What is a local option sales tax?

• This November 4, Iowa City voters will decide on a ballot measure proposing a 1% Local Option Sales Tax (LOST). If approved by a simple majority, the sales tax on eligible purchases will increase from 6% to 7% starting July 1, 2026.  

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Who pays for LOST?

• Anyone who shops in a community that has adopted LOST pays the tax, including visitors and people making online purchases delivered there.

• In Johnson County, this includes the millions of visitors who spent more than $450 million locally in 2023, which would help fund local services if a LOST is adopted. Iowa City residents already pay the additional 1% when shopping in the 93% of other Iowa communities that adopted LOST, including Des Moines, Cedar Rapids, Davenport, Sioux City, Waterloo, Council Bluffs, Dubuque, and Ames.

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Why is LOST being considered now?

• Iowa City is facing its most challenging financial environment since the Great Recession. State property tax reforms passed in 2013 and 2023 reduced revenues available to cities, while the cost of maintaining services and infrastructure has risen with inflation. Although past financial planning has helped Iowa City remain stable, long-term pressures make additional funding sources necessary.

  

What purchases are and are not impacted by LOST?

• LOST applies to most taxable goods and services. However, many basic necessities are not subject to sales tax in Iowa. For example, the following categories are generally not taxed under LOST: 

  • Groceries

  • Rent, mortgage payments, and utilities

  • Vehicles and gasoline

  • Prescription drugs and many health products

  • Purchases made during the annual Sales Tax Holiday

  • A complete list is available at the Iowa Department of Revenue's Sales & Use Tax Guide.

• By exempting food and other necessities from sales taxes, the impact on vulnerable households can be minimized.

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What will the ballot say in Iowa City?

•  On November 4, Iowa City residents will see this question on the ballot:

  • “SHALL THE FOLLOWING PUBLIC MEASURE BE ADOPTED?” Yes or No   

 

Summary: To authorize imposition of a local option sales and services tax in the City of Iowa City, Iowa, at the rate of one percent (1%) to be effective on July 1, 2026.

 

A local option sales and services tax shall be imposed in the City of Iowa City, Iowa, at the rate of one percent (1%) to be effective on July 1, 2026.

 

Revenues from the sales and services tax shall be allocated as follows:

•  50% for property tax relief;

 

The specific purposes for which the revenues shall otherwise be expended are:

• 25% to preserve existing affordable housing stock, increase shelter, transitional, and permanent housing supports, and increase access to and the supply of affordable housing for households with low incomes.

• 10% for maintenance and construction of public streets, sidewalks, trails, parks, and facilities as designated by City Council.

• 15% for community partnerships, including, but not limited to, partnerships that support intergovernmental, economic development, arts and culture, and social service priorities as designated by City Council.”

 

If a majority of Iowa City votes “yes,” the tax will take effect July 1, 2026, without a sunset."

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What about North Liberty and Coralville?

• Voters in North Liberty and Coralville will also have the opportunity to approve a local option sales tax on November 4.  Each city has unique ballot language and would use tax revenues differently based on their priorities.  Each city’s voters will determine whether the tax is collected in their community.  

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How much money would LOST generate?

• If Iowa City, Coralville, and North Liberty all adopt LOST, up to $22 million annually could be generated for property tax relief and local projects.

• Sales tax revenues for all communities that vote “yes” in Johnson County are pooled and distributed according to a formula based on population and property tax dollars. If a community votes “no”, that community would not share in the revenue collected from other communities that adopt LOST.

• For Iowa City, projections estimate $8-$10 million per year. This would change depending on whether other communities also adopt LOST.

 

How would LOST affect property taxes?

• By law, 50% of LOST revenues must be used for property tax relief. This could mean lowering property tax rates or preventing rate increases that would otherwise be needed to fund critical infrastructure and public services. Each year, City Council will decide how property tax relief is applied through the public budget process. Learn more at www.icgov.org/budget.

 

How will LOST be used in Iowa City?

• In addition to the 50% required for property tax relief, the remainder would be distributed according to community priorities in the ballot language.

• 25% - Affordable Housing: LOST would create a dedicated funding source that would support affordable housing. Funding may be used for preserving existing affordable housing, increasing temporary and permanent housing supports, and improving access to and increasing the supply of affordable housing for households with low incomes.

• 10% - Public Infrastructure & Facilities: LOST would help increase funding for essential public improvement projects for infrastructure and public facilities. Funding may be used for maintaining and constructing public streets, sidewalks, trails, parks, and public facilities.

• 15% - Community Partnerships: LOST would sustain and expand the City’s many collaborations with local organizations. Funding may be used to support social service, arts and culture, economic, and intergovernmental partnerships.

For Iowa City, the Council adopted these priorities based on community feedback and its Strategic Plan values.

 

City Council will decide each year how funds are applied within these categories. If voters believe that funds are not being used as promised, they can petition for another ballot measure to ensure accountability.

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Has Iowa City used LOST before?

• Yes. After the 2008 flood, a 1% LOST was in place in Iowa City from 2010-2013, raising about $35 million. These funds were used for major flood protection projects like the Dubuque Street Gateway reconstruction project, the South Wastewater Treatment Facility expansion, and Riverfront Crossings Park.

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When and where can I vote?

• Vote during the regular city and school election on Tuesday, November 4, at regular polling places from 7:00 am to 8:00 pm.  To learn about early voting by mail or in person, or find your polling place, call the Johnson County Auditor at 319.356.6004 or visit  https://www.johnsoncountyiowa.gov/auditor/elections

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