Frequently Asked Questions
What is on the May 7, 2013 ballot for the City?
An income tax initiative designed to immediately reduce property taxes will be on the May 7th ballot. The income tax initiative is a 1.5% income tax for a seven year period starting January 1, 2014.
Why does the City need an Income tax?
The City continues to face steep losses from the state. Right now, our City has lost $2.3 million from the state and local revenues remain down. We have stemmed the bleeding by delaying critical infrastructure improvements throughout the City.
What would the income tax fund?
• Approximately 50% of the tax will be used to reduce 7.3 mills of property taxes.
• Approximately 33% will be dedicated to address over $200 million dollars of infrastructure improvements such as;
o Street and bridge repairs
o Curb and gutter replacement
o Storm sewers and ditch repair and construction
o Building maintenance
o Pedestrian and bicycle facilities
• Approximately 12% will be used to offset state revenue reductions to allow the City to maintain essential services.
• The remaining funds will be used for administration and maintaining a fund balance.
Who pays the tax?
It is estimated that over 75% of the employees working in the City reside outside the City limits. These employees and businesses will pay the 1.5% income tax on their wages or profits earned within the City. This shifts the tax burden to non-residents who are utilizing City services. This shift will allow the City to reduce property taxes.
City residents working in a municipality that has an income tax will receive a 100% credit for the taxes paid to their work place municipality but will receive an immediate reduction in their property taxes.
What type of income is exempt from the income tax?
Exemptions from the proposed earnings tax would include pensions, social security, and investment earnings.
How and when will property taxes be reduced?
Per the City Ordinance, current voted levies will be allowed to expire and will not be renewed during the seven year term. Property tax savings will begin immediately in 2014 as noted on the expiration schedule below:
• 1.0 Mill Street levy – Expiration 2014
• 3.7 Mill Police levy – Expiration in 2015
• 2.6 Mill Street levy – Expiration 2017
What happens if the income tax fails?
Addressing critical work on the city’s infrastructure will continue to be delayed. The problems with continuing deferral on these projects means that the infrastructure continues to deteriorate resulting in additional maintenance and increased future cost for these repairs.
In addition, the City will have to face very tough service cuts in the next year. These cuts will likely affect all areas of the city, including police services, streets, services to seniors, our parks, and administrative services.