Iowa Policy Project’s Fisher says Cedar Rapids’ state sales-tax request could lead to line of cities with hands out

IOWA CITY - Cedar Rapids City Hall's proposal in front of the Statehouse, which would divert some state sales tax revenue to the city to help it build a flood-protection system, would open the door for communities across Iowa to seek similar help for every want and need, says Peter Fisher.

Fisher, research director of the left-of-center Iowa Policy Project and emeritus professor of Urban and Regional Planning at the University of Iowa, calls the Cedar Rapids' request a “poor solution to big need.”

Fisher says Cedar Rapids' proposal would cost $200 million to $214 million in lost state revenue over 20 years and, in effect, would mean that the rest of Iowa would be paying for Cedar Rapids' flood-protection system.

The city calls its idea the Growth Reinvestment Initiative, which Fisher says is really tax-increment financing (TIF) at the state level. TIF is a funding approach used frequently by cities as they steer the growth in property-tax revenue in a particular area to development in that area.

“But if Cedar Rapids receives this GRI as a sales-tax TIF, the argument could (and doubtless will) be extended to any other city putting in a waste treatment plant or a convention center,” Fisher says. “Promoters of one economic activity or another will seek a special TIF to finance their project, ultimately at the expense of taxpayers throughout the state.”

Fisher's comments come as part of the Iowa Fiscal Partnership, a joint policy initiative of the Iowa Policy Project, Iowa City, and the Child & Family Policy Center, Des Moines.

Fisher recommends that the Iowa Legislature provide direct funding for the Cedar Rapids flood-protection system if lawmakers conclude that the project requires a special state response rather than a local response. He also suggests that local property-tax revenue should be used since flood-protection typically increases property values for the property it protects.

The Iowa Fiscal Partnership, Fisher says, warned back in 2005 that other Iowa cities would seek a special piece of state sales tax revenue after the legislature that year provided a similar mechanism to what Cedar Rapids is now seeking to help pay for the Iowa Speedway in Newton.

Cedar Rapids Mayor Ron Corbett cites the Iowa Speedway in making his case for Cedar Rapids flood protection.

“If a speedway is worthy of your investment, surely disaster prevention is,” Corbett has said.

Corbett has noted that the city is not expecting the state and federal governments to pay for Cedar Rapids flood protection on their own. The city is working to pass a 20-year extension of its local-option sales tax to help pay a share of the cost, he has said.