HF 38 (LSB 1315YH (4) 91)

HOUSE FILE 38

BY  LOHSE

A BILL FOR

An Act authorizing cities to establish self-supported entertainment areas.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

    Section 1.  NEW SECTION.  386A.1  Definitions.
   As used in this chapter, unless the context requires otherwise:
   1.  “Alcoholic beverage” means the same as defined in section 123.3.
   2.  “Council” means the governing body of a city.
   3.  “Cultural or entertainment establishment” means a sporting or concert event venue, performing arts theater, movie theater, museum, convention hall, or enclosed shopping mall.
   4.  “Department” means the department of revenue.
   5.  “Director” means the director of the department of revenue.
   6.  “Entertainment area” or “area” means an area designated by ordinance under this chapter and the cultural or entertainment establishments, food establishments, liquor establishments, and lodging providers therein that are subject to the entertainment surcharge in accordance with section 386A.3.
   7.  “Entertainment tickets” means all tickets or admissions subject to taxation pursuant to section 423.2, subsection 3.
   8.  “Food” means the same as defined in section 137F.1.
   9.  “Food establishment” means a food establishment licensed pursuant to chapter 137F, at which food is served or sold at retail. “Food establishment” also includes a temporary food establishment defined in section 137F.1.
   10.  “Licensed premises” means the same as defined in section 123.3.
   11.  “Liquor establishment” means a licensed premises in or at which alcoholic beverages are sold at retail.
   12.  “Lodging” means the same as defined in section 423A.2. “Lodging” does not include lodging exempted from tax pursuant to section 423A.5.
   13.  “Lodging provider” means the same as defined in section 423A.2.
   14.  “Property owner” or “owner” means the owner of property, as shown by the transfer books in the office of the county auditor of the county in which the property is located.
   15.  “Retail sale” means the same as defined in section 423.1.
   16.  “Surcharge” means an entertainment surcharge imposed pursuant to this chapter.
    Sec. 2.  NEW SECTION.  386A.2  Authorization.
   A city that proposes to create an entertainment area and impose an entertainment surcharge must do so in accordance with the provisions of this chapter.
    Sec. 3.  NEW SECTION.  386A.3  Establishment of an entertainment area —— entertainment surcharge —— use of revenues.
   1.  An entertainment area may be created by ordinance of the council in accordance with the provisions of this section. A proposed entertainment area shall meet all of the following requirements:
   a.  The combined attendance at cultural or entertainment establishments, food establishments, liquor establishments, and lodging providers within the proposed entertainment area is reasonably expected to exceed two hundred fifty thousand persons per calendar year within two years of the establishment of the entertainment area.
   b.  The proposed entertainment area consists of contiguous parcels wholly within the boundaries of the city and does not exceed seventy-five acres in total.
   c.  The proposed entertainment area does not include the entire incorporated area of the city.
   d.  The proposed entertainment area consists only of properties zoned for commercial uses or properties within a duly designated historic district, and at least seventy-five percent of the properties must be cultural or entertainment establishments, food establishments, liquor establishments, or lodging providers.
   e.  The proposed entertainment area must be comprised of property related in some manner, including but not limited to present or potential use, physical location, condition, relationship to the area, or relationship to present or potential commercial or other activity in the area, so as to be benefited in any manner, including but not limited to a benefit from present or potential use or enjoyment of the property, by the condition, development, or maintenance of the area or of any improvement or services provided to the area or be comprised of property the owners of which have a present or potential benefit from the condition, development, or maintenance of the area or of any improvement or services provided to the area.
   f.  The entertainment area shall be given a descriptive name containing the words “entertainment area”.
   2.  The council shall initiate proceedings for the adoption of an ordinance under subsection 6 upon the filing of a petition containing all of the following:
   a.  The signatures of at least twenty-five percent of all owners of property within the proposed entertainment area.
   b.  A description of the boundaries of the proposed entertainment area, or a consolidated description of the property within the proposed area, along with a map depicting the existing parcels of real estate located in the proposed entertainment area.
   c.  The name of the proposed entertainment area.
   d.  Subject to the limitations of subsection 4, paragraph “e”, a statement of the maximum surcharge rate that may be imposed upon retail sales within the entertainment area.
   e.  The purpose of the establishment of the entertainment area, which may be stated generally, or in terms of the relationship of the property within the entertainment area or the interests of the owners of property within the entertainment area, or in terms of the specific or general categories of improvements proposed to be developed for the purposes of the entertainment area, or in terms of the services to be provided within the entertainment area and supported from the revenues of the surcharge, or a combination of such purposes.
   f.  A statement of the specified length of time the surcharge shall be imposed for the purposes of the entertainment area, along with any option to renew the surcharge.
   3.  Upon receiving a valid petition for establishment of an entertainment area, the council shall set a time and place for a public hearing on the establishment of the entertainment area, and shall publish notice of the public hearing as provided in section 362.3, and the clerk shall send a copy of the notice by certified mail not less than fifteen days before the hearing to each owner of property within the proposed entertainment area at the owner’s address as shown by the records of the county auditor.
   4.  In addition to the time and place of the public hearing on the petition, the notice must state all of the following:
   a.  That a petition has been filed with the council asking that an entertainment area be established.
   b.  The name of the entertainment area.
   c.  The purpose of the entertainment area.
   d.  The property proposed to be included in the entertainment area.
   e.  The maximum surcharge, not to exceed three percent, which may be imposed upon any of the following retail sales within the entertainment area:
   (1)  The retail sales price of food or alcoholic beverages sold at a cultural or entertainment establishment, food establishment, or liquor establishment.
   (2)  The retail sales price of entertainment tickets sold at a cultural or entertainment establishment.
   (3)  The retail sales price for the renting of any lodging.
   5.  At the time and place set in the notice the council shall hear all owners of property in the proposed entertainment area or residents of the city desiring to express their views. The council must wait at least thirty days after the public hearing has been held before the council may adopt an ordinance establishing the entertainment area. The established entertainment area must be comprised of all the property in the proposed entertainment area that the council finds has the relationship or whose owners have the interest described in subsection 1, paragraph “e”. Property included in the proposed entertainment area need not be included in the established entertainment area. However, no property may be included in the entertainment area that was not included in the proposed entertainment area until the council has held another hearing after the council has published and mailed the same notice as required in subsections 3 and 4 on the original petition to the owners of the additional property, or has caused a notice of the inclusion of the property to be personally serviced upon each owner of the additional property, or has received a written waiver of notice from each owner of the additional property.
   6.  Adoption of the ordinance establishing the entertainment area requires the affirmative vote of three-fourths of all the members of the council, or in cities having three members of the council, the affirmative vote of two members. However, if a remonstrance has been filed with the clerk signed by at least twenty-five percent of all owners of property within the proposed entertainment area representing ownership of at least twenty-five percent or more of the total number of cultural or entertainment establishments, food establishments, liquor establishments, and lodging providers in the proposed entertainment area, the adoption of the ordinance requires a unanimous vote of the council. 
   7.  The clerk shall cause a copy of the ordinance to be filed in the office of the county recorder of each county in which any property within the entertainment area is located. 
   8.  At any time prior to the final adoption of an ordinance establishing an entertainment area, the entire matter of establishing such entertainment area shall be withdrawn from council consideration if a petition objecting to establishing such entertainment area is filed with the clerk containing signatures of at least forty percent or more of all owners of property in the proposed entertainment area.
   9.  The adoption of an ordinance establishing an entertainment area is a legislative determination that the property within the entertainment area has the relationship or its owners have the interest required under subsection 1, paragraph “e”, and includes all of the property within the entertainment area which has that relationship or the ownership of which has that interest in the entertainment area.
   10.  Any resident or property owner of the city may appeal the action and the decisions of the council, including the creation of the entertainment area and imposition of a surcharge for the entertainment area, to the district court of the county in which any part of the entertainment area is located, within thirty days after the date upon which the ordinance creating the entertainment area becomes effective, but the action and decision of the council are final and conclusive unless the court finds that the council exceeded its authority. An action shall not be brought questioning the regularity of the proceedings pertaining to the establishment of the entertainment area or the validity of the entertainment area, or the propriety of the inclusion or exclusion of any property within or from the entertainment area, or the ability of the city to impose the surcharge in accordance with the ordinance establishing the entertainment area, after thirty days from the date on which the ordinance creating the entertainment area becomes effective.
   11.  The surcharge imposed by the ordinance establishing the entertainment area shall be in addition to the state sales tax imposed pursuant to chapter 423, subchapter II, the state-imposed and locally imposed hotel and motel tax pursuant to chapter 423A, and the local sales and services tax imposed pursuant to chapter 423B.
   12.  a.  Within ten days of the effective date of the ordinance establishing the area and imposing the surcharge, the county auditor of the county with the largest parcel in the entertainment area shall give written notice to the director by sending a copy of the ordinance to the director.
   b.  A surcharge shall be imposed either January 1 or July 1 following the notification of the director but not sooner than ninety days following the effective date of the ordinance imposing the surcharge and not sooner than sixty days following notice to sellers with a place of business, as defined in section 423.1, in the entertainment area and to lodging providers operating lodging in the entertainment area.
   c.  A surcharge shall be repealed only on June 30 or December 31 but not sooner than ninety days following repeal of the ordinance. At least forty days before the repeal of the surcharge, the council shall provide notice of the action by certified mail to the director.
   13.  a.  An entertainment area may be dissolved and terminated by action of the council rescinding the ordinance creating the area and any subsequent ordinances amending the area by an affirmative vote of three-fourths of all members of the council, or in cities having three members of the council, the affirmative vote of two members. However, if a remonstrance has been filed with the clerk signed by at least twenty-five percent of all owners of property within the area representing ownership of at least twenty-five percent or more of the total number of cultural or entertainment establishments, food establishments, liquor establishments, and lodging providers in the area, the rescission of the ordinance creating the area, and any subsequent ordinances amending the area, requires a unanimous vote of the council.
   b.  At any time prior to action of the council rescinding the ordinance creating the entertainment area, and any subsequent ordinances amending the area, the entire matter of dissolving an area shall be withdrawn from council consideration if a petition is filed with its clerk containing the signatures of at least forty percent of all owners of property within the area or signatures which together represent ownership of at least forty percent or more of the total number of cultural or entertainment establishments, food establishments, liquor establishments, and lodging providers within the area.
   14.  The ordinance creating an entertainment area may be amended, including to add property to the area, remove property from the area, extend the duration of the area, or alter the amount of the entertainment surcharge, by the same procedure as for the establishment of the entertainment area and imposition of the surcharge.
   15.  a.  Upon the adoption of an ordinance establishing an entertainment area, the city shall establish an entertainment area fund, and upon remittance of the revenues from the state surcharge revenue fund to the city under section 386A.5, the revenues shall be deposited into the city’s entertainment area fund.
   b.  Surcharge revenues deposited into an entertainment area fund of the city shall only be used for the following, as applicable:
   (1)  For deposit into the debt service fund in section 384.4.
   (2)  For deposit into the capital improvements fund in section 384.7.
   (3)  For the purposes described in section 384.3A, subsection 3, paragraph “b”, “c”, “e”, “f”, or “g”, including city operational expenses for public safety services within the entertainment area.
    Sec. 4.  NEW SECTION.  386A.4  Administration of surcharge.
   1.  The director shall administer the surcharge imposed pursuant to this chapter as nearly as possible in conjunction with the administration of state sales tax laws. The director shall provide appropriate forms, or provide space on the regular state tax forms, for reporting surcharge liability.
   2.  a.  Section 422.25, subsection 4, sections 422.30, 422.67, and 422.68, section 422.69, subsection 1, sections 422.70, 422.71, 422.72, 422.74, and 422.75, section 423.14, subsection 1, and sections 423.23, 423.24, 423.25, 423.31, 423.33, 423.35, 423.37 through 423.42, and 423.47, consistent with the provisions of this chapter, apply with respect to the surcharge authorized under this chapter, in the same manner and with the same effect as retail sales taxes within the meaning of those statutes. The director may require all persons who are engaged in the business of deriving any sales price subject to a surcharge under this chapter to register with the department. All surcharges collected under this chapter are deemed to be held in trust for the state of Iowa and the cities imposing the surcharges. Local officials shall confer with the director for assistance in drafting the ordinance imposing the surcharge. A certified copy of the ordinance shall be filed with the director as soon as possible after passage.
   b.  Frequency of deposits and monthly reports of the surcharge with the department of revenue are governed by the provisions in section 423.31. Local surcharge collections shall not be included in computation of the total tax to determine frequency of filing under section 423.31.
   c.  The director shall apply a boundary change of an entertainment area to the imposition or collection of that surcharge only on the first day of a calendar month which occurs sixty days or more after the director has given notice of the boundary change to sellers with a place of business, as defined in section 423.1, in the entertainment area and to lodging providers operating lodging in the entertainment area.
   3.  a.  The director, in consultation with local officials, shall collect and account for the surcharge. The director shall certify each month the amount of the surcharge receipts and any interest and penalties to be credited to the city account in the state surcharge revenue fund established in section 386A.5. Local authorities shall not require any permit not required by the director.
   b.  All surcharge revenues and interest and penalties received or refunded one hundred eighty days or more after the date on which the city repeals the surcharge shall be deposited in or withdrawn from the general fund of the state.
   4.  Each city that has established an entertainment area under this chapter shall assist the department in identifying new establishments required to impose the surcharge in the entertainment area. This process shall be ongoing until the surcharge is repealed.
    Sec. 5.  NEW SECTION.  386A.5  State surcharge revenue fund —— accounts.
   1.  A state surcharge revenue fund is established in the state treasury under the control of the department consisting of the surcharge revenues collected within each entertainment area and deposited in the fund pursuant to section 386A.4. Revenues deposited in the fund are appropriated to the department for the purposes of this section.
   2.  An entertainment area account is created within the fund for each city creating an entertainment area under this chapter.
   3.  The department shall deposit the revenues described in subsection 1 that were collected in a month beginning on or after the entertainment area’s commencement date into the appropriate entertainment area account in the fund.
   4.  All revenues in each entertainment area account within the fund shall be remitted monthly by the department to the city that established the entertainment area for deposit in the entertainment area fund of the city.
   5.  The department shall adopt rules pursuant to chapter 17A necessary to administer the department’s responsibilities under this chapter.
    Sec. 6.  Section 423A.5A, subsection 3, Code 2025, is amended to read as follows:
   3.  Unless otherwise provided in this section, the state-imposed tax under section 423A.3 and any locally imposed tax under section 423A.4 shall be collected by the lodging provider from the user of that lodging and shall be remitted to the department. The lodging provider shall add the state-imposed tax to the sales price of the lodging and the tax, when collected, shall be stated as a distinct item, separate and apart from the sales price of the lodging and from the locally imposed tax under section 423A.4 or entertainment surcharge under chapter 386A, if any. The lodging provider shall add the locally imposed tax, if any, to the sales price of the lodging and the tax, when collected, shall be stated as a distinct item, separate and apart from the sales price of the lodging and from the state-imposed tax or entertainment surcharge under chapter 386A, if any.
EXPLANATION
The inclusion of this explanation does not constitute agreement with
the explanation’s substance by the members of the general assembly.
   This bill authorizes cities to establish entertainment areas and to impose an entertainment surcharge within the area. Under the bill, following the filing of a petition for the establishment of an entertainment area (area) and holding a public hearing, a city may establish an area by ordinance for the purpose of imposing an entertainment surcharge (surcharge). The city council shall initiate proceedings for adoption of the ordinance upon signatures of at least 25 percent of the owners of property within the proposed entertainment area. The proposed area must meet all of the following requirements: (1) the combined attendance at cultural or entertainment establishments, food establishments, liquor establishments, and lodging providers within the proposed area is reasonably expected to exceed 250,000 persons per calendar year within two years; (2) the area consists of contiguous parcels wholly within the boundaries of the city and does not exceed 75 acres; (3) the area does not include the entire incorporated area of the city; (4) the area consists only of properties zoned for commercial uses or properties within a designated historic district, and at least 75 percent of the properties must be cultural or entertainment establishments, food establishments, liquor establishments, or lodging providers; (5) the area must be comprised of property related in some manner; and (6) the area must be given a descriptive name.
   Adoption of the ordinance establishing the area requires the affirmative vote of three-fourths of all the members of the council, or in cities having three members of the council, the affirmative vote of two members. However, if a remonstrance has been filed with the clerk signed by at least 25 percent of all owners of property within the proposed area representing ownership of at least 25 percent or more of the total number of cultural or entertainment establishments, food establishments, liquor establishments, and lodging providers in the proposed area, the adoption of the ordinance requires a unanimous vote of the council. At any time prior to the final adoption of an ordinance establishing an area, the entire matter of establishing such area shall be withdrawn from council consideration if a petition objecting to establishing such area is filed with the clerk containing signatures of at least 40 percent or more of all owners of property in the proposed area or signatures which together represent ownership of 40 percent or more of the total number of cultural or entertainment establishments, food establishments, liquor establishments, and lodging providers within the proposed entertainment area.
   The surcharge authorized under the bill shall be a rate not to exceed 3 percent, which shall be imposed upon any of the following within the area: (1) the retail sales price of food or alcoholic beverages sold at a cultural or entertainment establishment, food establishment, or liquor establishment; (2) the sales price of all sales of entertainment tickets sold at a cultural or entertainment establishment; or (3) the sales price for the renting of any lodging.
   The bill specifies that the surcharge shall be in addition to the state sales tax imposed pursuant to Code chapter 423, subchapter II, the state-imposed and locally imposed hotel and motel tax pursuant to Code chapter 423A, and the local sales and services tax imposed pursuant to Code chapter 423B. The bill establishes a process and timing for imposition or repeal of the surcharge and for dissolution of the area.
   The bill specifies the director of the department of revenue shall administer the surcharge as nearly as possible in conjunction with the administration of the state sales tax. The bill specifies that administrative and enforcement laws relating to the sales tax apply to surcharges imposed under the bill. The bill requires each city to assist the department in identifying new establishments required to impose the surcharge in the area.
   The bill creates a state surcharge revenue fund in the state treasury under the control of the department of revenue consisting of surcharge revenues collected within each area. The bill creates an area account for each city creating an area. The bill requires the revenues be deposited into the appropriate area account. All revenues in each area account shall be remitted monthly by the department to the city that established the area for deposit in the entertainment area fund of the city. Surcharge revenues deposited into the city’s entertainment area fund may be deposited in any of the following funds: the debt service fund in Code section 384.4, or the capital improvements fund in Code section 384.7. If the surcharge revenues are not deposited in any of the above-mentioned funds, the surcharge revenues may also be used for any of the purposes described under Code section 384.3A(3)(b), (c), (e), (f), or (g).