The Gazette covers City Hall, now a flood-damaged icon on May's Island in the Cedar River

City of Cedar Rapids apt to see more than $1 million more a year in revenue from local-option sales tax

In City Hall on March 5, 2009 at 9:15 am

The city of Cedar Rapids could see more than $1 million more a year from the local-option sales tax than the $18 million it had expected before five cities in Linn County on Tuesday turned the tax down.

The estimate is based on a look at sales tax revenue for Linn County and for the five cities that rejected the tax on Tuesday, Marion, Hiawatha, Robins, Center Point and Walford.

In fiscal year 2008, sales for all of Linn County totaled $3.1 billion with the five cities and $2.68 billion when sales for the five cities are subtracted.

Without the five cities in the mix, Cedar Rapids will now get 72.94 percent of the local-option sales-tax revenue collected in Linn County, according to the Iowa Department of Revenue.

Using that new percentage and the revised sales figures, Cedar Rapids would take in about $19.3 million, up from the estimated $18 million that the city had expected to see if all the Linn jurisdictions had the tax in place.

Both Sue Vavroch, the city’s treasury operations manager, and Victoria Daniels, of the Iowa Department of Revenue on Wednesday urged caution with any revenue estimates because of the state of the economy.

In fact, the state agency, which collects the sales tax and then distributes it to the jurisdictions, bases its distributions on 95 percent of what it expects to collect in case fewer sales occur than expected.

Daniels said the agency would have new estimates for what the sales tax is apt to pay out in Linn County in about two weeks.

Each jurisdiction will get a larger share of the Linn County sales-tax pot, but the pot also will shrink some because the tax will not be collected or the revenue from it distributed to the five cities that voted against the tax on Tuesday.

For instance, the city of Cedar Rapids would have gotten 59.9 percent of the local-option sales tax revenue if all the jurisdictions in the county had the tax in place.

With the five cities turning the measure down, Cedar Rapids now will get 72.94. Unincorporated Linn County was to have gotten 16.33 percent of the total, and now will get 19.38 percent.

The tax was expected to have brought in about $30 million countywide. It will be less than that now that the five cities won’t collect the tax.

The Iowa Department of Revenue acknowledges that the collection system comes with a level of imprecision because some retailers mistakenly charge the extra 1-percent tax thinking it is in place throughout the county when, in fact, some places in the county do not have the tax in place.

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