Lawmakers leave property tax relief undone, but invest in job training

DES MOINES - “The 2012 session,” Gov. Terry Branstad said, “may be remembered as much for what failed to be accomplished as for what actually was accomplished.”

The governor made his remark after the split-control Legislature adjourned for a second straight year but hadn't found a compromise on how best to deliver relief to owners of commercial and industrial property without undercutting local governments or shifting tax burdens to homeowners and farmers.

Members of the Republican-controlled House and Democrat-led Senate worked for 122 days on various ways to provide property tax reform without reaching resolution.

The House sought to phase down the business rollback by cutting the percentage of the assessed value that is taxed from 100 percent to 90 percent by 2017 and allocate as much as $140 million a year to local governments to help offset revenue losses they may incur.

The Senate created an enterprise property tax credit - it would grow in increments of $25 million a year when state revenues were strong, up to $125 million, and provide across-the-board tax reduction that ultimately would be around a 7.2 percent rollback.

Both plans also taxed apartments as resident property and included breaks for telecommunications companies and a boost in the state earned income tax credit.

“We're extremely disappointed that in the end it's all by the wayside,” said Kristen Kunert of the National Federation of Independent Business's Iowa chapter, which represents more than 10,000 Iowa businesses with an average work force of about 20 people.

“I think what's happened is we've become sort of the child of a really bad divorce, where both parents are spending so much time arguing about who can take care of us better that they forget that we're here,” Kunert said. “They spent all this time trying to figure out who would do a better job of taking care of us and, in the end, no one's taking care of us, and that's really how it feels right now.

“It was everybody's priority and still we've got nothing.”

SOME PLUSES

It's unfortunate, said Mike Ralston of the Iowa Association of Business & Industry, that lawmakers probably don't get the credit they deserve for their good work in balancing the state's budget, starting an education reform initiative and helping businesses stay in Iowa by allowing a capital gains deduction on the sale of a company to an employer stock ownership plan - an ESOP - so its employees can become owners.

“Those are all pluses,” Ralston said.

“I think the great failure of this session is to not have passed some sort of commercial and industrial property tax reform. Everybody was saying the right things.

“I think they got very, very close and ultimately couldn't get it done, and that's too bad,” he said. “It's a big, big, big minus.”

While easing property tax burdens would have helped Iowa businesses, Ralston said the state's employment situation and economic conditions generally are improving. Both stability and consistency in the operations of state government contributes to that healthy business climate, he added.

At the same time, more progress in easing taxation and regulatory burdens could have accelerated the rebound, he noted.

The uncertainty over the unresolved tax issues likely contributed to some small businesses deciding to hold off on hiring decisions in the coming months, Kunert added.

A positive, however, was the legislative decision to invest $5 million for a new skilled work force shortage grant program at Iowa's community colleges and $3 million for training programs to better train workers for available jobs currently unfilled due to a lack of skills, the business leaders said.

“There is a skills gap in Iowa, and anything that addresses that is a good thing,” Ralston said. “If the state is going to spend money, the best place to put it is in people.”

Senate Majority Leader Mike Gronstal, D-Council Bluffs, said matching worker skills with unfilled good-paying jobs is a key factor in reducing the number of unemployed or under-employed.

“I think we took really, really dramatic steps this year to work on a skilled work force,” he said.

“That piece doesn't create jobs. It helps match up individuals with the skills they need to work the jobs that are already going open in Iowa because they can't find skilled workers.”

House Republicans also relented in their opposition to state job-creation incentives, agreeing to provide $15 million to the state Economic Development Authority in state money to recruit and retain companies seeking to locate or expand in Iowa. The final figure was less than Branstad and Senate Democrats proposed in their budget proposals.

‘CERTAINTY AND STABILITY'

Craig Hill, a Milo crop and livestock farmer who is president of the Iowa Farm Bureau Federation, said his organization was pleased with legislative action during the recently completed session that benefitted property owners, increased conservation funding and protected livestock farmers from fraud.

Hill said the extra $27 million the state paid to local governments to cover the ag land, family farm and homestead property tax credits represented direct relief. Also, he noted, the Legislature reinstated the statewide dollar cap to ensure that property tax contributions to the mental health system remained limited and controlled.

“These efforts, along with fully funding the legislature's K-12 education commitments, provide protections for property taxpayers and assure limited and controlled use of property tax dollars for these services,” he said.

House Speaker Kraig Paulsen, R-Hiawatha, said he believed the 84th General Assembly went a long ways in improving the state's business climate with a return to responsible, conservative budgeting and injecting “some much-needed certainty and stability” in governmental policies at the state level.

“For too long, Iowa employers were reluctant to invest in their operations, preventing them from hiring and expanding,” Paulsen said.

“They were reluctant because they constantly threatened with job-killing legislation like the repeal of our right-to-work law and open scope bargaining. House Republicans put those ideas in the rearview mirror and moved forward.”

Officials with the Cedar Rapids Area Metro Economic Alliance said this year's legislative session produced mixed results. The Cedar Rapids-Iowa City Corridor stands to benefit from a new state commitment to flood protection measures, and the ESOP changes awaiting Branstad's expected signature should help perpetuate some locally owned businesses.

“But on the flip-side, lawmakers stalemated on commercial property tax reform proposals, and several other debates were rife with anti-business, anti-growth rhetoric troubling to economic development efforts,” according to the alliances “e-connection” newsletter.

Another item of interest to Eastern Iowa was proposed legislation that sought to lay the groundwork for a state regulatory structure for the MidAmerican Energy's planned construction of a nuclear power plant in Iowa.

The House-passed measure stalled in the Senate this past session, and utility officials said they are evaluating their potential options.

“At this time it's premature to speak in detail about those plans,” said Tina Potthoff, media relations manager for MidAmerican Energy.