Reynolds: Iowa property tax reform requires ‘more efficient and effective’ local government

PEOSTA — Iowa Gov. Kim Reynolds talked with local leaders about ways to reduce property taxes and streamline government operations during a visit to Peosta in Dubuque County on Thursday.

Reynolds met with state legislators, local government officials and business and industry representatives at the Peosta Fire Department. The main goal of the discussion was to chart a path forward for property tax reduction across the state, Reynolds said.

The meeting was part of a statewide tour for Reynolds to receive input on the best steps forward for 2026. The event itself was closed to the media, but Reynolds talked with the press afterward.

“This is a wonderful opportunity for me to travel the state and really talk about the importance of looking at how we deliver services differently,” Reynolds said. “The focus, of course, is property tax reform and reduction. If we have heard one thing loud and clear, property taxpayers expect the Legislature and the governor’s office to do something about them.”

Iowa’s method of collecting property taxes employs a “rollback” system that limits the percentage of a property’s assessed value that is taxable by local governments, school districts and other taxing entities. For instance, the residential rollback rate for the 2026 fiscal year is 47.4 percent. That means the owner of a property valued at $250,000 pays taxes on $118,579 of that value.

Bills proposed in this year's legislative session sought to replace the rollback system with a “revenue restricted” system. The bills proposed taxing the full value of residential property, while limiting the amount of new revenue local governments can collect. However, the bills did not pass before the legislative session concluded.

Ultimately, an overhaul of the state’s property tax system would likely put the burden on local governments, which, if they end up losing money from the change, would need to consolidate services, Loras College politics professor Chris Budzisz said following the event.

Reynolds: Local governments need to find efficiencies

Reynolds acknowledged that changes in the state's property tax system likely would prompt local governments to adjust accordingly.

Reynolds said no new policy proposal is in writing yet. However, she cited the recent report from the Iowa DOGE Task Force as something that could be extended to local governments as a way of reallocating funds to services that could better serve their citizens.

“I need local governments looking at how they can be more efficient and effective,” Reynolds said. “And if we’re all doing that, it has to ultimately be a cost savings to taxpayers in Iowa. And then (the taxpayers) can reinvest that in our businesses and in our communities.”

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Iowa Rep. Shannon Lundgren, R-Peosta, echoed Reynolds, saying local governments might be able to operate more efficiently if there are fewer restrictions on where the funds are being invested.

“We heard today that fire, police and infrastructure are all extremely important services that the taxpayer has to pay for,” Lundgren said. “It’s everything above that that we have to take a look at.

“If we could actually eliminate those silos (outlining where funds are going) and say, ‘Here’s your one pot of money, you can spend it on what your community feels like you need to spend it on,’ then we’ve actually kind of simplified it for everyone,” she said.

Reynolds said she introduced the idea of a “shared-service model” to local leaders during the discussion. Under that proposal, local governments would share things like emergency medical services and public health services within or between counties.

Budzisz said rural areas of Iowa will face different challenges than urban areas because of the lack of readily available services they currently have.

“I do wonder what the impact will be in more rural areas, where costs for things like EMS and finding providers for those services can be quite difficult and expensive,” Budzisz said. “It will definitely hit them in a different way than it will more urban, developed areas.”

‘It’s a hard task’

Reynolds also said officials covered school funding at the roundtable. She said an overhaul of the state’s property tax system would require officials to take another look at how much of the tax revenue is directed to public schools.

“School funding is about 40 percent to 45 percent of the tax bill,” Reynolds said. “So when you combine that with just trying to think about delivering services differently, it’s a hard task, but we’re determined to get something done.”

Budzisz said the efficiency of educational institutions and that of governments and businesses can’t be compared “like apples to apples,” adding that while it’s important to look at how best those institutions allocate their funds, it might lead to school districts combining or realigning themselves.

He emphasized that this kind of policy, should it pass the Legislature, would likely force communities across the state to make tough, yet sometimes “economically necessary” decisions.

“There’s always these trade-offs and balance,” Budzisz said. “In the name of creating more uniformity across the state, you may reduce the ability of local governments to respond to the needs in their communities. But at the same time, in some of those communities, you may be increasing their standard of service.”