Property tax squeeze pushes Iowa cities to consider franchise fees
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Some metro cities are pondering new franchise fees on gas and electricity next year or increasing existing ones, city officials tell Axios.
Why it matters: Local governments are seeking other revenue options while grappling with a recent state law restricting property tax growth.
The latest: On Monday, Johnston City Council will discuss increasing its 1% fee to as much as 5%.
- Norwalk City Council will hold a Dec. 5 public hearing to consider a 1% fee.
Elsewhere, it's too early in the budget process to determine whether an increase to a 2% fee in Ankeny or a 5% fee in Des Moines will be proposed, officials tell Axios.
State of play: Norwalk's proposal would generate an estimated $127,000 a year but would be revenue-neutral for most residents because it would replace a 1% Local Option Sales & Services Tax (LOSST) on their gas and electricity, finance director Jean Kelly tells Axios.
- Switching to a franchise fee allows the city to keep all the money collected rather than share it with other local governments, as required under the LOSST formula.
- This would mean Norwalk keeps about $100,000 more of the collections annually, a similar financial move West Des Moines made this year.
Zoom in: Johnston's discussion is part of a more extensive review of five-year staffing needs, including how to pay for more police and firefighters, city administrator Mike Pogge-Weaver tells Axios.
- Its current 1% fee, approved last year to replace a LOSST, collects just under $300,000 a year.
The intrigue: Iowa law caps the fees at 5% for most cities except Des Moines, which could increase them up to 7.5%, with the extra amount going to public transit.
- DART advocates have urged DSM to approve the increase this year to avoid future service cuts.
- Mayor Connie Boesen, also a DART board member, told Axios last month that she's open to the concept but wants to complete a review of transit services and options first.
Between the lines: Local government officials believe it is necessary to identify alternative revenue options as property tax changes take effect, Kelly and Pogge-Weaver said.
What's next: Cities must generally complete their budget process by the end of March for the fiscal year that begins in July.