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Sunset Hills Answers Capital Improvement Tax Questions

A self-administered Q&A was distributed at the most recent finance committee.

Residents will have a chance to vote Aug. 7 on whether to extend a half cent sales tax for the purpose of funding capital improvements in . The Capital Improvement Tax also will pay the cost of operation and maintenance of previously built capital improvements. This would not be an additional levy upon citizens, merely an extension of a tax in effect since 1994. 

At last month's Board of Aldermen meeting, Aldermen Thomas Musich and Scott Haggerty voted against the ordinance due to a lack of knowledge of how capital improvements funding will be distributed. However, the board approved the finance committee's recommendation to extend the tax. A special election will be held to give residents an opportunity to weigh in on the matter.

The Sunset Hills finance committee compiled a Q&A for voters to learn more about their decision. It was distributed at Tuesday's finance meeting. Read below for a sample of some of the questions and answers for informational purposes only. The finance committee will decide in the next couple of weeks if the full Q&A will appear on the Sunset Hills site.

Does Sunset Hills generate any income from its current cash balance in the Capital Improvement Fund? 

Is it important to note that the Capital Improvement Fund is a non-interest bearing account, thus the city currently generates no interest on its positive cash balance.

What is the interest expense on Capital Improvement Bonds?

The current interest rate paid on the bonds stands at 4.125 percent through 2013. In 2014 this rate will move to 4.25 percent and in 2015/16 to 4.5 percent. 

What are the future capital improvements planned for Sunset Hills?

It is important to recognize that in connection with the redemption of bonds and extension of the Capital Improvement Tax, a Capital Improvement Committee will be formed to outline a long-term Capital Improvement Plan for the city. Included in this plan is a 5-year capital improvement plan identigying intermediate uses of revenue generated by the Capital Improvement Tax. The Capital Improvement Committee will updated the long-term and intermediate plans every five years to assist in the ongoing use of the 1/2 cent Capital Improvement Tax. 

What would happen if the Capital Improvement Tax expires?

The city would be faced with a very challenging fiscal situation in 2016. The current tax represents roughly 12.5 percent of the city's total gross revenue. The tax represents a much greater contribution to the ongoing welfare of Capital Improvement projects.

What happens if Proposition 1 is not approved by voters?

The city will continue to generate a surplus of cash in the Capital Improvement Fund generating no return and incur incremental interest expense of $41,000. The bonds will mature in 2016 and the Capital Improvement Tax will expire. Capital improvements will continue to be deferred, operating budgets would be significantly impaired and/or greater tax burdens will likely be placed on the citizens. 

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