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County drops request for LOST funds

By Lori Lindner
Solon Economist

JOHNSON COUNTY– All the hoopla between governments in Johnson County over their propensity to share is apparently now moot.
The Johnson County Board of Supervisors has withdrawn its request for the county’s municipalities to collaboratively pay for a long-awaited courthouse expansion in exchange for an extended sunset.
On Nov. 4, voters will be asked whether they support a Local Option Sales Tax (LOST), to pay one penny more on the dollar for qualified purchases they make in the county. The referendum was initiated by the City of Iowa City, prompted by concerns over state-legislated property tax cuts that will eventually impact the city’s budget.
Also appearing on the November ballot is a bond referendum seeking support for a bond issue– recently reduced to $32.7 million– to expand and renovate the current county courthouse.
When Iowa City proposed the LOST vote, supervisors saw an opportunity for the potential new tax to help fund the courthouse initiative, and asked each of the municipalities that pass the LOST to dedicate 10 percent of their respective annual revenues to that purpose.
City councils are required to draft individual ballot language to specify how each will spend the revenues, with a deadline of Aug. 27. The five contiguous cities of Iowa City, Coralville, North Liberty, University Heights and Tiffin will vote as a single block, and a simple majority of all voters in that block will decide the fate of the LOST for all five cities. The cities of Solon, Lone Tree, Hills, Shueyville, Swisher, Oxford, a portion of West Branch and the unincorporated areas of the county will each vote on the LOST referendum in their own jurisdictions.
Over the last few weeks, councils have discussed, some informally and some officially, where the money would go, including whether or not they agreed to contribute to the courthouse project.
Discussions were tricky, as various council members found themselves at odds with their colleagues over cooperating with the county.
According to Iowa Code, a LOST’s duration must be set by county supervisors, and it need not be a uniform sunset for all jurisdictions. While Iowa City requested it last 10 years, the supervisors at an Aug. 6 work session informally decided to set the LOST for 10 years in those municipalities that agreed to give their 10 percent, and only three years for those that did not.
“This is the art of negotiation. It’s not even about the money. It’s about the buy-in,” said Supervisor Janelle Rettig, indicating communities’ willingness to participate in the courthouse initiative would show support of an issue that plagues the entire county; an aging, unsafe courthouse.
Rettig also noted the strain on the county budget when cities use Tax Increment Financing (TIF) to capture all tax revenues within certain districts. “It’s just the reality if your city is 90 percent TIF’d, and you won’t help us out with the courthouse, I don’t know how we can help you with other expenses. It’s not a threat; it’s a mathematical issue.”
Supervisor Terrence Neuzil said he was ready to state publicly that cities’ designations of LOST spending could influence his future decisions about county spending on roads projects.
“The decisions in regards to, if both of these pass, and where we put the investment in roads, will have some influence in my decision making if a community chooses not to participate with us,” said Neuzil.
And that’s when council discussions turned really unfriendly.
At its Aug. 12 meeting, North Liberty council members all were unhappy with the supervisors’ decision.
“I think the 10 percent the county is asking for is very close to extortion,” said councilor Coleen Chipman. “To say ‘you’re going to get 10 years if you do this, and if you don’t you’re only getting three…’ I’m not sure they can do that legally. I don’t see how they can treat city entities differently that way.”
Council member Chris Hoffman agreed in principle.
“I’m no happier than anybody else about this and I feel the word extortion can’t be used too many times. We’re all mad. Iowa City wants help. The county got put into this position and they weren’t consulted by Iowa City, and they want their bond to pass for the courthouse. I get that,” said Hoffman. “So in an effort to be a good member of the county, to further the progress of all us in Johnson County, (contributing to the courthouse) is fine with me.
Eventually, the North Liberty council leaned in the same direction, coming to an unofficial consensus to dedicate 10 percent of LOST revenues to the courthouse, as well as 50 percent to streets projects, 35 percent to offset rate increases from planned sewer and water facility upgrades, and five percent to parks development.
On the same evening, Coralville’s council voted not to contribute to the county courthouse, also stating disappointment over the county’s sunset stipulation.
The Tiffin City Council last week tabled its formal discussion on ballot language until a special meeting Aug. 20.
But in the end, nobody’s decisions about courthouse contributions came into play, as the county board moved to withdraw the request altogether in its Aug. 13 informal meeting.
“I think voters, when they get confused, tend to vote no. I think this whole thing has been confusing to voters, and my fear is any kind of connection between the courthouse referendum and the LOST could bring the courthouse down,” said supervisor Rod Sullivan.
Further, the supervisors expected that since Coralville declined the county’s request, it would impact the decisions of the other contiguous cities as well.
In the supervisors’ Aug. 14 meeting, member Pat Harney reiterated his desire to keep the courthouse and LOST initiatives separate.
“With all the publicity, it distracts from the purpose of the courthouse annex,” Harney said. “I don’t like all these distractions and hopefully that gets resolved in the near feature. It’s been needed for a long time and I would like this (courthouse bond) to be successful.”
Last week, the supervisors directed staff to draft their LOST ballot language to state that, if LOST passes in the unincorporated areas, 90 percent would go to roads and bridge projects, and 10 percent would be used for present or future courthouse needs.
It was not a unanimous recommendation, as both Sullivan and Rettig oppose LOST as a regressive tax.
“I believe that across Iowa there is a tax shift going on where the poor and middle class are expected to pay more so the rich can receive tax cuts,” said Rettig, especially where sales tax is dedicated to lowering property tax rates to the benefit of those who are wealthy enough to own land. She also said so far, no city has offered specific proposals about how LOST revenues will be spent. “That is like a blank check for way too long. I think taxpayers should think carefully if they want to give that kind of blank check to their local government.”
Sullivan lamented that no open dialogue on the LOST initiative or its uses had taken place between government entities when it was first considered.
“The only way we can talk about these things is to actually talk about them, by sitting at the same table, and it needs to happen in a public meeting,” Sullivan said. “I don’t like the idea that ‘a couple of our people can go to lunch with a couple of your people.’ We need to have open, joint meetings where the public is welcome and the media is there. Let’s do the public’s business in public.”
The board of supervisors will finalize its LOST ballot language and hold its official vote Aug. 27, while North Liberty City Council plans to vote at its Aug. 26 meeting.