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Sales tax on the ballot to replace state funding

BY REBECCA MORIN | OCTOBER 27, 2014 5:00 AM

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With a new state property tax implemented this fiscal year, Johnson County — and especially Iowa City — officials have added a sales tax to the Nov. 4 ballot in hopes of alleviating financial loss to the jurisdiction due to the new property tax.

The local-option sales tax, which is a 1-cent tax increase, will be voted on throughout the county.
In Iowa City, 50 percent of the sales tax would go to street improvements and roadway maintenance, 40 percent would go toward property-tax relief, and 10 percent of the sales tax would be allocated to affordable housing.

“There were other options,” Iowa City Finance Director Dennis Bockenstedt said. “The sales tax was the best of the options.”

Iowa City, Coralville, North Liberty, University Heights, and Tiffin acting as one bloc, and more than 50 percent of combined votes for those cities will determine if the local-option sales tax will be adopted in those cities.

Although the cities are voting as a bloc, ballot language of the tax will differ in each city.

In 2013, the state adjusted the property tax, which will slow taxable growth of residential property, lower taxable values of commercial and industrial property, and treat commercial multi-residential property as residential.

The assessed value of multi-residential property, which was 100 percent, has now dropped to nearly half of that, the same level as residential property.

Iowa City could lose up to around $51.7 million over the next 10 years. But, the state could replace up to nearly $14.7 million of that funding over the 10 years.

With the sales tax, Iowa City could earn around $9 million to $9.5 million a year, Iowa City City Councilor Susan Mims said.

But the sales tax would not be the only thing the city would need to implement to fill the budget.

“We have to look at controlling expenses, which may come through service levels or program cuts,” Bockenstedt said. “The sales tax will help diminish the impact and will most likely come from a combination of different factors and different things.”

Bockenstedt said the city is not looking into services or programs that could be cut that will also help replace revenue lost. He said the city will look into that annually through the budget process.
The sales-tax hike  would last for 10 years, and then have to come up for another election or it would just expire, Bockenstedt said.

“I’m cautiously optimistic,” Mims said. “Most people I’ve talked to feel it is the right thing to do.”

Although Iowa City would experience the biggest hit because of the number of rental properties, Johnson County Finance Administrator Dana Aschenbrenner said the county will also see a loss.

Over the next 10 years, the county could see a cumulative loss of approximately $25 million in tax revenues.

With the sales tax, the county could earn about $4 million a year.

“On the one hand we would capture revenues from visitors to our county that willingly come here to shop and take part in our local activities, so we are acquiring this tax money not solely from our residents alone,” he said.

Aschenbrenner said, however, the tax could also affect local residents who are on set earnings.

“I’m also aware that this is a somewhat regressive tax that has a more profound impact on the working poor and those residents of our population on limited incomes, and that should be considered as well.”


Local-Option Sales Tax

The local-option sales tax, which will be on the general-election ballot, will allocate funding to several different areas.

The Daily Iowan will delve into a four-part series on what this tax means, and how the funding will be distributed.

Today: What does Local-Option Sales Tax mean
• Tuesday: Streets and roadways
• Wednesday: Property tax
• Thursday: Affordable housing


In today's issue:





 
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