Rod Sullivan, Supervisor, Johnson County, Iowa

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September 14, 2011

Sullivan’s Salvos 9/13/11

In this edition:

*Big Tax Cuts For Apartments
*Rents To Go Down?
*Fiddler’s Picnic
*I Love IC Film Contest
*Did You Know?

*Big Tax Cuts For Apartments
The Iowa Supreme Court recently ruled on a Jasper County case that will have major tax impacts in Johnson County, particularly in Iowa City.

In the decision, the Court allowed an apartment building to convert to a “co-op”. This conversion means that the apartment building goes from being taxed at full value (like other commercial properties) to getting the residential rollback (like other residential properties).

Since the rollback is about 50%, this reclassification means an immediate 50% cut in the apartment owner’s taxes. Similarly, it means local governments will collect half the taxes they used to from these properties.

Several apartment building owners have tried this in Johnson County, too, dating back to 2009. Now that the Court has ruled in their favor, taxing bodies (county, city, school) will need to issue refunds.

Moving forward, not every apartment building will meet the applicable building codes. Still others have tax reasons for remaining apartments rather than switching to co-ops. Still, Iowa City and the ICCSD stand to lose a substantial amount – perhaps $3 million each. Johnson County’s losses should be closer to $1 million.

That might not sound like much, but it is about 1.4% of our budget. That means we will need to either cut services or raise taxes by 1.4% next year just to keep even.

I am concerned by this ruling and the impact it will have on some local governments. More troubling is the growing trend that people who “lawyer up” get a better deal from their governments.

Government is supposed to be fair to everyone. Lately, it seems most fair to those with the most expensive attorneys.

*Rents To Go Down?
I just mentioned the recent Iowa Supreme Court decision and its tax impact on local governments.

While I am concerned by the impact of this decision, it does present an interesting case study to settle a longstanding argument between my friend Former Iowa City Councilor Bob Elliott and myself.

Bob always claims that all things being equal, higher taxes will automatically result in higher rents. His argument is that property tax increases disproportionately affect the poor because property owners pass the tax on in the form of higher rent. On the face, this seems logical. But I disagree.

I stole my arguments directly from former UI Urban and Regional Planning Professor Peter Fisher, who argues that rents are a function of supply and demand, and every other factor (including taxes) is virtually meaningless.

Peter says that if you overbuild, rents will go down. If an area is underbulit, rents will go up. The Iowa City apartment market has pretty much always fluctuated between 94-99% occupied. So the built environment has traditionally matched the need pretty well.

So Peter argues that all business-savvy landlords are already charging the maximum they can squeeze out of their properties. If rent is $700/month, that is because at $725 the property will take longer and cost more to rent out. It may sit empty longer, thereby generating less revenue.

If taxes go up, the landlord is still stuck with a property that is most rentable (and most profitable) at $700. Taxes do not impact the bottom line nearly as much as supply and demand.

Bob is a good guy, a smart man, and a person who cares about this County. We disagree on many things, but he means well. I like him, even though he insists on being a Cardinals fan.

But Bob is wrong on this issue. Just watch. We know taxes are going way down on many rental units – a 50% drop. So according to Bob’s theory, rents should go down.

Just wait. Barring a huge construction boom, rents will not go down in Iowa City.

*Fiddler’s Picnic
The Iowa Friends of Old-Time Music present the 41st annual Fiddler's Picnic! Come on down to the Johnson County Fairgrounds on Sunday, September 18 to enjoy a fun afternoon of old-time music.

Among the festivities will be a continuous stage show featuring some of the best old-time, bluegrass, Celtic, country, and folk musicians in Eastern Iowa. You can swap instruments at the vintage instrument dealer showcase, kick your heels up at the square dance, join in on one of the many parking lot jam sessions that are guaranteed to get going, and learn some new licks at the free workshop. Rain location is the fairgrounds barn.

The cost is Adults: $5, Kids 12 and under: FREE.

I Love IC Film Contest
Do you love Iowa City? What do you love most about it?

PATV is hosting its first ever short film contest about just that on November 6th from 6 - 8 p.m. Make a short film and you could win fabulous prizes!

The submission deadline is Monday, October 3rd, and the screening and awards ceremony will be Sunday, November 6th.

For full contest details, rules & regulations, tips and suggestions and submission guidelines visit

*DID YOU KNOW? Johnson County’s largest percentage growth occurred between 1940 and 1950, when the County grew 38% from 33,191 to 45,756. (Source: US Census.)

Anyone interested in learning more about County government should take a look at the County website-

"Sullivan’s Salvos" is sent once per week to any interested party. It will give a brief update on issues of interest to Johnson County residents.

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As always, feel free to contact me at 354-7199 or I look forward to serving you!



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