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New tax puts more burden on a community already worn thin

BY DI EDITORIAL BOARD | JULY 02, 2009 7:20 AM

Taxes during a recession are troublesome on many levels. Taxes on basic utilities — which almost everyone uses — are especially regressive and only increase the burden on any community.

Unfortunately, this might be what Iowa City residents can look forward to in the future if the City Council votes to put an up to 5 percent franchise fee on utility companies in the Iowa City area. In doing so, the council will leave such energy companies as MidAmerican no other choice but to push that extra cost onto Iowa City residents. We urge the council not to approve a franchise fee.

The average annual cost for MidAmerican customers is $811. If the City Council approves the proposed franchise fee, that number will surely rise. Like the rest of us, businesses are suffering from this recession. Utility companies cannot sustain higher taxes without raising their rates.

Enforcing a franchise fee on local utilities as a way to quell budget woes is not a new idea. The idea is especially popular in Salt Lake County, Utah. Communities there have been burdened by additional taxes and fees after their local governing bodies approved franchise fees on utilities.

And, as near as Des Moines, franchise fees have been abused by local government officials. A Polk County judge recently ruled that Des Moines officials had enforced too high of a franchise fee and forced the city to pay its citizens back.

Additionally, as the city councilors seem to have forgotten, Iowa Citians have just had a new tax imposed on them. As of Wednesday, sales tax in Iowa City is 7 percent — up from 6 percent — as a result of a local-option sales tax approved by voters in May.

The sales tax hike is something we can live with; voters understood the tax’s consequences and approved it. This franchise fee, however, is something that would be pushed on Iowa Citians by a City Council who has not always demonstrated its ability to act in the public’s best interest.

A 5 percent increase would be particularly egregious because of its effect on the students of this city and their increased costs to live in a community struggling to break even. Students should strongly speak out against this and form a connection with fellow Iowa City residents against this poorly designed resolution.

Once the Iowa Legislature voted to allow these taxes to be implemented, they knowingly placed a great deal of the burden on Iowa citizens. Sure, the franchise fee can subsist a local economy as it drowns in the waters of debt and budget constraints. And to a certain degree, depending on the willingness of the utility company, it can promote lower prices for energy consumers. But the various benefits — using that word in the vaguest way — are not enough for the possible increase in energy taxes for our struggling community.

We concede that the City Council would put money which would be earned from the franchise fee to good use. In a memorandum sent to the council, interim City Manager Dale Helling said among the projects to be accomplished with the money would be the construction and staffing of a new fire station on the North Side of town. Other priorities include increased public-safety efforts. Both a new fire station and a boost in police are important to the community right now, but they should come from cutting from the budget, rather than forcing already-too-taxed citizens to cover the bill.

The tax and spending plans of this city have reached their breaking points. The council needs to understand that until they reach an agreement on an effective and positive way to use the money they receive, these taxes are just another step in the evolution of unnecessary taxation by our government. While the council has framed the franchise fee as a tax on business, it is ultimately a burden to all Iowa City residents.


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