North Liberty proposes using local-option sales tax for capital projects, community investment

NORTH LIBERTY — The North Liberty City Council is getting closer to approving ballot language that would put a 1 percent local-option sales tax in front of voters this fall.

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.

City staff drafted proposed ballot language based on past city council discussions. While council members reached a general consensus to move forward with the language, they indicated they’d still like to condense the proposed language.

The proposed language outlining uses for 50 percent of the funds reads, “for capital projects, including but not limited to, a fire station, fire apparatus & equipment, community center upgrades, parks, trails, streets and related infrastructure, equipment and other projects identified in the City’s Capital Improvements Plan; and for programs and initiatives that increase housing supply and access, including, but not limited to, affordable housing funding, workforce housing gap support, neighborhood reinvestment projects that may include infrastructure improvements, home improvement/renovation grants, rental rehabilitation, and other housing projects designated by City Council.”

The city council will vote later this summer on a resolution to finalize the language and put the tax on the ballot for the November election. The tax would need a simple majority — 50 percent, plus one, approval — to pass.

City staff estimate that the sales tax could provide North Liberty with $1.7 million 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.

Council not in favor of allocating a percentage for housing

The North Liberty City Council had previously agreed to move forward with a local-option sales tax, but had yet to decide what the 50 percent not used for property tax relief would be put toward.

Greater Iowa City Inc., presented a proposal that would allocate 20 percent of LOST revenue to affordable housing efforts in Iowa City, Coralville and North Liberty.

The Iowa City Council has chosen to move forward with a LOST vote, and has agreed to put 20 percent of the revenue to affordable housing efforts. 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.

While the majority of the North Liberty City Council agreed that affordable housing efforts are a priority for the city, some council members expressed concerns that dedicating 20 percent of potential LOST revenue to affordable housing could impact voter support for the tax.

“It's not necessarily what we might think as a council makeup exactly what we need, but what the voters will approve. And I think those two things are quite different with the makeup of our of our town,” said council member Brent Smith. “I think that this (ballot language) gives us the ability and gives the flexibility to future councils if they have priorities of housing to be able to do that.”

With the current proposed language, the city council still could allocate 20 percent of revenue to affordable housing efforts should it choose to do so.

“I think the language as it's written right now is probably the best comprehensive option that we have if we add anything more … it might actually confuse it even more for folks. My preference would just be to leave the language as it is,” said Mayor Chris Hoffman. “It gives us and it gives future councils a lot of flexibility.”

City council members also said they’d prefer that the local-option sales tax not have a sunset date. That means if the tax is approved, it would be in effect indefinitely, but could be repealed through another vote.

Past LOST initiatives in North Liberty

North Liberty voters in 2009 rejected a local-option sales tax ballot measure that 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 cast ballots against the tax.

The city has not put a local-option sales tax in front of voters since the 2014 effort.

Comments: megan.woolard@thegazette.com

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