Branstad willing to protect local government revenues with property tax relief

ALTOONA – Gov. Terry Branstad said Monday he hopes to forge a bipartisan property tax relief agreement next legislative session by providing enough state money to fully fund local tax credits and to protect local governments against potential revenue losses caused by lowering rates on commercial property and capping increases for homeowners and farmers.

“The cost is significant, but the state is in a position where I think we can do it,” Branstad said after addressing the Iowa Taxpayers Association's 77

^th

annual meeting. “I want to get this done.”

Branstad said past legislative efforts to lower tax rates on commercial and industrial properties to 60 percent of their assessed values over a phased period have stalled due to concerns from officials in cities and counties that their major source of revenue would be eroded by in the process of reducing property taxes for businesses and modifying the rollback for agricultural and residential properties so they do now grow by more than 2 percent in coming years.

In a speech to the same group two years ago, Branstad estimated it could require a state commitment of up to $500 million over four years to offset the potential loss of revenue to local governments if commercial property tax rates were to be pared back. However, he said at the time that he expected a sizable share of that amount would be offset by new development spurred by lower taxes.

On Monday, Branstad said he has gone “back to the drawing board” in formulating a new property tax plan to offer lawmakers when they convene their 2013 session on Jan. 14, but details of what his new proposal will look like have not been finalized.

“The plan's not put together yet, so I'd better not put any dollar figure on it except to say I believe that property tax reform should be a top priority and it ought to protect all classes of property and it ought to be fully funded so we assure local governments that they're going to be protected in the process,” he told reporters after his ITA speech. “That's been the big objection from local governments, so I'm trying to put together a plan that will meet their concerns.”

State government closed its fiscal 2012 books with a $688.1 million surplus after its cash reserve and economic emergency funds were filled to the statutory maximum of nearly $596 million, and that projected surplus could grow to as much as $768 million by next June 30. Branstad told the tax group he wanted to continue to hold the line on government spending but believed the state was in a better position to target more resources to strategic areas that will aid Iowa's economy.

“It's critically important at this critical time in our state's history that we use resources we have in a way that's going to most effectively position us for growth and investments in jobs in the future,” he said. “Financially  I think we're in a position to make significant progress on doing that.”

On a separate topic, Branstad was asked about the prospects for a state gas tax increase during the 2013 session, the governor said the issue has a “long, hard way” to get to his desk.

“I've never said that I would veto it,” the governor told ITA members. “It's a very controversial issue, especially because of the extremely high cost of computing to work for a lot of people. I'm certainly willing to work with the Legislature on that, (but) it's not something that I'm going to advocate.”

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