A majority of voters in North Liberty would have to approved the measure
Megan Woolard
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NORTH LIBERTY — The North Liberty City Council will look to put a 1 percent local-option sales tax in front of voters this November, although city officials still are discussing exactly how the tax revenue would be used.
Under Iowa law, 50 percent of local-option sales tax revenue must be put toward property tax relief. How the other 50 percent of revenue is used is up to municipalities to decide.
The ballot measure requires approval by a simple majority of voters — 50 percent plus one vote. Voters in North Liberty have rejected 1 percent local-option sales tax proposals twice in the last 20 years.
City staff estimate that the sales tax could provide the city with $1.7 to $3.9 million in revenue each year. However, that estimate could change, as the number of cities within a county participating in a local-option sales tax can affect the revenue each city collects.
All local-option sales taxes are collected at the county level and then distributed to participating cities using a formula from the Iowa Department of Revenue that takes into account population and property valuations.
In Johnson County, voters in Swisher, Solon, Lone Tree and Hills passed local-option sales tax measures in the mid-2010s. Tiffin approved a local-option sales tax in fall 2023, and University Heights in fall 2024.
The Iowa City Council has already given initial verbal approval to take the tax to voters in November, and Coralville is contemplating doing the same. None of the three cities have formally voted on a resolution with specific ballot language.
State changes limit cities’ ability to capture growth
North Liberty, like other Iowa cities, has been limited in how much property tax revenue it can collect following changes at the state level.
The state’s “backfill,” which was intended to compensate for the loss of property tax revenue from changes to the rollback system, is being phased out. Additionally, cities have been limited in the amount of property tax valuation growth they can collect.
I mean, sales tax are inherently regressive in some ways, but I think with what we're seeing from the state legislature, as far as city budgets go and property taxes, it's something we should be able to do …” council member Erik Sittig said at a council meeting Tuesday night.
In order to provide property tax relief, cities can either use local-option sales tax revenue to pay down property tax levies, or use it to pay for projects that they otherwise would borrow to fund.
In North Liberty, city staff have recommended the city council use at least a portion of the revenue collected from the tax to fund proposed capital projects such as a new fire station, community center upgrades, road and trail improvements, and the city’s Centennial Park projects.
‘It will not fly like it will in Iowa City’
In Iowa City, city staff presented an initial proposal that would use 50 percent of the tax revenue for property tax relief, then put 20 percent of the revenue toward housing initiatives, 20 percent to public facilities, and 10 percent to community partnerships. Iowa City Council members agreed with those categories, but the city still is finalizing the exact percentage dedicated to each priority.
The proposal to put 20 percent of tax revenue toward housing initiatives came from Greater Iowa City Inc., which presented that same proposal to North Liberty officials.
“It's not that I am opposed to the 20 percent to housing, because that's not the case … the cautionary tale here is that it will not fly like it will in Iowa City. There are just different priorities,” said council member Brent Smith.
Historically, Iowa City voters have supported local-option sales taxes, voting in favor the past two times they’ve been on the ballot.
North Liberty Council members on Tuesday discussed the importance of developing ballot language that voters will support. The council did not come to a final decision about how the revenue should be used.
“I would put forth let’s move forward with LOST and then let’s have another opportunity to consider what are the percentages and what does the verbiage look like,” Council member Brian Leibold said.
In addition to North Liberty and Iowa City, Coralville also is considering a local-option sales tax vote, and has indicated any proposal likely would direct a percentage of the revenue to the city’s planned new recreation center.
Past LOST initiatives in North Liberty
North Liberty voters in 2009 rejected a local-option sales tax ballot measure, which called for 100 percent of revenue to be put toward road improvements. The measure was opposed by 61 percent of voters.
In 2014, due to state laws at the time, the cities of Iowa City, Coralville, North Liberty, Tiffin and University Heights voted on a local-option sales tax as one bloc.
In that election, 54 percent of all voters opposed the ballot measure. In North Liberty, specifically, 61 percent of voters voted against the tax.
The city has not put a local-option sales tax in front of voters since the 2014 effort.
Next Steps
North Liberty City staff will use a future meeting to present the council with additional ideas about how revenue from a local-option sales tax could be used. The city council would have to approve ballot language before the end of September for a November election.
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