Get Full Government Meeting Transcripts, Videos, & Alerts Forever!
Get email alerts on the Local Option Sales Tax topic
No spam. Unsubscribe anytime.
Iowa City puts 1% local option sales tax on Nov. 4 ballot to fund property tax relief, housing and infrastructure
Summary
City staff told the Senior Center Commission that Iowa City voters will decide Nov. 4 whether to adopt a 1% local option sales tax (LOST). The proposed ballot language dedicates at least half of the revenue to property tax relief and apportions the rest among affordable housing, streets/parks/facilities and community partnerships.
Kirk Layman, assistant city manager for Iowa City, told the Senior Center Commission that the City Council has placed a 1% local option sales tax (LOST) on the Nov. 4 ballot and explained how the revenue could be used if voters approve it. "Local option sales tax is a 1% tax on goods that are sold within Iowa City limits," Layman said.
Layman said state law enables cities to adopt the tax and requires that 50% of LOST revenue be used for property tax relief. He told commissioners the ballot language proposed by council divides the remainder among affordable housing (25%), public streets/parks/facilities (10%) and community partnerships, including social services and arts/economic development initiatives.
The nut graph: Iowa City could see an estimated $8 million to $10 million a year if it adopts LOST on its own, Layman said; revenues would be larger if nearby Coralville also adopts the tax. That revenue is intended to provide a steady, dedicated source for capital projects, property tax relief or bond repayment and for targeted community priorities chosen by council.
Layman described why city leaders are pursuing LOST now: reductions and caps in state property-tax authority over the past decade, slowed growth in the city’s property tax base since the pandemic, and inflationary pressures on general-fund operations. "This is the last really major lever that we have to pull to be able to pay for some of these public services," he said.
He estimated Iowa City has roughly $1 billion in taxable sales and that visitor spending (about $458 million in 2023, he said) and about 5 million visitors last year would contribute to LOST revenues. Layman recalled the city’s prior LOST use for flood mitigation from 2010–2013, when the city collected more than $34 million for projects including Dubuque Street reconstruction, wastewater treatment work and riverfront flood-protection measures.
Under the proposed ballot language, the affordable-housing portion would target low-income households and could fund down-payment assistance, grants to nonprofits, rent subsidies or city-built affordable units. Layman said the city already budgets about $1 million a year for an affordable housing fund; LOST would be an additional, dedicated source.
Layman and commissioners discussed other mechanics and limits: hotels are not subject to LOST (they are taxed under a separate hotel/motel tax used for visitor promotion), vehicle sales and many groceries are exempt, and the state caps LOST at 1%. He told the commission early voting begins Oct. 15 and, if adopted by a majority of Iowa City voters, LOST could take effect July 1 following the election.
Several commissioners asked about details. Commissioner Kate Millster asked whether the affordable-housing allocation would include off-campus or student housing; Layman replied the city typically follows federal rules that limit student eligibility unless students meet independence criteria. One commissioner asked why the ballot language does not include a sunset; Layman said removing a sunset allows more predictable long-term planning and lets the city bond against LOST revenue for large capital projects.
Layman also warned LOST revenues will fluctuate with retail sales and economic conditions, so the city intends to prioritize capital projects and debt-avoidance strategies rather than ongoing operations that require permanent staffing increases.
The presentation included historic context (2014 LOST ballot that failed when jurisdictions voted jointly), the statewide adoption pattern (about 93% of Iowa communities have adopted LOST, Layman said), and the drafting choices council used to match community survey priorities (streets, affordable housing, parks and social services).
Ending: Layman said city staff will continue public information and outreach but that the city’s role is informational; advocacy by the City or commission is restricted. He encouraged commissioners to refer constituents to informational resources and noted Greater Iowa City is conducting broader outreach in the region.
