HomeMy Public PortalAbout2014.09.30 Special MinutesMINUTES
McCall City Council
Special Meeting
Idaho First Bank Community Room
475 E. Deinhard Lane
September 30, 2014
Agenda
Call to Order and Roll Call
Work Session
Adjournment
CALL TO ORDER AND ROLL CALL
Mayor Aymon called the Special meeting of the McCall City Council to order at 6:05 p.m.
Mayor Aymon, Councilor Giles, Councilor Scott, Councilor Swanson, and Councilor Witte
answered roll call.
Staff present Gene Drabinski, City Manager; Linda Stokes, City Treasurer; Dennis Coyle, Parks
and Recreation Director; Peter Borner, Public Works Director; Erin Roper, Communications
Coordinator; and BessieJo Wagner, City Clerk.
PUBLIC FORUM
Public Forum —1% Sales Tax Initiative
Mayor Aymon welcomed the attendees and introduced the Council.
Gene Drabinski, City Manager, opened the public forum by describing the process for passing
the ordinance for the 1% sales tax. He described the process that began with City departments
presenting their high -priority capital needs. The Capital Improvement Committee (CIC) scored
each project using a priority matrix. He stated that it was quickly discovered that the streets and
sewer and water lines were the most in need of repair or rebuilding. Mr. Drabinski showed slides
to the audience of several places in the City where the streets and infrastructure are broken down
and in need of replacement. He stated that when the CIC reviewed these slides they immediately
began to focus on streets and infrastructure instead of the other departments. Mr. Drabinski
stated that a finance advisor was consulted and provided three financing options; one was to cut
the budget, the second was to borrow the money, and a third option was to find a new source of
revenue. He stated that cutting the budget would not produce enough money to help.
Mr. Drabinski explained that the Council looked at getting a bond, but this would increase
property taxes to pay it back. He stated that grants were another option, but matching funds are
needed and there are many cities competing for grants. He stated that the Local Option Tax was
Page 1 of S
McCall City Council Special Meeting
September 30, 2014
also explored and the Capital Improvement Group recommended a 1% sales tax ordinance to
fund streets projects. Mr. Drabinski stated that the group wanted to make project -by -project
decisions about bonding or local improvement districts and that a bond could be paid off with
revenue from a 1% sales tax. He explained that for a local improvement district, it also leaves the
City the capability of underwriting the property tax increase with revenue from the 1% sales tax.
Mr. Drabinski stated that after discussion it was decided that the City would go forward by
making an annual contribution from ordinary city revenue for the replacement and maintenance
to extend the life of capital projects funded by the 1% sales tax so that in 20 years the City does
not have to raise this money again, but rather, a fund would exist to be able to keep up on
maintenance.
Mr. Drabinski explained the details of the ordinance, namely, what would be taxed and for how
long. He stated that items for which a 6% sales tax applies would be taxed at 7% for a period of
10 years. This could only be implemented with 60% of the vote and modified with 60% of the
vote. He explained that the revenue would be used for direct costs of administering the tax, and
only for street replacement and resurfacing, ADA-compliant sidewalks, and repair or
replacement of new underground utility infrastructure. Ordinarily the latter is paid for by rate
payers, so this is unusual. Also included would be pathways for pedestrians and bicycle, and
matching funds for leveraging grants or to underwrite bonds or LIDs for the above uses.
Mr. Drabinski explained how it would be determined what gets fixed. He stated that seven
volunteer members would be appointed to a Capital Infrastructure Advisory Committee, which
would be comprised of three McCall business owners and four at -large residents. He stated that
the members would review the Ten -Year Streets Plan and use it to make funding
recommendations to Council for specific projects that would satisfy the above criteria for each
year. The Ten -Year Streets Plan describes the remaining service life of asphalt on each street and
the cost breakdown to replace, etc. He explained that also, a Capital Infrastructure Budget would
be established. There would be a specific line item in each fiscal year's budget apart from
revenue that is generated by the 1% sales tax ordinance, taking funds that come from property
taxes to set aside for future replacement and maintenance.
Question and Answer Discussion
Steve Gaines is a new resident. He asked how the tax would be collected. Would it be sent to the
Idaho State Tax Commission and would they charge a fee for collection? Mr. Drabinski replied
that the City would self-administer the tax. The Idaho State Tax Commission would charge about
$160K a year, so the City would save that money and administer it internally.
Mr. Gaines added that being a resident of McCall, this tax would affect him on a daily basis, like
when going to the grocery store. He asked if he would have to pay the extra 1% when registering
a vehicle that had been purchased elsewhere. Mayor Aymon explained that the beauty of this tax
is that the visitors share the brunt of paying it, and she anticipated that approximately 70% of this
tax would be paid by visitors. Mr. Gaines asked how she could anticipate 70% of the tax being
paid by visitors when people that live here seven days a week are shopping all week long. Mr.
Drabinski explained that the tax would be administered locally instead of having it go through
the State. When a retailer pays the 6% sales tax they will send the additional 1% directly to the
City. Mr. Drabinski said he would research the vehicle tax question and post it later online.
Page 2 of 5
McCall City Council Special Meeting
September 30, 2014
Mr. Gaines asked how it is known that the visitors would pay 70%. Mr. Drabinski explained that
this number was derived from experience with other similar cities in Idaho who have the
additional 1% sales tax. Of the money collected, about 70% is collected from people who do not
live in the City. Mr. Gaines then asked why the money could not come from property taxes,
because there are so many second homes that would not qualify for the Homeowners Exemption.
Mayor Aymon explained that the City is only allowed to levy a maximum 3% increase in
property taxes every year, which would only be $142K. The sales tax would earn more revenue
than that, an estimated $1 million per year.
David Sorensen said he was concerned about the burden of the 1% sales tax on the citizens of
McCall. He is going to build a house in the spring, and if the building goods are taxed through
Franklin or ProBuild, he would purchase his building supplies in Boise and transport them
because 1% of this cost is quite a bit when building a house. If others think like him it would
impact local businesses and reduce their sales. Mayor Aymon pointed out that not having the 1%
and likewise not fixing our roads would be expensive and cause hardship for our locals because
cars may get damaged on our bad roads. Alternatively, if we raised property taxes to fix roads
the homeowners would pay more taxes, but in addition the landlords may raise rent and this
would likewise affect the renters too. She also mentioned that community safety can be impacted
if our water quality and sewer are compromised. Also, economic development would be
impacted because the poor infrastructure would impair economic development. Mr. Sorensen
also asked if there was something the citizens were willing to do to help make the city better,
perhaps by volunteering. Mayor Aymon acknowledged the volunteers that help with some of the
City's projects, but when talking about the infrastructure, it has to be done by professionals.
Rebecca Hurd commented that the very nature of this tax is regressive. She wanted to know is
there any way to look at this from a very basic human need -- food, and how it would impact
people's monthly income. Are there certain exclusions that this tax would include? Councilor
Swanson replied that he was probably the lowest income person on the Council and that this tax
would personally burden him further. He acknowledged that this tax would hurt everybody, but
on the other side, he pays rent, and he noted that if the money was raised by raising property
taxes his landlord would be affected by about $80 for every $100K in taxable value, so perhaps
an increase in $20 or $30 per month in rent. In comparison to a sales tax, he would have to spend
about $3K a month on food to be paying more in sales tax on food when compared to the
increase in property tax. Councilor Swanson also expressed concern that he would not be able to
buy a house someday should property taxes rise. Ms. Hurd once again asked if the tax could be
set up to exclude some very basic human needs in the community and reminded the group of low
income families living in the area. Councilor Swanson explained that the reason certain
categories were not excluded was so that the City could gain the most revenue in a short period
of time and not have to continue the tax past the 10-year period. Councilor Witte added that the
1% sales tax spreads out the burden to all people who use the streets instead of just those who
pay property taxes and includes those in the impact area.
Mr. Drabinski added that USDA was contacted to see the impact on a family of four, and that
impact, depending on how they buy, would be between $8 and $11 per month. It was also
learned that food stamps are exempt from this and that there is a food tax rebate provided by the
Page 3 of 5
McCall City Council Special Meeting
September 30, 2014
State. Also, there is the possibility that the increased revenue from the sales tax might provide
additional employment opportunities.
Christie Grob asked if food was excluded and if it was feasible to supplement the difference by
increasing tax elsewhere such as the bed tax or alcohol? Mayor Aymon explained that the
ordinance is already fixed for 1% sales tax increase so no amendments can be made to it at this
point. It is always a possibility to do that in the future. Mr. Drabinski gave the example of
Ketchum where they have a very complex sales tax that excludes food and pharmaceuticals but
taxes liquor by the drink, lift tickets, etc. However, there is a very different demographic there
and a larger tourist economy and it raises around $7 million a year.
Dan Krahn asked for clarification about the term "point of delivery." This refers to business that
may be outside city limits but may deliver goods to places inside city limits, making the purchase
subject to sales tax even though the business is not in city limits. He asked how merchants
become responsible for that or are penalized. BessieJo Wagner, City Clerk, replied that State
statute says that if delivery is made within city limits then it would be taxed, and if delivery is
made outside the city then it would not be taxed. It is much like the tax that citizens are required
to pay on internet purchases. Ms. Wagner implied that if the City knows that there is an issue
then it would be enforced. If someone delivers within the city from Boise and they do not pay the
tax and the City learns about it, then it would be addressed with that vendor. She stated that
many vendors do call the City and ask if there is a tax so they know before delivering to McCall.
Mr. Krahn also asked if the City was trying to reach other groups that may be impacted by the
sales tax, such as senior citizens. Mayor Aymon responded that the City is trying to get in front
of every group in the city to talk about the sales tax. He also added that the vehicle registration
question comes from a county level, so the additional sales tax may not be relevant. Lastly, as a
retailer, Mr. Krahn pointed out that the 1% increase in sales tax would not justify the time and
expenses to buy materials from outside the area.
Rick Fereday asked if this would affect people buying homes. The Council replied that it would
increase the price of homes, but there is already a considerable difference in taxes when buying
inside versus outside city limits.
Mayor Aymon added closing comments, stating that the City is not going to be rescued. The
State has a $500 million backlog of failing infrastructure projects of its own. The Federal
government is also cutting funding as well. She stated that the people who live here need to step
up and fix the problem. Spreading the cost across all users is the fairest way to come up with the
money.
Rick Fereday commented that he tried to help pass a 1% tax 15 years ago. He acknowledged
from his observation over the last 40 years that the City's infrastructure has never been properly
invested in and it appears that some very poor decisions have been made in the past. He felt that
the tax is fair and appropriate.
Mayor Aymon stated that the City Engineer has done two surveys of the City's paved roads and
it was determined that in order to maintain the existing roads in their current condition it would
cost $700K to $800K a year just to maintain the roads right now as they are. The current roads
Page 4 of 5
McCall City Council Special Meeting
September 30, 2014
maintenance budget is $200K to $300K a year, so the City is way behind. That leaves no money
for building or rehabilitating, just maintaining the roads in their current condition. Mayor Aymon
reinforced that it is the local citizens' responsibility to do the right thing and support the tax.
ADJOURNMENT
Without further business, Mayor Aymon adjourned the meeting at 7:51 p.m.
Page 5 of 5
McCall City Council Special Meeting
September 30, 2014