Iowa Senate leader signals phase out of property tax 'backfill'

Payments have gone to cities, counties since 2013 tax change

Iowa Senate President Jack Whitver, R-Ankeny, said during Friday’s taping of Iowa Public Television’s “Iowa Press” that lawmakers will likely look at phasing out state “backfill” payments to local governments for commercial property taxes. (James Q. Lynch/Gazette Des Moines Bureau)
Iowa Senate President Jack Whitver, R-Ankeny, said during Friday’s taping of Iowa Public Television’s “Iowa Press” that lawmakers will likely look at phasing out state “backfill” payments to local governments for commercial property taxes. (James Q. Lynch/Gazette Des Moines Bureau)

JOHNSTON — A bipartisan deal Iowa lawmakers made with local governments five years ago will be honored this year, but Senate President Jack Whitver has sounded the death knell for hundreds of millions of dollars of “backfill” payments that local governments depend on to pay for public needs.

Even as his Senate Republican caucus is proposing $52 million in cuts to the current $7 billion-plus state budget, Whitver said lawmakers are unlikely to reduce the payments to cities, counties and school districts for now.

“I believe there is general agreement in the Legislature that we don’t want to touch that for the current fiscal year,” he said during Friday’s recording of Iowa Public Television’s “Iowa Press” program.

Local governments have certified their budgets for the current fiscal year, so “it would be very difficult for them to go back and change that” for this year, Whitver said.

However, he predicted the backfill payments — about $150 million statewide this year — “should be on the table for the next few years.”

The payments were adopted to partially compensate local governments after Senate File 295 was passed in 2013 to begin what politicians bragged was historic property tax reform.

The law, which phased in several changes in the way local governments could tax property, most significantly cut taxes for commercial property.

ARTICLE CONTINUES BELOW ADVERTISEMENT

In 2013, a split-control Legislature and GOP Gov. Terry Branstad reduced the portion of commercial property assessed value that local governments could tax from 100 percent to 90 percent and lowered taxes on multifamily residential housing.

The idea was that the tax cut would spur development that would then result in greater property tax revenue.

“Many places around the state have seen tremendous growth since then,” the Ankeny Republican said. “So I believe we should look at phasing that out over time.”

In a special report last September, The Gazette found that state budget experts could not say yet whether the tax cut was actually working as planned. The Iowa League of Cities estimated cities in the state would lose $37.3 million in commercial property taxes in 2017, with the backfill covering $34.6 million of it — a difference the league expected to substantially worsen.

In theory, cities and counties could increase the tax levy to bring in more revenue. But, The Gazette found, most were already at the maximum allowed by the state.

The money raised from local property taxes goes to police and fire, parks, libraries and other local public services.

Whitver seemed to favor phasing out the backfill payments, which have amounted to more than $390 million, over stopping them cold.

He’s not the first to broach the subject.

In the run-up to the 2018 session, both Democratic and Republican lawmakers suggested it’s time to end the backfill. Before the Legislature convened earlier this month, state Sen. Chaz Allen, D-Newton, and Rep. Jake Highfill, R-Johnston, called the backfill a bad idea that should be ended.

ARTICLE CONTINUES BELOW ADVERTISEMENT

Thank you for signing up for our e-newsletter!

You should start receiving the e-newsletters within a couple days.

“It made no sense in the first place,” Highfill told the Iowa Chamber Alliance in December.

Allen, a former mayor who was part of the same legislative preview panel, agreed, adding, “It is not like you are going to get it forever.”

Republican Gov. Kim Reynolds is not calling for cuts to the backfill this year but has not committed to maintaining the payments beyond the current budget.

“Iowa Press” can be seen at 7:30 p.m. today and noon Sunday on Iowa Public Television; at 8:30 a.m. Saturday on IPTV World; and online at IPTV.org.

CONTINUE READING

MORE Government ARTICLES TO READ NEXT ...

CEDAR RAPIDS - It may not be the most glamorous award to some, but Linn County Engineer Steve Gannon said recent recognition of the county's paving efforts speaks the a commitment to something most residents need - safe and qualit ...

DES MOINES - Majority Senate Republicans unveiled a sweeping tax plan Wednesday that will cut individual and corporate income tax rates more than $1 billion a year beginning in 2019, reduce the number of tax brackets and expand th ...

Give us feedback

Have you found an error or omission in our reporting? Tell us here.

Do you have a story idea we should look into? Tell us here.