The City of North Liberty is eying additional revenue with a new tax.
The five-member North Liberty City Council began exploring the possibility of a local option sales tax, or LOST, during a meeting on Tuesday, June 10.
The measure must first pass a city-wide vote in a local election to go into effect, which means the course must decide whether to put it on the November ballot.
How does a local option sales tax work?
Under Iowa law, North Liberty would be required to use 50% of the revenue generated by the sales tax for property tax relief. The other 50% can be used however cities please, though it must be defined on the ballot.
Iowa City chose to move forward with a proposal to implement a local option sales tax on June 3, while Coralville is still considering a tax.
Iowa City staff said that 93% of municipalities statewide already use a local option sales tax. North Liberty Councilor Brent Smith said that means that most cities in the state are taking advantage of the sales tax, “except us.”
“It’s obviously good for the vast majority of those that live in Iowa and it’s been very successful,” Smith said. “So, I don’t know why it couldn’t be here.”
N. Liberty council split on how to use tax revenue
North Liberty councilors spent roughly 45 minutes discussing what they’d use the tax revenue for.
The discussions largely centered on a proposal from the business-led Greater Iowa City, Inc., which suggested that 20% be used for a county-wide housing project. They suggested the remaining 30% be used to fund specific projects.
A few councilors were hesitant to dedicate money to county-wide housing projects instead of focusing on North Liberty proper, which they believe could turn off some voters.
North Liberty Mayor Chris Hoffman, who does not vote on official matters, said the council needs to make housing a priority by earmarking specific funds.
“I think the language that Greater IC is proposing here is general enough to give us a lot of latitude as a council and as a city,” Hoffman said. “Housing is going to be an issue for many, many years because it already has been. So, I’m not really in favor of a 50% (property tax), 50% (general uses split). We need to designate 20% of these dollars to housing.”
‘A rising tide lifts all boats’
Iowa City Assistant City Manager Kirk Lehmann said in his presentation to the council on June 3 that “a rising tide lifts all boats” when it comes to local option sales taxes in Johnson County.
North Liberty staff projects that to be true within their city limits.
City staff said North Liberty will generate an additional $200,000 per year if Iowa City also approves a tax, while Coralville’s tax will boost the revenue by $1 million.
Staff projects an annual revenue of $1.71 million if only North Liberty voters approve the local option sales tax. That number rises to $1.97 million if North Liberty and Iowa City voters approve the tax. If Coralville is added in, the total projected revenue increases by $1 million, to $2.81 million.
If only Coralville and North Liberty approve a tax, the annual revenue is projected at $3.89 million.
Have North Liberty voters considered local option sales taxes before?
In 2009, North Liberty voters considered a measure that would have used all revenue for “the construction and improvement of city streets.” That measure easily failed, with only 39% of voters in approval.
Five years later, voters again considered using the revenue it would generate for roads, water, wastewater utilities, and parks. The number of people who voted in 2014 increased sevenfold, but the result was the exact same. Only 39% of voters gave their approval.
North Liberty City Administrator Ryan Heiar said staff will continue to “explore” and “refine” the 2025 language.
Ballot language must be submitted to the Johnson County Auditor’s Office by Sept. 19. Greater Iowa City, Inc. has asked for clarification “much sooner” to help inform the community.
Ryan Hansen covers local government and crime for the Press-Citizen. He can be reached at rhansen@press-citizen.com or on X, formerly known as Twitter, @ryanhansen01.
This article originally appeared on Iowa City Press-Citizen: North Liberty considers adding a local option sales tax to November ballot. What to know
Reporting by Ryan Hansen, Iowa City Press-Citizen / Iowa City Press-Citizen
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