Iowa City votes, votes, votes and votes again on franchise fee

IOWA CITY - It was a bit of a wacky meeting Monday night with the Iowa City Council.

There were three tie votes before the council voted 4-2 in favor of establishing a 2 percent franchise fee on natural gas and electric customers.

Here's a link to the story.

The split was primarily over whether to reduce the fee to 1 percent.

Interim City Manager Dale Helling said the success of Plaza Towers, a mixed-use high-rise building downtown, would put more money back into the city's general fund than was expected.  The privately developed project received tax breaks from the city, and that money is being paid back quicker than expected.

The council wants to use the franchise fee to fund the hiring of more firefighters and police officers. Helling said projections showed a 1 percent fee would suffice.

But Mayor Regenia Bailey and council members Mike O'Donnell and Ross Wilburn wanted more information. The preliminary budget comes out this month. Bailey noted that contract negotiations with union employees are going on now and it's not known how salaries and benefits may change.

Council members Mike Wright, Matt Hayek and Connie Champion disagreed, wanting to do 1 percent now. But a motion to amend the proposed ordinance to 1 percent failed in a 3-3 tie. Amy Correia was absent.

A motion to defer the final vote on the 2 percent fee to January, when two new members will join the council, also failed 3-3. Then, a motion to defer until Dec. 14, in the hopes all seven current council members were present, failed 3-3.

The 4-2 vote passing and adopting the ordinance, with a 2 percent fee, followed.

If you're wondering, yes, four votes on one issue at one meeting is a lot. It may be the most I've seen in my three and half years covering Iowa City-area governments. Mike Wright said he thought it was the most in his two years on council.

And just to be clear, Bailey, O'Donnell and Wilburn did not say they were against lowering the fee (I didn't hear them say they were for it, either). They just want to wait until the city's financial picture is clearer, probably next month, before the council considers doing so. My impression was a majority of the council would support lowering the fee to 1 percent.

At 1 percent, most Iowa City residents and businesses would see no change in their utility bills.

That's because a local-option sales tax cannot be collected on natural gas and electric utilities if a franchise fee is in place. Iowa City has a 1 percent local-option sales tax, meaning a 1 percent franchise fee would in effect replace that.

Tax-exempt entities like the University of Iowa, however, would see an increase because they don't pay local-option sales taxes but would be subject to the franchise fee. That's been one of the selling points for the council, which says the city is too dependent on property taxes.

In 2008, there was nearly $2.1 billion worth of exempt property in Iowa City, with more than $1.8 billion of that owned by the University of Iowa.