Traer Council changes local option tax spending process following annual audit

Traer Manufacturing also discussed

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During the June 6 meeting of the Traer City Council, the city’s most recent audit report — conducted by Auditor of State Rob Sand’s office — was discussed as it pertains to how the city disperses its local option tax funds.

Iowa has a state sales tax of 6 percent but allows local governments to collect a local option sales tax of up to 1 percent which Traer has elected to do.

Such funds – commonly known as LOST funds – have long been dispersed in July by the city of Traer to various non-profit community organizations and entities through an annual application process, a process that has not required the recipients to present proof of spending in the form of receipts or bills.

“In our last audit report we got hit pretty hard with how we are handing out our option tax money,” Blaine said. “A couple of reasons – I don’t think they like the way we document how we’re giving out money and they don’t like who we’re giving that money out to.”

During the last fiscal year, the city of Traer donated LOST funds to the following entities: Traer Shaker Gallery, $6000, for general budget/operations; Winding Stairs Festival, $5500, for the community festival; North Tama Community Schools, $5000, for youth baseball/softball program; Traer Theater, $5000, for daily operations/overhead; Traer Chamber of Commerce, $4000, for landscape/lights display at Taylor Park; North Tama Dollars for Scholars, $4000, for scholarships; Pied Piper Preschool, $2360, for a furnace unit; North Tama After Prom, $2000, for after-prom activities; North Tama BASIC, $1000, for Christian Bible study materials; and C.H.A.T (Christian Hands Across Traer), $1000, for operations.

The Constitution of the State of Iowa prohibits governmental bodies from making a gift to private non-profit corporations.

According to the Auditor of State’s report, “at least six official Iowa Attorney General Opinions since 1972 have consistently concluded that ‘a governmental body may not donate public funds to a private entity, even if the entity is established for charitable educational purposes and performs work which government can’t perform directly.'”

In an interview with the Telegraph this past April, Auditor Sand went through the city of Traer’s audit report item by item including the ‘Other Findings Related to Required Statutory Reporting’ which covered the LOST donations.

The biggest issue, according to Sand, is the potential for fraud.

“One of the most important ways to prevent the fester of abuse of public funds is to take away the opportunity for people to do it,” Sand said.

Although Sand said his office encounters this issue quite “commonly,” his office does not see it commonly at the level of Traer’s.

“That’s a lot of money,” Sand said. “[A government entity] can’t make a donation – that isn’t ok – but you can enter contracts for entities to provide services. There’s a lot of things that happen in rural towns that don’t really happen without public involvement. … So what we encourage entities to do … is sign a contract – that gives taxpayers more oversight and a little more accountability the money is spent in the appropriate way.”

During the June 6 meeting, council member Jon Panfil said that drafting a formal agreement like Sand suggested could cost several thousand dollars in attorney fees – something the city would like to avoid if possible.

Council members who spoke were in agreement, however, that many of the entities receiving Traer’s LOST funds better the community as a whole – including Traer Shaker Gallery, Winding Stairs, North Tama Schools, Traer Theater, Traer Chamber of Commerce, and Pied Piper Preschool – and they would like to find a way to continue doing so that is not in violation of the Constitution of the State of Iowa.

Following a lengthy discussion, the council made the decision going forward to continue to accept applications but to be more stringent when determining which types of entities receive LOST funds and to either require a bill or receipt before funds are dispersed.

During the Telegraph’s conversation with Auditor Sand, he was asked why citizens should care about how local option tax money is dispersed, to which Sand replied, “Because this is their money. And this is their system of self-governance. … We all are responsible for these outcomes.”

Taylor Park updates

In other business, Blaine told the council last November the city received roughly $40,000 in unexpected local option tax money. Blaine recently looked into the cost of replacing the playground equipment in Taylor Park – a project the Traer Sesquicentennial Committee has also expressed an interest in funding. Blaine told the council due to supply chain shortages, the earliest new playground equipment could be delivered would be November or December. Following a brief discussion, the council passed a motion to order Option 2 of the playground packages presented – with a red and grey color scheme – using the “bonus” LOST funds as well as any funds from the sesquicentennial committee.

Nuisance properties

An update was given on the city’s nuisance abatement work in the Berlin Avenue area. On Thursday, May 26, two of the three properties in question – one belonging to Rebecca Phillips and another occupied by Carl Pearce – were abated with the assistance of Tama County Sheriff’s deputies. Dumpster services were contracted through Cooley Sanitation. The third property in abatement proceedings owned by Mike Bradley has not been addressed yet, Blaine said.

Traer Manufacturing, fire department updates

The continuing story of the 2011 derecho-damaged Traer Manufacturing building located on the south side of town and currently owned by Heartland Co-op seems to have come to a standstill, according to council member Jamie Erhardt. Erhardt has been tasked with working to reacquire at least part of the former city property for a possible new fire station – or at the very least as a place to store the department’s new aerial truck which does not fit in the current fire station. “I can’t seem to get a phone call back from [Tom] Hauschel,” Erhardt said in his update to the council – Hauschel is Heartland’s CEO and general manager. “I’ve left him numerous messages.” The council discussed sending a letter to Heartland expressing the city’s interest in having a portion of the building back while also outlining a timeline for the company to complete the clean-up of the property but ultimately ruled against doing so for the time being. “The other option we still need to address is the fire station,” Erhardt said. “If [Heartland doesn’t] want to relinquish [the Traer Manufacturing building] and they want to take care of the whole thing, we got to have another plan for the fire station.”

Traer Fire Chief Tyler Sell was also in attendance at the meeting. Following Erhardt’s update, Sell told the council the new aerial truck was officially able to go into service as of Friday, May 27. Sell asked the council if his department could look into the cost of a small machine shed that could be erected to the east of the fire station on Second Street to store the new truck this winter. “We’re five months away from cold weather,” Sell said. The council gave the go-ahead for Sell to bring a proposal to next month’s meeting for a small machine shed.