Chairperson Neuzil called the Johnson County Board of Supervisors to order in the Johnson County Administration Building at 10:00 a.m. Members present were: Pat Harney, Mike Lehman, Terrence Neuzil, Sally Stutsman, and Carol Thompson.

Iowa State Association of Counties (ISAC) Assistant Legal Counsel Linda Hinton said that the last legislative session was tough for local governments. Hinton said that because of the property tax credit cuts and others, the Public Strategies Group, who is involved in the reinventing government bill, has been working towards trying to improve relationships between local governments and State government. One of the projects is trying to have the League of Cities and ISAC designate certain legislators that they want to make sure understand local government issues and make sure they are willing to carry some of the issues into their caucuses. Hinton said that they are happy to have State Senator Joe Bolkcom present to discuss some of the issues that he sees for the upcoming legislative session.

Bolkcom said that the new legislative session starts Monday January 13, 2004. He said that the State budget is about $300-350 million in the hole on day one: about $80 million of that is trying to give more money to the schools, and $160 million is making sure local property tax credits are funded. Bolkcom said that revenues are flat and no new money is projected for next year. Bolkcom said that it continues to be a tough situation and the national economy is going to be the key for the State getting back to a more normal revenue picture. Bolkcom said there will be continued opportunities for local governments to bring forward suggestions on how to work together to provide services in a different way. Bolkcom said that he isn’t talking about consolidation, but sharing of services. He said there are many examples of that now but it will provide opportunities for people to continue to experiment and make suggestions to the Legislature around the notion of Freedom Communities.

Bolkcom said that the challenge in the short term to Johnson County and other local governments as they make their budgets is trying to have a sense of whether or not the property tax credit issue is simply a one year situation or whether there will be a push to eliminate it. He said that House Appropriations Chair Representative Bill Dix said in a committee meeting that they were considering eliminating all property tax credits. Bolkcom said that he doesn’t know if that will happen or not but he encourages the Board to think about preparing a budget that takes that into account. He said that one of the problems that local governments faced last year with the $60 million cut was that it came after budgets were certified. Bolkcom said that it is unclear at this point whether or not there will be a proclamation about what is going to happen with property taxes before March 15, 2004. Bolkcom said that it will be helpful for ISAC and the League of Cities to press the majority party leadership early in the session about their intentions.

Bolkcom said that there are a series of committees meeting on the property tax reform effort that was passed last session. Bolkcom said that what was passed was an unworkable proposal to reform property taxes in the state. He said that it requires a committee to write reports on how to implement it and they may figure out that it doesn’t work after a couple of years and then move on to something else. Bolkcom said that his hope is that it will die and go away and they will take another shot at trying to look at property tax reform. Bolkcom said that in this time when the Legislature’s and local governments relationship is as bad as it’s ever been, he thinks that the County should try to step outside of that and move forward with progressive ideas in the areas of how to share services, work better, and support more efficiencies in local governments.

Hinton said that with regard to property tax credits there seems to be a message coming that perhaps the majority isn’t as interested in cutting property tax credits as Representative Dix might have been. Hinton said that the concern for ISAC and the League of Cities is the $350 million shortfall in the budget and where the Legislature is going to come up with a way to balance the budget. She said that the property tax credits were an easy target last year and therefore might be an easy target again this year. Hinton’s said that ISAC is involved in the property tax reform meetings and she shares some of the concerns that Bolkcom does with regard to whether the concept that they are using is the best way to go. Hinton said another issue that local governments are facing is whether the erosion in the tax base in addition to issues around property tax credits might not pile onto each other and create additional stresses on local budgets. Hinton said that they have recommended over and over that they use a different name than Freedom Communities.

Stutsman asked Budget Coordinator Jeff Horne to speak about the problems that Johnson County had with the late decision of the property tax credit cuts. Horne said that the General Fund could absorb it. He said that because of TIFs the County started using the Debt Service Levy for allowable expenses. He said that there is no other revenue source, so when the shortfall came the County had to borrow from the General Fund to make the obligation. He said that to do that across fiscal years a public hearing had to be held. Horne said that County taxpayers incurred expenses. He said that going forward looking at the budget, because the tax increment grew from 9 to 11% the County will probably look at bonding again. He asked if they are going to keep doing this in perpetuity. He said that other funds can absorb it or allowances can be made but it is difficult for anyone who bonds. Stutsman said that the bond was done because it was the only opportunity to take advantage of the TIF. She said that Johnson County is heavily TIF’d and is losing tax revenues because of that. She said that this was a reasonable way to go but has unintended consequences when the Legislature makes a decision after budgets are certified. Horne said that the County bonds for health insurance and property and casualty insurance.

Bolkcom asked if Horne anticipates any problem with the County’s bond rating. Horne said that the County has been doing local debt issue and hasn’t gone to the open market. Bolkcom said that is another thing for Counties to point out to legislators because he suspects there are other counties that have bonded debt that are impacted by this. Neuzil said that the County ran into a situation where the County was picking up the costs from the schools and others. Horne said that the Board decided the last 2 years to pick up the Elderly and Disabled Credit and the Military Credit but did not pick up the Homestead Credit. Horne said that the Board incurred the cost for the other taxing entities as well. Neuzil asked if they should talk to the cities and schools about contributing if they are getting the warning now that this could be a reality. Horne said that they could be told that it is a possibility. Bolkcom asked how many counties absorbed the cuts the other taxing bodies. Stutsman said that few counties absorbed all of the credits. Hinton said that there were problems, particularly with the Elderly Credit, where it wasn’t absorbed.

County Recorder Kim Painter said that when issues like these exemption credits come up, it isn’t that there is too much government, but counties are providing too much service. Painter said that she doesn’t think that is true because the services are important and have dramatic affects on people’s lives, as illustrated with the problems when the Elderly Credits were cut. Painter said that when the State makes decisions because of their difficult budget situation, problems come to the counties. She said that it’s not like the County can just consolidate offices and save as much money as what is included in the services. She said that it is the services that cost the most, not how the County runs its offices. She said that it is great to talk about new technologies and things that can be done, but what it is coming down to is what can government afford to do for people. Painter said that is a different discussion that is being danced around. Painter said that it is a separate issue from how big is government in the State of Iowa and how much government can be consolidated or gotten rid of.

Hinton said that underfunding at the State level of substance abuse treatment programs and juvenile services is creating a huge stress on County budgets. She said that what happens is that when the State can’t afford to do what it is supposed to do it falls to local governments. Hinton said that more and more services are being asked of the local level. She said that with substance abuse treatment, Counties don’t specifically have a requirement to pick that up, but they are required to pick up juvenile shelter services. Hinton said that at the local level if there are individuals who need substance abuse treatment and they don’t have the means, a quality of life issue at the local level is that government needs to get the people the treatment that they need. She said that most Counties are making the decision that if there is no State money to support that they will pick it up. She said the under funding of the Department of Human Services creates a great stress.

County Assessor Bill Greazel said that whenever he goes to a house that someone has moved into from someplace else he always asks what brought the people to the community. He said if they are under 60 the answer is opportunity and if they are over 60 it’s services. He said that people are moving to the growth areas in Iowa for both of those reasons. He said that some people say that if there were lower taxes everything would be great, but unfortunately, there could be zero taxes and there wouldn’t be the services that would attract the people to our area. He said that if low taxes were the answer everybody would be living in Uganda. Greazel said that when people talk about budget problems, there are a lot of things that aren’t taxes anymore. He said that when people say there is a shortfall of money is it because times are bad or because the focus has been narrowed so much on where to get money that even in good times money isn’t going to be there. Greazel said that when reinventing property taxes is discussed, one thing that has to be looked at is what was being done in the days when there was enough money. Greazel said that part of it was because a broader base of wealth was being taxed rather than just property tax, income tax, and sales tax. Greazel said that lower taxes aren’t the answer to everything, but services and opportunity are.

SEATS Director Tom Brase said that when services are cut often it costs more money in other areas. He said that a study done by the Joint Center for Housing at the University showed that assisted living costs $1,461 per month and conditional housing in the home costs $351. He said that is over a $1,100 per month difference. Brase said that paratransit service is key to keeping housing costs down.

Stutsman said that nobody wants to raise taxes but things aren’t done that might help the situation, one of them being mental health parity. She said that the County is getting swamped picking up the cost of prescription drugs. She said there has been a 52% increase and current MH/DD budget is at $821,000 for prescriptions for persons with mental illness. She said that this could be greatly alleviated if there was mental health parity.

Thompson said that Iowa gets a bad rap because it has too many governmental entities when townships are counted. She said that Iowa doesn’t have a lot of government service and many states provide more services than Iowa. She said that when the Legislature starts cutting, they think that they are cutting entities but they are cutting services. Thompson said that if they wanted to cut the amount of government they should say that there could be only so many townships in a county or so many counties in a state or only so many supervisors on a board. She said that those are the things that would cut the amount of government. She said that it is a mistake to think that when there are too many entities there is too much service. She said that when property tax credits are cut so late in the year it is unfair and it does things like cuts a low income aged person’s credit in one county but not in another. Thompson said that the State takes a lot of credit for providing the property tax credits, yet when they are cut, the State continues to take credit, but the County pays the bill. Thompson said that is really hard to accept and is part of the reason for the bad blood between counties and the Legislature. Thompson said that it is a mark of disrespect to take the County’s money, leave the County with a bad question to answer, and then take credit for it. Thompson said that the main thing that everyone talks about in terms of why it is hard to get businesses to come to Iowa is that Iowa looks like it has high income taxes, mostly because of Federal deductibility. She asked how the Legislature leaped from there to property tax relief. She said that Iowa doesn’t look bad on a list of property taxes state by state, because a lot of kinds of property aren’t taxed. She said that Iowa looks bad on income tax and asked why the Legislature didn’t just fix that. She said that would be a good thing to focus on this year. Thompson said that a change could be revenue neutral.

Bolkcom said that last year the Legislature had a whole series of issues on taxes and then there was the Iowa Values Fund. He said that there were a series of 4 proposals that were bundled together in the special session: an income tax proposal, a property tax proposal, regulatory reform, and the Iowa Values Fund. Bolkcom said that the majority party, rather than taking the issues and working through them on their own merit, decided it was going to be an up or down vote on the whole plan. Bolkcom said the income tax proposal, if passed, amounted to a 310 million tax cut across the state of Iowa with the majority of benefits going to the people who need them. Bolkcom said that one of the pieces of that was elimination of deductibility. Bolkcom explained that it was an issue where the majority party wanted to make progress on it but the Iowa taxpayers group came in and divided the Senate caucus. He said that what ultimately passed was a requirement that the Legislature would have to take it to the voters through a constitutional amendment. Bolkcom said that in terms of outsiders looking at the competitiveness of Iowa, they do not read the details in terms of Federal deductibility, therefore they see a high top rate. He said the effective rate is 3 or 4 points lower than that but people don’t read the fine print. Bolkcom said that getting rid of Federal deductibility would be the single most important thing that the Legislature did on the tax side. Thompson asked why it couldn’t just be made neutral by having a separate issue that got rid of Federal deductibility and then lowered the tax rate accordingly. Bolkcom said that they argued that case with Senator McKibben, the Ways and Means Chair. McKibben couldn’t get it done separately because he didn’t have the votes and he also believed that in order to get rid of Federal deductibility the people that bankroll their campaigns need a substantial reduction in their rate. Bolkcom said that it wouldn’t have been revenue neutral at that point. He said that the minority party argued for a revenue neutral income tax proposal that didn’t shift between taxpayers but was ignored. Bolkcom said that what Thompson suggested makes sense but it was tied up in other issues.

Bolkcom said that the tax changes that were passed last year were irresponsible. He said that the budget is a set of expenditures and revenues and they have to both be managed and the majority party has done an irresponsible job of managing the revenue side of the budget. He said that last year in the face of cuts to expenditures the cuts in revenues made no sense. He said that the Governor vetoed it and they will find out in the next few months whether the Governor is going to win. He said that he won at the District Court level and whether the Supreme Court will uphold that remains to be seen. He said the conversation about more revenue or any revenue this session is going to be hindered by the lawsuit hanging over the Legislature. Bolkcom said that the majority party isn’t of any mind to do anything on taxes until that is resolved. He said that what he has heard about it is that if they are successful with their lawsuit they will delay the implementation of the cuts because they’ve finally realized that there isn’t any money and the school system is on the edge of being in extremely difficult times. Bolkcom said that it is also an election year. He said that it is unlikely there will be tobacco tax increases. He said that a group of people have also signed pledges with various groups that they would not raise taxes in this term. Bolkcom said that the other thing that is troubling is the majority party has the notion that smaller government is better and public employees are tax eaters. Bolkcom said that the pejorative viewpoint that the majority party has isolated them where they are so ideologically stuck on "no new taxes" that even in the face of difficult times for the school system, local governments, and the health care system, they are simply unable to go to the revenue side of the budget and make difficult choices and not so difficult choices about bringing revenue to the table. Bolkcom said that many states have looked at revenues and many states have gotten more revenues in the past few difficult years. Bolkcom said that the Republican leadership in the State is so ideologically set that the facts about what the State needs have little merit and inform them little about where or how to get revenues. Bolkcom said that will play out this whole session and election year and is a long term problem for the State of Iowa as long as they are running the Iowa General Assembly.

Bolkcom said that on the question of the property tax credits, it was a safe cut for the majority party to take away 60 million from local governments. Bolkcom said that notwithstanding the concerns that have been laid by local elected officials, people around the state haven’t heard from their constituents about the impact of a 60 million or 70 million or 100 million cut to local governments. Bolkcom said that what has happened in local government and in the classrooms is that Iowans, and government employees took the cut and continued to provide the same level of service more or less. Bolkcom said that the political price for 60 million doesn’t exist. He said that when there isn’t a political price to pay for a big decision, the likelihood of revisiting it is high. He said that he has talked to others in State government who have been through a lot of cuts and some are saying that there are services that aren’t going to be provided anymore. He said that $20 can be taken from each of 10 services provided and the services can still be provided but at some point, when it is a higher amount, all 10 services can’t continue to be provided. Bolkcom said that the 60 million in tax cuts haven’t shown up in a way that there is going to be a groundswell of support that says not to touch the property tax credits. Thompson said that it won’t show up for awhile. She said that if police officers are cut, the public won’t notice until crime starts to increase in their neighborhood.

Neuzil said that a message needs to be sent to the majority party of the Legislature and the Governor that every time they pass the problems of the State budget to the County they are actually raising taxes, because that is what the County has to do to cover a lot of the cuts. He said the image that the Legislature and Governor aren’t raising taxes isn’t true. Bolkcom agreed. He said that he is interested in examining what the impacts of the 60 million cut are. Lehman said that the image from the Legislators might be that the County is passing the bill on to the cities and schools boards. Lehman said that the County did cover the entire cost. He said that 4 years ago he went to his first County-a-Day where they sat in on a subcommittee talking about property tax limitations. He said that 2 of the 7 were former Supervisors, so they understood the impact to County budgets. Lehman said that he can appreciate Bolkcom’s viewpoint but some Legislators don’t have an idea of the impact on local governments.

County Auditor Tom Slockett said he is interested in the way the discussion has enfolded about taxes. He said they are talking about lowering the income tax. He said there was no discussion about who pays income taxes or whether they pay too much income taxes or not. He said that Warren Buffett and Bill Gates Sr. are advocating that wealthy people pay more taxes and at the same time lowering the progressive tax, which allows them to contribute more to the success that they’ve had in this country. Slockett said that Johnson County has seen a lot of evidence that tax fairness is a big issue. He said that one of the things that is at the top of the list of priorities for people in Johnson County are libraries. He said that there was a proposal for a new Iowa City Library paid for by sales tax. He said that almost the whole discussion in that election was about the fact that sales tax impacts poor people significantly more than wealthy people. He said that it lost in every single precinct in the County. Slockett said it then came back with a bond issue and passed overwhelmingly. He said that the School Board talked about having a school sales tax and there was a huge discussion about the unfairness of that. Slockett said there was a prediction that it wouldn’t pass and finally the School Board decided to have a bond issue, the largest bond issue in history, and it passed with 70% approval. Slockett said that people are willing to pay taxes but they want to pay fair taxes. He said that State Legislators need to work with national Legislators. He said that TIFs are a good idea that went gone awry. He said that a decision isn’t being made on what the marketplace says would be the best place to locate a business, it is more based on which elected officials are willing to have their taxpayers pay the costs. He said that it is a catch-22.

Slockett said that there are advantages to having development and growth and Johnson County is an example. He said that Johnson County’s valuation went from 6.2 billion to 6.8 billion for next year. Slockett said that the County’s difficulties are mostly imposed by the State. He said that Johnson County is very fortunate to have a lot of growth. Slockett said that what is needed is to find a way to allow business to grow. He said that if the taxpayers have to be a part of that and the entrepreneurs no longer have to take the risks, then there needs to be some way to allow decisions to be made on a rational basis. He said that way businesses can go to the best locations and the local communities won’t be held up in bidding down the ability of corporations to meet their corporate responsibilities to the public. He said there is a recognition of the problem but no addressing it. Slockett said that there have been ideas about this in the past. He said that Richard Nixon thought of the idea of revenue sharing, where the Federal income tax advantages went to local communities to do the things that they needed to do. He said that it worked well and was one of the most cost effective government programs ever devised. He said that it lasted for a long time and did a lot of good things. Slockett said that some of the funds for the Administration Building came from revenue sharing.

County Treasurer Tom Kriz said that one program that was not cut was the Rent Reimbursement program. He said that it is the most abused program that he has ever seen. He said that the Rent Reimbursement Program was funded at 100%, or 13 million dollars. He said that cutting the Elderly and Disabled, and Military Credits, and not the Rent Reimbursement is scandalous. Kriz said that if the State wants to look at revenues it is time they look at the DOT. He said they need to stop the subsidy of pickup trucks with a flat rating. He said that a $45,000 pickup in Iowa is registered at $75-85 whereas a $40,000 SUV is $400. Kriz said that the premise was that pickups are used in agriculture, which isn’t the case anymore. Kriz said there are huge dollars to be gained.

Neuzil said that the issue of fees continues to come up. He said that more and more it seems like the State of Iowa is not allowing the County to increase some fees. He said that Public Health Department Director Ralph Wilmoth has provided the Board a neat philosophy on fees. Wilmoth said that he is opposed to the notion that there are services that fees are charged for that don’t support the cost of the service, particularly if it is a service that is not required. Wilmoth said that they should figure out what it costs to provide the service and then make that the basis for the fee. Wilmoth said he would like to see the State look at all fee based programs, look at the costs to run the programs and then adjust the fees accordingly. Greazel said that the Assessor’s Office doesn’t get any benefit from the TIF districts. He said that they have to appraise, hire, and litigate it but they don’t get any funds. He said that he went to the City of Coralville and told them that if they want the service they should have to pay for it. He said that they give him $75,000. He said that he is the only one in the State that does it and he is only reimbursed by Coralville. Neuzil asked if Bolkcom sees any movement on fees. Bolkcom said that the 60 million property tax credit was followed by letting cities raise their parking fee violations. Bolkcom said that local governments need a bigger menu of ways to raise resources. He said that fees are potentially one of those. Bolkcom said that a lot is done in State government that is subsidized and they need to start looking looking at opportunities there as well.

Stutsman said that the mental health redesign plan is a good plan. She said that counties, the Legislature, and ISAC are going to have to work closely together to put it in place. Stutsman said that Mental Health/Developmental Disabilities Director Elaine Sweet wanted the Legislature to be aware doing it right is going to be a tremendous administrative burden. She said that with so many initiatives they don’t allow for the administrative cost. She said that the Legislature needs to understand that putting programs in place does have a cost administratively. Hinton added that there is an administrative cost and a cost to the plan. She said that the plan is excellent and where they need to go but in order to move from legal settlement to residency and to add services for persons with brain injury and developmental disability will require careful thought and funding as they move forward. Stutsman said they should do it right to begin with.

Horne said that in the last couple of years newspaper publications have cost the County an average of $30,000 just in the Central Services budget. He said there are also other departments that do some mandatory publishing. He asked why counties still have to publish in newspapers in the internet age. Horne said that there is a 10 and 20 day rule for a lot of budget publications, which is difficult for the publications that only publish once a week. Horne said that everything that is published could be put on the internet and be accessible to taxpayers and to the public. He asked if this has been discussed at all. Bolkcom said that it has come up. He said there is major opposition to it from the newspapers. Bolkcom said that as somebody who uses the internet a lot, and likes the internet, he doesn’t see the internet as the only place where information about local governments ought to be. He said that he is a person that thinks there should be publication in the papers. He said that the costs seem like they’re going up substantially. Horne said that Johnson County has to publish in 3 papers. He said it would be better if the County only had to publish in the Press-Citizen, or if maybe the Board were given more discretion. He said that it seems that there could be some savings in this area and still be accessible. Bolkcom said it is trying to figure out what the balance is.

Thompson said that one of the first pearls of wisdom about money came to her from a Republican member of the Board of Social Welfare who said to her that there are Federal taxes, State taxes, local taxes, income taxes, property taxes, but there is only one taxpayer. Thompson said that if property taxes are lowered there will need to be higher income taxes. She said that things have to be paid for one way or another so the trick is in the negotiating and cooperation. She said that it’s not which tax gets raised or lowered. Thompson said that just as Federal deductibility is the thing that is most often mentioned when economic fails to come to Iowa, the thing that is most commonly mentioned as the thing that draws people to Iowa is the good schools. Thompson said that year after year there are slight decreases in test scores, and slight problems in the school districts. She said that if Iowa loses that there will be real trouble getting anybody to come to Iowa. Stutsman said that it is the quality of life like schools, safety and roads and it is the slow deterioration of all of those things that will have an impact. Bolkcom agreed.

Bolkcom said that on Wednesday January 7, 2004 local Legislators will be at Harvat Hall to listen to concerns on any topics of interest. He thanked the Board for the opportunity to visit.

Adjourned at 11:08 a.m.

Attest: Tom Slockett, Auditor

By Casie Kadlec, Recording Secretary