L.O.S.T. – It’s not a tax increase but it may prevent one

Some individuals have the idea that if the Local Option Sales Tax (L.O.S.T.) question is approved it will increase their taxes. Nothing could be further from the truth.

In fact, LOST could benefit local taxpayers by holding off increases in fees and tax rates, at least in regards to paying for the mandated sewer replacement project and the City’s pavement management program.

L.O.S.T. is a special-purpose tax implemented and levied at the city or county level and always attached onto a state’s base sales tax rate, most commonly at a rate of one percent (1%). The tax is not just a tax on the buying habits of local residents but rather a tax on the buying habits of anyone who purchases a product or service within Muscatine County. The local option tax collected within a county is placed in a special distribution fund which is dispersed on the basis of population and property tax levies.

The special-purpose tax can only be implemented upon approval by voters in the city or county and the referendum must state exactly what the money will be used for. Once stated, and approved, the money cannot be used for any other purpose unless another special election is held to change the distribution of the revenue received.

The City of Muscatine is asking voters to approve extending the local option sales tax for a 15-year period starting July 1, 2019 and ending June 30, 2034. Specifically, the ballot question states that not less than 80 percent of the proceeds will be used for sanitary and storm sewer projects with the rest used to fund the Pavement Management Program.

L.O.S.T. has been a part of the local economy since July 1, 1994, after Muscatine voters approved the first ballot question in May of 1994. All proceeds collected during the five-year period were entirely used to fund sanitary and storm sewer projects.

The same ballot question was approved for another five-year period in August 1998. However, in January 2003 voters were asked to redefine the distribution of L.O.S.T. funds with up to 10 percent of the revenue assisting in the financing of the Pearl of the Mississippi Projects.

Eight projects were included in the $10.67 million Pearl of the Mississippi Project including the Weed Park Aquatic Center, American Heritage Trail Extension, Musser Park Skatepark, community art, marina improvements, boat launch relocation, Riverview Center renovation, and the Environmental Learning Center at Discovery Park.

From FY 2002/2003 through FY 2008/2009, L.O.S.T. contributed $1.5 million to the overall project fund.

To continue funding the sanitary and storm sewer projects, and the Pearl of the Mississippi Projects, voters approved another five-year extension in January 2004. With the contribution to the Pearl of the Mississippi Projects ending in the first half of 2009, the City of Muscatine opted to continue splitting the L.O.S.T. proceeds when the question came up again in August 2008.

The aging city infrastructure had been a matter of debate for many years and the City of Muscatine saw an opportunity to fund repairs to the city streets, sidewalks, and alleys through L.O.S.T. When voters were asked in August 2008 to extend L.O.S.T. for a 10-year period, they were also asked to approve not less than 80 percent of the revenue going towards sanitary and storm sewer projects and no more than 20 percent for pavement management projects. Eighty-one percent of the voters who went to the polls supported the measure.

Approximately $533,000 of each year’s L.O.S.T. revenue has been transferred to the Pavement Management Program with $4.25 million of street improvement projects completed during the first eight years of the program. These funds were also used to supplement Road Use Tax funds that are used to support the annual Asphalt Overlay and full-depth concrete patching. L.O.S.T. revenue also supplemented funds for the Colorado and Cedar streets reconstruction projects as well as the Diana Queen Drive Extension project. The reconstruction of Cleveland Street from Park Avenue to 2nd Avenue is the latest example of the use of local option sales tax revenue to improve the infrastructure of the city.

Of course the main reason for L.O.S.T. is funding the Environmental Protection Agency (EPA) mandated sewer separation which requires the City to complete specific major projects by 2028. The West Hill Sewer Separation Project is the final project included in the EPA Consent Order. The City reached the half way point of the six phases late in 2017 which marked 34 percent completion of the sewer separation.

Phase IV of the project begins this spring and continues for the next three years and completes another 17 percent of the overall project with Phase V scheduled for 2020 through 2022 completing another 13 percent. The largest and most expensive of the phases begins in 2022 with Phase VI which will complete the final 36 percent of the sewer separation project.

A total of $54.4 million has been raised in the 23 year history of the local option sales tax with $49.7 million spent on the various sewer separation projects since 1994. It is estimated that $40.1 million will be needed to fund the remaining three phases.

L.O.S.T. is a significant factor in the City being able to keep sewer fees and the city tax rate from being affected by the mandated EPA Consent Order. The extension of the local option sales tax means that Muscatine will be able to complete the sewer separation project within the parameters set by the federal government without the use of additional taxpayer dollars.

Visit the City of Muscatine Local Option Sales Tax information page HERE.

-Kevin Jenison, Communications Manager

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