To be exact, John Wayne Gacy was born and raised in Chicago, Illinois. In his 20s, he lived for a few years in Waterloo, with his first wife and their two children. However, at age 26 he was sentenced to prison for sodomy, in a case that involved his having sexually assaulted two teenage boys, and then hired another Waterloo teen to physically assault his accusers in order to intimidate them out of testifying against him.
Gacy never lived in Waterloo again. Upon his release from prison after less than two years, he returned to Chicago and the surrounding metro area, where he went on to commit his various other crimes of murder and sexual assault. There was also a run-in with the law in 1972, in a case of sexual battery, but charges were dropped -- and Gacy went on to commit his many known killings.
(Also during that latter period, he became a Democratic ward activist in the Chicago area -- indeed, there is an infamous photo of him in 1978, getting his picture taken in a handshake with First Lady Rosalynn Carter.)
Eventually, in 1979, Gacy was caught and arrested. He was convicted in 1980 of 33 murders, was sentenced to death, and was finally executed by the state of Illinois in 1994.
(Via the Washington Times.)
Late Update: TPM's Evan McMorris-Santoro spoke with the director of the John Wayne museum in Winterset. Also, as it turns out, Marion "John Wayne" Morrison's parents lived for a very brief time in Waterloo -- but that was before he was born, and they soon moved back to the Des Moines area, in Winterset, to be closer to their relatives.