State Rep. Peter Cownie of West Des Moines is responsible for one of the nicer surprises to emerge from this year’s extensive rewrite of Iowa tax laws.

In early May at the end of this year’s legislative session, lawmakers rescinded a long-standing requirement that contiguous cities vote as a block in referendums for a local-option sales tax.

It was a major victory for Des Moines and West Des Moines, because decoupling communities gives individual cities more control over their finances.

“It took years to get this done,” Cownie said.

The change was made without rancor or even much debate, he said. In fact, it was one of the few pieces of the tax bill that had strong bipartisan support.

There had been efforts to decouple contiguous communities almost from the time the local option tax was first approved during the farm crisis years of the 1980s. But efforts waned as more communities approved the tax, eventually leaving areas touching Des Moines and Iowa City as the only two significant parts of Iowa without the local option tax.

Support to change the law gained new strength after a failed referendum in March, when residents of 10 Des Moines metro-area cities voted as a group to block implementation of a 1-cent sales tax that could have raised a total of as much as $79 million a year.

Despite favorable votes in Des Moines, West Des Moines and Windsor Heights, “no” votes from seven other suburbs tipped the collective total against the tax by a mere 229 votes, or less than half a percentage point.

Because the law required that the votes from contiguous cities be counted as one unit, the measure failed for all 10 metro-area communities.  

The March vote was the fourth time Des Moines-area voters turned down the tax, which many officials say is a much-needed source of income for Des Moines, which has an inordinately large amount of tax-exempt real estate owned by governments and nonprofits.

What was particularly galling this time was that, unlike earlier elections when a majority of Des Moines voters cast ballots against the tax, this time a majority of 54 percent of Des Moines voters supported the tax. In fact, the favorable margin in Des Moines was 1,030 votes, well above the overall margin of defeat for all 10 cities.

The 1-cent sales tax would have raised an estimated $38 million a year for Des Moines, which would have made a significant difference in the city’s cash-starved budget. It would also have raised more than $7 million a year for West Des Moines, where 51.4 percent voted in favor of the tax.

Cownie said there has been interest in changing the law for all of the 10 years he’s been in the Legislature.

“There was little movement until last year,” he said, “when we were able to get it out of committee before it died. 

“This year, because it was the first time in 21 years that we’ve had significant tax reform, we were more hopeful.”

Nevertheless, things moved slowly.

The Iowa House, the Senate and Gov. Kim Reynolds all had different versions of what they wanted to accomplish with tax reform, Cownie said.

As the session ground toward an end, many figured the decoupling provision was dead. But, Cownie said, “It was one of the final pieces to be added to the tax bill.”

It was easier to sell, he said, because lawmakers also wanted to widen the door to tax internet sales, and they could see contingent cities were, like internet sales, a fairness issue.

Officials in Des Moines and West Des Moines are now considering holding sales tax referendums next year.