The Iowa City City Council on Tuesday evening deferred its decision on a possible franchise fee until Dec. 7.

The fee would go help fund a new Iowa City fire station.

The franchise fee would tax up to 5 percent of the total revenue of such utility companies as MidAmerican, though Iowa City Mayor Regenia Bailey said she was considering a rate of 2 percent.

In a prior interview with The Daily Iowan, interim City Manager Dale Helling estimated that for every percent taxed, Iowa City would bring in $840,000 per year.

Bailey said the decision was to wait for the auditor’s office to get preliminary figures on any tax revenue from tax-increment-financing properties.

TIF is a freeze on the property-tax level of a certain property, which is used as an incentive to get developers to build without paying increased property taxes, Bailey said.

However, after a period of time, the TIF expires, and the owner has to pay the full level of property tax. This means that when the City Council knows the amount of additional tax revenue from expiring TIFs, it can potentially use some of that money for the fire station and decrease the percentage of the franchise fee.

“It just makes sense to use the property tax, [which is] our primary revenue,” she said.

The discussion to levy a franchise fee started after Iowa Gov. Chet Culver signed a bill allowing city governments in Iowa to levee a charge up to 5 percent.

However, a later Polk County judicial ruling placed limits on the fee, stating that revenue generated must go toward a specific project.

— by Scott Raynor