The Clinton Herald, Clinton, Iowa

May 22, 2013

City forced to cut $1.1M from budget

By Katie Dahlstrom Herald Staff Writer
The Clinton Herald

---- — CLINTON — The city of Clinton is scrambling to cut more than $1.1 million from next year’s budget because of a settlement that was reached between the Clinton Board of Review and Archer Daniels Midland.

As part of a settlement that ADM and the Clinton Board of Review reached earlier this month, ADM will receive more than $2.5 million in tax credits from the city, county and Clinton School District because the agency overpaid property taxes on its cogeneration facility, corn processing plant and bio-processing plant in the 2010 and 2011 assessment years.

While the city will be able to pay off its portion of the tax credits for the bio-processing plant and the corn plant, which amounts to roughly $212,000, in fiscal year 2014, the credits for the cogeneration facility will impact the city into fiscal year 2016. The cogeneration facility’s lowered valuation will cost the city around $788,586.

During the Internal Operations Committee meeting Tuesday, Finance Director and interim City Administrator Jessica Kinser told committee members the city’s portion of the tax credit paired with the agreed-upon assessments of ADM’s facilities means the city’s fiscal year 2014 budget will be impacted by approximately $1.1 million.

At-Large Council member John Rowland asked how the assessment, particularly of the cogeneration facility, could have been lowered so drastically. The facility was originally assessed at $77 million, but the settlement sets its value at $7.6 million for the 2010 assessment year.

“Is the assessor qualified and trained to do the assessments of properties such as ADM and other large industrial sites? Because again, back to that discrepancy, how could those assessments be off so far?” Rowland asked.

The property in question was labeled a utility plant in 2008 and was thus exempt from property taxes in 2009.

However, City Assessor John Moreland and other city officials protested the tax-exempt designation.

In 2010, legislation was passed saying that a co-generation plant would be locally assessed. Moreland conducted that assesment, determining the facility’s value at $78 million.

In 2011, ADM lobbied for new legislation that would relieve the company of its property tax obligation. They were successful and that ruling applied retroactively to the previous year.

On Sept. 30, 2011, a partial property tax settlement was reached, lowering the stipulated value of the co-generation facility from $77 million to about $32 million.

When contacted by the Herald, Moreland pointed to the law change for the lowered assessment and declined to comment when asked what his office’s responsibility was in the tax revenue being lost to the city.

To make up for some of the lost funds, the city must now examine where to find extra funds and where to cut. The city and the Iowa Office of Management are looking into raising the debt service levy to offset the deficit for next fiscal year, which begins in less than two months.

The city has a $295,066 set aside from fiscal year 2012 for the purpose of offsetting potential losses from a settlement with ADM. A $245,617 contingency in fiscal year 2014 also is available to offset the shortfall.

At-large Councilwoman Jennifer Graf asked Kinser if the city should anticipate more lost tax revenue and future short-notice budget revisions over appealed assessments.

“This is not how things should work,” Kinser said. “It’s frustrating. We have to certify things to the state on March 15 and if we don’t know this information prior to even setting a public hearing, we’re just out of luck.”

Kinser explained the process of setting the budget based on tax revenue relies heavily on the city assessor communicating with the county auditor, who then relays the information to the city.

“It’s a process where we’re stuck. We can’t change our process. I think the only thing we could do is ask that the assessor keep in mind what all of our taxing entities’ processes are and try to be more mindful of the impact that something like this has on us,” Kinser said.

Graf said on a personal note, she was frustrated with ADM.

“This million dollars is something they sneeze at every five minutes,” she said. “Where is the sense of community? I don’t feel it. I don’t see it.”

Ward 4 Councilman Paul Gassman said part of the reason the city faces the $1.1 million cut is because it planned to have money it had no guarantee of receiving.

“Before it ever happened though, you budgeted with the intent of getting it without really knowing and that’s not right,” Gassman said.

The city will also look at alternative revenue options such as permits, licenses and charges for services as well as other efficiencies that can be found in the general fund in order to make up for the lost tax revenue.

Kinser plans to come back to the Committee of the Whole on June 11 to tell council members what steps the city will need to take to deal with the settlement impact.

The assessment process The property in question was labeled a utility plant in 2008 and was thus exempt from property taxes in 2009. However, City Assessor John Moreland and other city officials protested the tax-exempt designation. In 2010, legislation was passed saying that a co-generation plant would be locally assessed. Moreland conducted that assesment, determining the facility's value at $78 million. In 2011, ADM lobbied for new legislation that would relieve the company of its property tax obligation. They were successful and that ruling applied retroactively to the previous year. On Sept. 30, 2011, a partial property tax settlement was reached, lowering the stipulated value of the co-generation facility from $77 million to about $32 million.