Hiawatha looks to implement hotel/motel tax

HIAWATHA — The city of Hiawatha is seeking voter approval to implement a 7 percent room tax on overnight hotel stays within city limits.

City council members this week voted to put a referendum on the Nov. 4 ballot asking voters to approve the imposition of a local hotel and motel tax. A simple majority would be required for the referendum to pass.

Notably, Hiawatha currently has no hotels or motels within city limits, but Mayor Steve Dodson said approving a hotel/motel tax now is a “proactive” move aimed at maximizing future earnings.

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“You can only have an election every so often, so if we don’t pass a hotel/motel tax and we actually get a hotel, we would lose that revenue from the 7 percent tax” in the meantime, he said. “We want to be preemptive with this.”

The 7 percent tax would be paid by lodging visitors and have no impact on residents’ own taxes, Dodson explained. Revenue from the tax would then be distributed back to the city on a monthly basis.

Under state code, at least 50 percent of the collected hotel/motel taxes must be used for the promotion and encouragement of tourist and convention traffic with potential uses including economic development work and/or the improvement of local parks or other cultural amenities.

During this week’s council meeting, city council members were broadly supportive of implementing the tax as a means of bolstering city coffers. The vote to put the issue on the ballot passed 4-0 with member Bill Bennett being absent.

“To me, it’s a great opportunity for us to be able to increase our budget for Parks & Recreation without increasing property tax revenues since we’re using revenue sources from outside the community,” said council member Ben Fiedler.

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The city has been courting potential hotel developers for more than a decade in hopes of meeting the needs of the growing Hiawatha community, said City Manager Dennis Marks. Those conversations are ongoing, although no concrete deals are in place.

Hotel/motel taxes are commonplace in Iowa, and state data shows that more than 200 jurisdictions have enacted such measures — including other Linn County communities such as Cedar Rapids, Marion and Mount Vernon.

As such, Hiawatha officials said there is little concern that implementing a hotel/motel tax would dissuade future hotel development within city limits.

“We have a need in the area, and we have land that could be utilized in different parts of town” for hotel development, Marks said. “We don’t know exactly when (that development) is going to happen, but we know it’s going to happen eventually.”

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