May 30, 2024 - News

West Des Moines wants to replace its utilities tax with a new fee

Illustration of an electrical tower casting a dollar sign as a shadow.

Illustration: Sarah Grillo/Axios

In an effort to bolster its budget, West Des Moines might replace its gas and electricity tax with a "franchise fee," which the city says won't actually cost residents more.

Why it matters: The proposed change, to be considered next month, responds to a recent state law that restricts local tax growth. It would also keep more revenue in city hands.

  • Currently, WDM doesn't receive all its utility tax money because it is collected by the state and shared with other local governments.

By the numbers: WDM would receive an estimated $1 million more annually from the fee than it gets from the current 1% Local Option Sales & Services Tax (LOSST), city officials say.

  • The LOSST currently generates about $600,000.

The fine print: Nonprofit groups like churches and hospitals are currently exempt from the sales tax but would generally be on the hook for the franchise fee, WDM city manager Tom Hadden said.

Behind the scenes: County and city governments are wrestling with the changes that limit tax growth, which local leaders say is especially difficult for communities with growing populations.

  • As a result, WDM is trying to become more efficient and the fee is one way to improve budget projections, Hadden said.

The big picture: Altoona, Clive, Colfax and Pleasant Hill all have 5% utilities franchise fees while Ankeny charges 2%, according to the Iowa Utility Association.

  • Johnston replaced its 1% LOSST with a franchise fee last year.

What's next: WDM City Council will consider the 1% franchise fee at its June 17 meeting, Chris Hamlett, a budget analyst for the municipality tells Axios.

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