Elected officials like higher property values

CEDAR RAPIDS - Balancing local budgets for nearly every city in Linn and Johnson counties, as well as for the county governments and school districts there, is getting a little help because taxable valuations are up in nearly every jurisdiction.

A jurisdiction with a total property valuation that is on the rise can make it easier for elected local officials to avoid raising the property-tax levy rate. That's because the increased valuation brings in more budget revenue.

And that's the case even if the tax rate decided on by local elected officials stays the same. An individual property owner's bottom-line property-tax bill might increase, but the tax rate might not.

The new taxable valuations are compiled by local county auditors, and the valuation reports don't tell the entire story of revenue gains for most local jurisdictions, especially for a city such as Cedar Rapids, which has a large number of commercial businesses and industries.

In the Linn County valuation report, Cedar Rapids's overall taxable valuation for the budget year beginning July 1 is up 1.89 percent, which Casey Drew, the city's finance director, said should generate about $1 million more than now for the city's $112 million general fund.

However, the calculation of taxable valuation takes into account Iowa's property-tax reform directive that reduces or 'rolls back” by 10 percent the total valuations of commercial and industrial property for tax purposes, said Gordon Thompson and Mark Kistler, deputy auditors in Linn and Johnson counties respectively.

The resulting loss in property-tax revenue to local jurisdictions, though, isn't lost because the state of Iowa has agreed, for now, to reimburse local jurisdictions for what they lose in the 10 percent tax cut for businesses and industries. That's the expectation, said Dennis Bockenstedt, Iowa City's finance director.

A year ago, Cedar Rapids's Drew estimated that the state would pay the city about $1 million when the commercial/industrial rollback was at 5 percent.

Cedar Rapids Mayor Ron Corbett this week had two words when asked if rising property values makes it easier to put together an annual budget.

'Of course,” said Corbett, who along with others on the City Council have their annual budget meeting set for Thursday.

Among cities in Linn County, Central City has seen the largest percentage increase in property valuation in the last year at 22.1 percent. Mayor Don Gray and Julie Kester, Linn County assessor, said the reason primarily is that Central City has annexed property that has brought Innovative Ag Services's grain storage and seed-and-feed operation inside the city limits.

'Yes. A lot,” Gray said, when asked if he and his City Council members noticed the additional valuation and property-tax revenue expected from it as they work on their next budget.

It's a work in progress, but he said the council likely will be able to cut its property-tax levy rate.

Fairfax Mayor Jason Rabe said he isn't surprised to see Fairfax's taxable valuation increase 7.23 percent from last year as the city continues to add new homes and some commercial businesses year in and year out. The extra revenue is helping the city improve parks and improve its water system, Rabe said.

Jeff Schott, director of the Institute of Public Affairs at the University of Iowa and a former city manager in Marion, said city managers and local elected officials want to see property valuations go up at least at the rate of inflation.

In that way, cities, counties and school districts can begin to keep up with personnel and other costs that always increase. Rising valuations can mean elected officials don't have to raise the tax rate, he said.

At the same time, Schott said an individual property owner's tax bill still can climb because the valuation of the property has increased. He said he always made it a practice in Marion to report the change in the actual property taxes paid by a property owner rather than to emphasize that the property tax rate may have stayed the same.

'I think from a citizen's standpoint, you care how much money you're paying. Most don't pay any attention to the tax levy rate,” he said.

A third key factor in Iowa - in addition to valuation and tax levy rate - goes into the final determination of a property owner's tax bill. That is the percentage of a property's value upon which the tax rate is levied.

In recent years, residential property owners in Iowa have been paying tax on only about 50 percent of the value of their property. But that percentage has been increasing as the state-determined 'rollback” on residential property has changed.

The change has been favorable to local elected officials in the same way as increasing valuations have been.

For the current budget year beginning July 1, residential property owners in Iowa will pay property tax on 55.7335 percent of the value of their property up from 54.4 percent, which is a 2.45 percent increase.

In November, Cedar Rapids City Manager Jeff Pomeranz said the city would see a $1.2 million bump in revenue from the residential rollback change for the budget year beginning July 1. The city of Iowa City said the change would mean $776,909 in additional revenue at the current valuations.

'I don't think the average person understands the rollback at all,” the Institute of Public Affairs' Schott said.

In any event, most elected officials and school boards in Linn and Johnson counties will see boosts in property-tax revenue from both the new valuations and from the change in residential rollback announced last fall.

Schott said property owners also need to remember that the local property-tax bill is a 'consolidated tax” with pieces of the tax payment going to the city and/or county and a school district and a few other entities such as the area community college.

A jurisdiction's total valuation is larger than its taxable valuation since only about half of the value of residential property is taxed and only 90 percent of commercial and industrial property is. In addition, many cities use property-tax dollars generated in tax-increment districts for use there and those dollars don't factor in taxable valuation for use in general fund operating budgets.

Local jurisdictions in Iowa must finalize their annual budgets by mid-March.