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MYTH VS. FACT ON THE LOSST TAX

There are a lot of conflicting messages about the upcoming September 13 vote on the Local Option Sales and Service Tax (LOSST). We sat down with City staff to better understand exactly how voting YES will impact Pella residents. The truth is, continuing the tax the way it is, allows us to rely on visitors and tourists to contribute approximately 50% of the tax revenue that helps fund our road and infrastructure improvements and quality of life projects like the Wonder Spelen park and bike trail extensions. If we vote NO, we will likely experience an increase in property taxes, shifting 100% of the burden to property owners.

MYTH: Approving the LOSST tax will raise property taxes in Pella.

FACT: LOSST revenues supplement dollars into the City so they can be less reliant on property tax to fund projects and improvements. This keeps property taxes consistent.

The truth is, continuing the tax the way it is, allows us to rely on visitors and tourists to contribute over 50% of the tax revenue that helps fund our road and infrastructure improvements and quality of life projects like the Wonder Spelen and bike trail extensions. If LOSST is  not approved, we will likely experience an increase in property taxes, shifting 100% of the burden to property owners.

MYTH: The Local Option Sales & Service Tax (LOSST) is a 1% increase to the current tax rate – raising it from 7% to 8%.

FACT: Nothing will change if the LOSST tax is passed. Pella has had a 1% Local Option Sales & Service Tax since 2001.

6% sales tax + 1% LOSST tax = 7%

The LOSST tax (more than 50% paid by visitors) has funded numerous projects: indoor pool renovations, outdoor aquatic center, park upgrades (new equipment and Wonder Spelen), Sports Park, as well as more than nine major road reconstruction projects and overlays, to name a few. Without the LOSST tax, many of these projects would not have happened, been scaled back, or delayed to a later date.

94% of all Iowa Cities and Counties have the LOSST tax.

MYTH: Tax relief is when the City property tax rate decreases.

FACT: Property tax relief is also when the property tax rates remain the same with no increases.

Pella’s property tax rate of $10.20/$1000 valuation has remained the same for over 20 years. This property tax relief is due, in part, to the LOSST tax. The City was able to supplement the funds needed to provide infrastructure upgrades (i.e., street repairs and park upgrades) and quality of life projects for Pella residents without raising taxes, even though the costs of these projects have increased over the 20 years.

MYTH: Ballot states, “0% shall be used for property tax relief,” so none of the LOSST revenues will go to property tax relief.

FACT: The ballot stating “0% shall be used for property tax relief” means no specific amount is designated.

In reality, any project that relies on property tax revenues, which can be supplemented with LOSST revenues (partially paid by visitors), IS PROPERTY TAX RELIEF. Whenever a City project can be funded in part or entirely by other sources than property tax, it lessens the burden to the taxpayer.

MYTH: Since 2011, 20% of the LOSST has gone toward property tax relief.

FACT: Since 2011, City Council has directed approximately 50% of the LOSST funds to tax relief, higher than the designated 20% in the language of the 2011 LOSST ballot.

Because of LOSST tax revenue, the City doesn’t rely as heavily on property tax, keeping the property tax rate at $10.20/$1000 of valuation (property tax relief).

FREQUENTLY ASKED QUESTIONS

What is a Local Option Sales and Service Tax?

A local option sales and service tax is a 1% tax (1 cent/$1) on retail goods purchased in a city or area that has approved the tax. Since Pella is a strong tourism destination, our visitors help pay this tax in our city. Visitors help fund our streets and quality of life projects, so 100% of the burden does not rest on property owners.

 

How does a Local Option Sales & Service Tax keep property tax rates down?

By diversifying revenue sources, the City Council can be less reliant on the property tax levy for the revenue needed to support infrastructure projects (streets) and quality of life projects.

 

How does a City use property tax?

Property taxes, paid by property owners in a jurisdiction, are a significant source of income to fund a city’s streets, emergency/safety, parks, recreation, and libraries.

 

Who can vote on the Local Option Sales and Service Tax extension?

All registered voters living within the Pella city limits may vote on September 13, 2022.  Find your voting location here.

 

Does Pella currently have a Local Option Sales & Service Tax (LOSST)?

Yes. The residents of Pella approved the first LOSST tax on August 28, 2001, then voted to extend the tax an additional 12 years on March 1, 2011.

 

Who will pay the local option sales tax?

Anyone (residents or visitors) purchasing taxable goods or services in Pella.  The extra one-cent tax is only collected on items currently subject to sales tax. Basic elements like most groceries, prescription drugs, vehicles, gasoline, and professional services like medical or legal services are not subject to the sales tax.

 

Did you Know?

Over 94% of all jurisdictions in Iowa’s 99 counties have the 1% LOSST in place.