Iowa City Rejects Local Tax Diversion for College Scholarships

Published June 1, 2009

Voters in Davenport, Iowa overwhelmingly rejected a measure to use a local sales tax to fund a college scholarship program that would have been run by the city.

Nearly 60 percent of voters in the March election cast ballots against sending 30 percent of the proceeds from a 1 percent citywide sales tax to pay for the scholarships. The vote also means no increase in funding for the city’s police and firefighters from a portion of sales tax revenue.

City officials cast the Davenport Promise scholarship program as an economic development effort. Opponents cast it as a boondoggle. Opponents clearly won the day, as the measure won in only one of 40 precincts.

Tried to be Unique

“I’m unsure what the city was after,” said Davenport resident Dave Nelson, who led the opposition. “They wanted Davenport to become the only city with this type of program. There are a half dozen or so cities doing something like it, but they are using private money. The largest backer was Genesis Hospital, which is having trouble hiring. A spokesperson said they would use it to recruit. It’s corporate welfare, as far as I’m concerned.”

The scholarship program would have been available to high school graduates living in the city. Scholarships would have paid for all or part of their college tuition, depending on which school they attended and how long they have lived in Davenport. Students also would have needed to do community service work to qualify.

‘Far Outside the Scope’

Mayor Bill Gluba told reporters, “You only get one bite at the apple. We certainly wish it would have passed. It would have been a step forward for the City of Davenport. It would have shown we were willing to try something different and take a step forward.”

Nelson said he and the strong majority who opposed the subsidized scholarship program saw it as a step in the wrong direction.

“I believe there were two factors in the defeat. One, people understood it was so far outside the scope of what cities should do, they couldn’t wrap their mind around doing it,” Nelson said. “Two, this city has done a lot of stuff that’s been poorly received and ineffective. People looked at that history and said this is more of the same.”

Steve Stanek ([email protected]) is a research fellow at The Heartland Institute and managing editor of Budget & Tax News.