Ficken helped draft the sales-tax ballot language, which was crafted in tight wording intended to assure voters that the tax money would be spent in very specific ways if they approved the tax.

Voters agreed to use 10 percent of the sales tax revenue to provide property-tax relief while 90 percent of the revenue was to go three flood recovery items – acquisition and renovation of flood-damaged homes and “matching funds for federal dollars to assist with flood recovery.”

At the time, no one, including the City Council, had any idea that the federal government would provide money in the months after that to pay for most of the cost of nearly 1,400 property buyouts with little need for local money.

Last night, the Oversight Committee said the council's unmet-needs program did not involve acquisition or renovation of property, nor did it meet the third criteria, “matching funds.”

Committee members Elizabeth Hladky, Doug Wagner and Jeff Palmer noted that the idea behind “matching funds” is that the city must set aside some local money as a condition of securing federal or state dollars. Hladky noted that it is typical for a federal program to provide the majority of a project's cost contingent on the local jurisdiction providing a local “match.” That is not happening in this case, the committee's majority said.

Instead, the City Council tailored the unmet-needs program to homeowners who received earlier payments from the Federal Emergency Management Agency, the Small Business Administration or flood insurance. The sales tax money now will help match those earlier payments, and so it fits the ballot language, the council has said.

Last night, Mayor Ron Corbett said he respects the committee's vote but disagrees with it.

Only Ficken last night sided with the council's vote of last week. He agreed with other committee members that the council had stretched the meaning of the referendum language, but Ficken argued that getting local-option sales tax revenue into the hands of flood victims for unmet needs outweighed any concerns he had about the precision of the ballot language.

Palmer, though, said the Oversight Committee had a fiduciary responsibility to do what it could to make sure the revenue is used as voters asked that it be used.

Hladky agreed with Ficken that the unmet-needs idea fit “the spirit” of what voters had approved, and she, like Ficken, said she was eager to get some of the local-option sales money into the hands of flood victims. But she didn't think the ballot language allowed it.

To date, the local-option sales tax has brought in $19.5 million to the city, but only $270,405 of that amount actually has been spent.

Palmer emphasized, though, that the City Council actually has obligated $53 million of the $78 million now expected to be taken in over 63 months. The money, though, will begin to flow out as the pace of buyouts picks up and as a rental rehabilitation program for landlords takes off, council member Chuck Wieneke, the council's liaison to the Oversight Committee, said last night.

Wieneke agreed with committee members that the council's view of what “matching” funds meant was “imaginative,” but Wieneke voted to approve the unmet-needs program along with his council colleagues.

Several on the Oversight Committee also questioned the unmet-needs program's ability to really police whether some of those who will get up to $10,000 for lost personal belongings really had that many belongings or if there was any way to know how much they had already been paid by other programs to replace them.

Linda Seger, a new committee member, noted that the unmet-needs program as now designed will only subtract earlier FEMA or Small Business Administration or insurance awards for personal property, while some residents got thousands of dollars more from other local programs.

Drew Westberg, assistant to the city manager, told the committee that the City Council concluded that the program is for those flood victims who owned or were buying homes, and the council has concluded that most owners lost far more than $10,000 in personal possessions that the unmet-needs program hopes to address.