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Five revenue generators say no to LOST, smaller towns say yes

JOHNSON COUNTY– While the 2009 vote for a Local Option Sales Tax (LOST) marked the closest public measure election results in Johnson County history– with a margin of seven votes in Iowa City– last week’s outcome was more disparate.
Smaller communities in the county managed to pass the one-cent sales tax measure, but the contiguous cities of Iowa City, Coralville, North Liberty, Tiffin and University Heights– which were combined into a single voting block– failed to reach a majority.
It means the biggest sales tax-generating areas in the county will not be adding another penny on the dollar for the sale of consumer goods and services. Therefore, the communities that did pass it– Hills, Lone Tree, Solon, Swisher and the Johnson County portion of West Branch– must charge the extra penny, but will not see nearly as much in revenues as expected.
The unincorporated parts of Johnson County, as well as the cities of Oxford and Shueyville, also failed the pass the LOST, both by a slim two percent margin. In Oxford, that difference was comprised of just five votes, based on preliminary results from the Johnson County Auditor’s Office. In Shueyville, it was just seven votes that separated the yes votes from LOST opponents.
Anticipated revenue if all jurisdictions in the county passed the LOST was somewhere around $17 million, money that would have been put into a pool and redistributed out to the approving jurisdictions via a formula based on population and property tax collections in years 1983-1985.
With just five smaller jurisdictions passing the LOST, the pool of anticipated revenues has shrunk considerably.
According to figures from Johnson County Finance Administrator Dana Aschenbrenner–revised to account for collection and distribution among only the passing entities– projected LOST revenues for Solon are $123,603 annually, while Swisher will receive approximately $56,789, Lone Tree $85,534, and Hills $48,954.
Solon City Administrator Cami Rasmussen said she expects Iowa City to put a LOST referendum up for another vote in the short term. Meanwhile, her community will prepare to utilize LOST revenues it does receive to assist with upcoming projects.
“The city council has focused the current infrastructure needs– on water storage and a north trunk sewer. We are in the preliminary planning and design phases of water storage project, and once underway, will begin the north trunk sewer planning and design. Each project has an estimated cost of $1 million dollars.”
Rasmussen was asked if she is concerned about an extra one-cent sales tax in Solon will be a disadvantage to local retailers.
“In my 20 years in Solon, I have always felt fortunate to live in a small town with retail and service-related business so conveniently close to home, and not have to spend time and gas driving to another town,” said Rasmussen. “As a resident I want to support local business and continue to benefit such conveniences. As a city representative of a fast-growing community, I hope to see Solon’s business districts grow and thrive and serve our communities needs.”
The duration of the sales tax, set by the Board of Supervisors, is 10 years.
The cities do have an opportunity to repeal the LOST by an election held in all the passing jurisdictions, after the tax has been in effect for one year. In order to do so, a city would have to receive approval from the Iowa City council, as the jurisdiction that represents at least half the county’s population. According to information from Johnson County Deputy Auditor Kingsley Botchway, city councils may also request the repeal of the LOST by motion at any time after the tax has been in effect for one year or more. The board of supervisors must repeal the tax in that city upon receipt of a motion. The Secretary of State’s office sets the dates for allowable special elections, but the earliest any city would be able to hold a repeal vote would be sometime after July 1, 2016.
Businesses in the cities of Hills, Lone Tree, Solon, Swisher and West Branch will begin imposing the extra one-cent sales tax beginning July 1, 2015 on goods and services that qualify for state sales tax.
There are some exemptions from LOST. For example, local option sales tax is not imposed on the sale of natural gas or electric energy in a city where utility bills are subject to a franchise fee. Also exempt from LOST are room rentals in a hotel or motel, sales of equipment by the State Department of Transportation, the sale of direct-to-home satellite pay television service, certain self-propelled building equipment, and car and truck purchases. (Instead, vehicles subject to registration are subject to a five percent one-time registration fee rather than a state sales tax.) However, the receipts from the rental of cars and trucks, as well as sales of parts and repair services, are subject to the tax.
Swisher Mayor Chris Taylor said it was difficult to say how his small community’s budget will be impacted by the outcome of the LOST, until the Iowa Department of Revenue provides revised estimates. But his government and city leadership, like that of Solon’s will also focus on the best way to use the revenues that do come in.
“Obviously we would have liked to have had the ‘big five’ cities pass the tax, though I can appreciate why they didn’t. That said, even a small increase in revenue can make a big difference in a little town. Residents have consistently said that streets are a priority, and I doubt that focus will change. We will find the funds in our budget somewhere; we’ll just have to tighten our belts in other areas,” Taylor said. For many years, roadways in Swisher were patched only on an as-needed basis, with no long-term plan for rehabilitation or reconstruction, he added.
“Earlier this year, the council finally committed to a multi-year pavement management plan. I expect that whatever LOST monies we receive will go toward that project.”