Bolivar’s leaders hope a quick shuffle of their financial cards will give them a winning hand when facing seemingly bad odds of beating budget shortfalls.
Thanks to a unanimous vote in a Wednesday, Aug. 21, special session, Bolivar’s board of aldermen plan to take a tax reallocation issue to the voters in the upcoming November election.
Aldermen Ethel Mae Tennis, Steve Skopec, Justin Ballard, Mike Ryan, Steve Sagaser, Alexis Neal and Charles Keith voted to approve the ballot issue. Alderman Thane Kifer was absent.
The ballot issue asks voters to approve a one quarter of a 1% general sales tax increase with funds going to the city’s general reserve.
At the same time, if the measure passes, the board says it will decrease the city’s capital improvement sales tax by the same amount, essentially leaving the tax rate at the same 2.5% level.
“I think it’s very important that the voters would understand that we’ve adopted an ordinance that says, should you elect to allow us to increase our sales tax that we, the aldermen, are voluntarily reducing the capital improvement tax in the same amount,” city administrator Tracy Slagle said. “So that there would be no increase to the overall sales tax that you pay at point of sale.”
When Neal asked if there was a way to assure voters overall tax rates would remain the same, city attorney Don Brown said the ordinance language itself “binds the city to actually reduce the capital improvement tax if the sales tax increase passes.”
“We can’t pull the rug out and say, ‘Oops, sorry,’” Brown said. “If it passes, we are obligated to reduce the capital.”
Slagle said the move would shift around $500,000 from the capital improvement fund — which currently brings in around $1 million at the half-percent rate — to the general fund, in turn giving more flexibility in the way the tax dollars can be spent.
She said the city pays around $700,000 in lease payments each year from the capital fund. That account had a $248,000 surplus in 2018.
If the reallocation passes and less money funnels into capital improvement, the remaining balance can be paid from the general fund until those leases are paid down, she said.
“That would give us about $270,000 of flexibility, so it could be used on capital projects or it could be used for whatever other operational costs we have,” Slagle said.
In a Tuesday, Aug. 13, board meeting, Slagle explained why the reallocation would help city finances overall, saying while funds in the general fund can be spent any way the city and board see fit, dollars sitting in capital improvement are restricted.
“If we take more away from the capital improvement and move it into general, general can still pay for capital purchases,” she said. “But when it’s in the capital fund, it can’t be used for operational needs other than those capital debts or leases.”
In an attempt to explain the reallocation of sales tax more simply, Neal said it “would alleviate a significant amount of the pressure we currently feel, because the money has to go into certain buckets, and it can’t get out of those buckets once it’s in those buckets.”
Referring to last year’s surplus in the capital improvement fund, Slagle said having those dollars fall into the general fund from the beginning would have freed up “a quarter-million dollars that we would have sitting in general that we could have used to help supplement the public safety departments.”
With the loss of the city’s Federal Emergency Management Agency SAFER grant, which helped the city’s fire department transition to a combination career/volunteer department in 2014, Slagle said the city has supplemented its “public safety programs by about $325,000 a year out of our general reserves” since 2016.
“You can only do that so long before you have no reserves left,” she said. “So this is really the year we need to make a pivotal decision on what we’re going to do to increase that revenue stream and help support public safety.”
Neal said while the tax reallocation would give the city “breathing room” on the general fund shortfall, “it is not a long-term, fail-safe fix.”
“It’s giving us more time so we don’t have to borrow from another fund another year,” she said. “But I think we’d still need to be thinking about what we could do to deal with the general fund shortfall.”
In the Aug. 13 meeting, Kifer said one possibility is to bring a use tax ballot issue back to the voters in the future.
Voters shot down local use tax initiatives for both Polk County and the City of Bolivar in April 2018. Fifty-two percent of Bolivar voters rejected the tax.
“I think there was a tremendous lost opportunity for us to get that enacted last time and then to lose only by 33 votes,” he said.
Kifer said without the use tax in place, the city has a “leakage of sales tax dollars that was going to the brick and mortar stores in Bolivar that the city operated off of that’s now gone to Amazon that we’re not getting.”
He said with the city’s need to replace those funds, it may come down to a question of use tax versus property tax, adding his feeling is more people would prefer a use tax.
“I would recommend that we do take another stab at the use tax, but we couple it with more voter education this time,” Kifer said.