City Council discusses options for rail spur funds

The subject of how to word the option voters will get on the November ballot concerning what will be done with the funds that have been collected for the abandoned rail spur project was discussed at the City Council meeting the night of Tuesday, June 17. Though the conversation started off smoothly, it quickly turned into a contentious debate when the members were split on whether or not to give residents the option to discontinue the tax dollars that are still taken out for the project.

The discussion began with the consideration of making changes to the city’s Economic Development Plan which includes the amendment that allows the city to take four-tenths of a percent out of residents’ taxes for the rail spur project.

“We initially were talking about what then to do with the amendment that was put forth in the Economic Development Plan that put in place a property tax assessment to fund initially the rail spur. The language is very specific to rail spur development as well as how that was going to be controlled, the finances to a certain extent, so now we’re at the point as we’re approaching the fall election period we need time to start figuring out a strategy to start getting the information out there to the voters,” City Administrator Daniel Ortiz said.

According to Ortiz, the recommendation of the Economic Development Committee concerning the taxation for the rail spur project is to change the language of the plan and have residents be able to vote to apply the saved funds to community development purposes.

Ortiz believes that this could be an uphill battle with residents come November as there is not currently a consensus as to a specific goal in mind or a special project to use them for. However, he also stresses the importance and the need for funding when considering future funds that will be needed with the growth of the city, especially when it comes to funding lift stations sewer extensions, and water lines.

“The downside of that is, obviously, it’s not something tangible that people can see and feel. But certainly it is needed. And if you don’t have those funds available to apply for infrastructure like that, you typically will see those types of projects funded through rate increases or property taxes or some other sort. But we want to bring this back to discussion. Hopefully, an action that the staff can work on and move forward with [can be taken],” Ortiz said.

Council member Ann Warner was skeptical that, if given another option to which the funds could be applied to, the public would vote to move forward with funding a new project.

“From all the ones that I’ve heard from, and I usually get all the negative ones, they want the tax stopped, that if we’re not going to do the rail spur they want the tax discontinued,” Warner said. “From what I’m hearing it wouldn’t pass a vote.”

However, herein lie the problems for the city. If the issue does not get on the November ballot, the city will either have to pay for a special election or wait until the next general election.

Besides the time constraints that the council faces, the more pressing issue is that, if a new option is given to residents and they simply vote it down, that does not effectively stop the current tax that is going for the rail spur project. It will simply, due to the language of the initial amendment, make it so that the funds are continued to be collected for the project without the city being able to touch the funds to use them for anything else.

“That’s the difficult part to try to get people to understand is that you have to really decide to change the language as it is. For some people, partly because of frustration, partly because of failure on our part to properly educate or educate enough, what that entails is that people assume that if you put together a proposal or you put together a plan and they vote it down, that doesn’t mean the tax goes away. That means the tax stays in place, but you can’t touch it. When you initially passed it in 2010, you made it so narrow in scope you can’t use it for anything else but the rail spur in that designated area, which isn’t going to happen,” Ortiz said.

Warner then asked how the council could word the language on the ballot so that residents can vote to discontinue the tax, citing that she believes that it “has to be one of the choices”.

However, council member John Morrison disagreed with Warner’s statement, stating that the four-tenths of a percent that is taken out of taxes is so minimal that most people wouldn’t even notice it.

“If we would continue this plan, that would give us the power that when somebody did come to town we could give them sewer. We could give them water, because then we could pass bonds and pay for them. The people that are negative all the time don’t want to do anything, and as long as they don’t want to do anything nothing’s going to happen. We can be proactive," Morrison said.

Morrison went on to clarify his stance, stating that, if the tax was a substantial amount, he would side differently on the subject.

“Now, if this was 10 percent of your taxes, I wouldn’t say this. But four-tenths of one percent? That’s nothing. Those people pay more money on coffee than they spend on this,” Morrison said.

Morrison also concluded that this is a circumstance where he thinks the council needs to “lead”.

While Warner accepted Morrison’s point, she argued that writing the language on the ballot so that it avoids giving residents a choice to stop taxation could be problematic and could potentially make many residents unhappy.

“When you’re pushing it down somebody’s throat, that doesn’t make them happy either. If you give them the choice, cause we passed the rail spur thing, the people voted for it. And so you had people behind you. But if you have them vote on something that you vote down and we’re going to collect your money anyway and some other time we’re going to use it and we don’t tell you what it’s for, then people are upset and you don’t have them behind you,” Warner said.

Mayor James Schnell stepped into the conversation to once again remind the council that unless a new project is designated for the funds, the money will not be able to be used for anything other than the abandoned rail spur project.

“If nothing else passes, if we put on the ballot we’re going to buy Charmin toilet paper with it and they say, ‘No, you’re not’, we’re still collecting for rail and we can’t touch it for anything else. You’re saying we’re going to go spend it somewhere. We can’t touch it, because it still has that designation, rail spur,” Schnell said. “I would say, if they have a concern, they need to talk to you guys as the city council. We’ve held public hearings. We had two constituents who were the only ones who showed up. The people that I probably see that have ever griped the most are all homestead exemption. They don’t pay it.”

One resident in attendance at the meeting addressed the council asking if there was a way from a compromise with the public when approaching the subject. She asked that instead of collecting the tax for 30 years could the council possibly cut down on the time to perhaps 10 years so that it gives residents time to see what the council has done with the funds and then decide whether or not they approve furthering the tax.

“Do you think there is potential to word it so that maybe you’re not collecting it as long so that the people see that you’re trying to save them a little bit of money and by then the little money that you have collected, let’s say it was for the next ten years, they’ll see that you’ve used it for something that they’ve enjoyed and you can continue to ask for an extension or you guys haven’t used it then at least there’s potential?” The resident asked.

Mayor Schnell said that his concern would be that the funds would fall short of helping fund any new projects if the time frame of collection was cut short.

“For me, my concern would be, and we’ve talked quite a few times tonight, what does half a million [do]? All we’re collecting out of the whole deal is $3 million which isn’t very much once you’re building something. We’re spending $500,000 just to put a lift station in. So if you cut it back or cut the years back, what have you gained to build infrastructure or do a downtown improvement project?” Schnell said.

Ortiz reflected Schnell’s remarks, citing the cost of the planned sewer extension approved near Castronics.

“When you’re looking at infrastructure, and I think the mayor is entirely correct, we’re spending half a million dollars for less than half a mile of sewer. That’s just sewer. That’s not what we pay for sewer and electric. So when you’re talking about growing our community and growing beyond our current city limits, we’re going to be spending a lot more than a half a million dollars. And whether we have these funds available to use or you’re going to start seeing, to fund those infrastructure improvements and expansions, true rate increases. You’ve already seen what has happened with our landfill and having to expand that landfill dramatically and increases we have seen there. Imagine that across water, sewer and electric,” Ortiz said.

Council member Kim Christensen also weighed in on the topic stating that she believes that the people had a vote and had put their trust in the council to decide what was best for the funds when they elected each member.

“I understand what Ann’s saying exactly, that people should have the right to say, but I feel like when they voted for us as city council and each of us ran for office that they voted for what we put in place. There’s not one of us up here that isn’t giving from our whole heart to be here tonight and hasn’t for the entire four years or eight years or however long we’ve been on. I really feel like that they had a vote,” Christensen said.

Again, Ortiz pointed out the costs that the city would incur having to expand infrastructure if new businesses relocated to the Kimball area, using a mile long stretch of land from Chestnut Street to County Road 32 that currently has no infrastructure as an example.

“We’re spending a half a million dollars for less than a half mile of sewer. Now, people just for $3 that we’ve had to increase our landfill rate for that service and that expansion, like I said we’re talking about infrastructure and the cost is not getting any cheaper. It would be helpful in order to relieve some of that burden to have a pot of money that we can use for community development purposes,” Ortiz said. “If a company wanted to come in and bring 100 jobs, we’d have to find a location for them and figure out a way to extend that infrastructure out to them. Unfortunately, you can only do so much through rate increases without planning for it and being ready when that opportunity comes to be able to execute on that.”

Council member James Shields commented that with whatever path they choose as far as the wording on the ballot, it is important to educate the public on future plans efficiently.

“I don’t disagree with what John said, but I think what carries the most, which we’ve already discussed here and talked about, is the fact that when they step up to that voter booth what they’re going to remember is the fact that that rail spur didn’t get pushed through,” Shields said. “So if we give them the options or the opportunity to give them the options as necessary, we need to be better sales people in this case and give them that information upfront as to what we’re trying to get accomplished. We still are trying to be proactive and try to get that opportunity out there to allow those funds available for projects like that. It just comes down, I think, to being able to get that in front of the public.”

No formal action was taken by the council on amending the Economic Development Plan or setting a specific phrasing for what will appear as options on the November ballot concerning the rail spur funds. However, the council instructed Ortiz and City Attorney Kent Hadenfeldt to draft up options for the council to consider including the choice for residents to stop taxation and preserve the Economic Development Plan or to keep the taxation for community development purposes.

Though no action was taken, Ortiz warned the council that a decision must be made soon in order to effectively communicate with the public concerning potential uses for the funds collected, which currently total approximately $500,000.

“Probably the first week of September is when it’s due. If you were to wait that long it doesn’t provide a great deal of opportunity to start putting together educational information on what those options are. I would strongly urge you to make a decision by no later than the second meeting in July to bring this back to discussion,” Ortiz said.