Ankeny City Council rejects setting special election for local option sales tax
The Ankeny City Council voted against setting a special election to ask voters whether they approve bumping up the sales tax rate for new revenue to pay for local projects and lower the property tax rate.
City Manager David Jones recommended the council set a special election to ask voters if they approve adding a 1% local option sales tax in September. With voter approval, the new sales tax would have gone into effect Jan. 1, 2025, and the city could have captured more than $10 million in annual sales tax revenue, according to city documents.
The council voted against calling the election, voicing concerns about the timing and costs for community members impacted by inflation.
"I think we owe it to our community to really tighten the screws on some things and show that we really are doing our due diligence on cost measures, like everyone else is in their households, and then thinking about this again in maybe a year, or 18 months, or when the time is right," said council member Bobbi Bentz.
Council member Jeff Perry wrote on Facebook after the meeting that while the revenue would have helped lower property taxes, he had concerns about inflation and the regressive nature of sales taxes. According to the Tax Foundation, a regressive tax has the same rate, regardless of a taxpayer's income, which could increase the burden on someone with a lower income.
What is the local option sales tax in Iowa?
Iowa's local option sales tax adds 1% to the sales tax rate in communities that approve it. The sales tax rate goes from 6% to 7%, increasing the amount a customer pays for a purchase. Other cities in Polk County, and nearly every city in Iowa, have approved the tax.
If the special election went forward and voters said yes to the 1% tax, Ankeny would have used half the money for capital projects — such as roads, parks, trails, recreational facilities, infrastructure and public safety equipment — and retiring debt.
The other half of the local option sales tax would have been used for property tax relief under Iowa law. In Ankeny, that would have cut the current rate from $9.90 per $1,000 of assessed value to $9 per $1,000.
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Visiting shoppers also contribute to local service and infrastructure costs when they buy things in communities with the tax. According to city data, 60% of Ankeny sales tax is paid by residents, while 40% is paid by visitors.
The local option sales tax does not apply to exempt items like gasoline and many groceries.
Cities in the Des Moines area use the 1% sales tax to support various local projects, infrastructure, amenities and services. West Des Moines, for example, has used the funds to pay for more police officers, firefighters and amenities, while Des Moines has used the proceeds to pay for streets, flood prevention, neighborhood improvements and public safety.
Why did Ankeny staff want the local option sales tax?
Ankeny officials have lobbied the council on the 1% tax for months. According to a memo, the city faces "unprecedented financial headwinds" from post-pandemic cost increases and state property tax legislation.
More: Des Moines, other cities say Iowa's tax changes have left budget holes, no room for growth
The new sales tax would allow the city to reduce debt, diversity revenue sources and make the city less reliant on property taxes, the memo says. It would also help the city invest in new infrastructure for growth while maintaining aging infrastructure.
Without it, the city could see tax increases, service reductions and fewer projects, according to the memo from staff.
Ankeny voters rejected the tax in 2018, with 53% of voters at the time choosing no.
Chris Higgins covers the eastern and northern suburbs for the Register. Reach him at chiggins@registermedia.com or 515-423-5146 and follow him on Twitter @chris_higgins_
This article originally appeared on Des Moines Register: Ankeny will not have a special election for a local option sales tax
