Apr. 25—OTTUMWA — After receiving new information from city finance director Cole O'Donnell regarding three different potential distributions from local option sales tax revenue, the Ottumwa City Council approved a new distribution during Tuesday's special meeting at the Amtrak Depot.

The council, on a 4-1 vote with Keith Caviness voting against, approved a 70-30 split as ballot language for a special election in September. The action took place in three separate votes — one to remove the resolution for an 80-20 split from the table, a vote to amend the resolution, and a final vote to adopt the new resolution.

A special election will be scheduled for Sept. 10 to extend the 1-cent sales tax for 10 years. The new distribution would start Jan. 1 and end Dec. 31, 2035.

If approved, street and sewer repairs would get only 70% of the sales tax funding as opposed to the current 90%, but an additional 20% in property tax relief would help the city's general fund cover expenses such as personnel and operations costs in future budgets once that levy gets tightened to $8.10, which now includes supporting the emergency, Bridge View Center and library levies.

O'Donnell tested three different potential splits — 80-20, 75-25 and 70-30. Though only estimates beyond the next fiscal year, he said a 70-30 split would bring in $958,950 to the general fund starting in fiscal year 2026 and increase through at least 2030.

"Either 70-25 or 70-30 provide for better ability to meet our expenses, with 70-30 offering the greatest relief," he told the council. "Changing the distribution does not necessarily mean that all of the increase to property tax relief will go to the general fund, and it's possible not all funds from the distribution would be needed in certain years.

"The excess could be distributed to streets and sewers to free up finances and to free up finances for economic development efforts."

However, he said the city still must remain diligent with planning efforts moving forward. O'Donnell said he and city administrator Philip Rath have had discussions about purchasing capital improvement software that will help the city project into the future if funding will be available for certain projects.

"The software allows us to look at (something) and say, 'OK, this year, we're going to run into a problem because we're not going to have enough money for a project,'" he said. "Or, we move that project to a different year, move something up or something like that, then we can get things done and completed and still maintain a balanced budget."

Council member Cara Galloway asked how much closer a 75-25 or 70-30 split gets the city to covering its costs.

"It does get us closer, but everything is going to be looked at," he said. "It might be one of these were everything is held at a zero increase except for necessary wage increases. You might look at other reductions, such as if a training option could be done virtually instead of having to go somewhere.

"One of the things I've seen done in the past, and everyone laughs and scoffs at it, but turn off every other streetlight," he said.

Rath said the city's goal has been to lower the tax levy each year, which it has done for several years.

"Being one of the top-10 in the state (in terms of taxed communities) isn't a goal that anybody should be proud of," he said. "The reality is that services cost money, but the goal over the last few years has been to proactively and methodically reduce that levy without having to cut positions or severely cut services."

The city has been hampered by House File 718, which takes back a certain percentage of valuation growth. There's only one main way to offset that.

"We had a 3% haircut because we grew over 3%, but we need to continue to grow," Rath said. "Having a lower assessed valuation affects the revenue we have compared to communities like us in terms of population. Those communities have a lower tax rate.

"We do definitely need to continue to grow."

O'Donnell said when businesses come to the community, property tax "is No. 5 on the list."

"What's at the top of the list right now is quality of life, because they want to attract workers and workers want recreational opportunities. They want restaurants and shopping," he said. "Unfortunately the Iowa Legislature things we can do that with less revenues. But we still have the same acreage of parks, a civic center we have to support to bring in those shows and attractions.

"In just my honest opinion, I think the legislature sometimes cuts off their nose to spite their face."

— Chad Drury can be reached at cdrury@ottumwacourier.com, and on Twitter @ChadDrury