Lawmakers still bullish on property tax reform

DES MOINES - Despite broad differences in their approaches, Iowa legislators remain optimistic this will be the year they will reach agreement on commercial property tax reform.

“I'm not discouraged,” House Ways and Means Committee Chairman Tom Sands, R-Wapello, said after a 90-minute subcommittee hearing on House Study Bill 500. The meeting exposed more opposition than agreement on competing plans to reduce the inequity between commercial property that is taxed at 100 percent of its value and residential property that is taxed at about 50 percent of its value.

Rep. Jerry Kearns, D-Keokuk, the ranking Democrat on the tax writing committee, may not be quite as optimistic, though.

“We're closer to resolution than any year I've been here,” he said, but HSB 500 “is a long way from getting my ‘yes.'”

“But it's early in the session and there is time to work out the bugs,” Kearns added. “If we don't get there this year it will be the closest we've ever come.”

HSB 500 would phase in the lower taxes over 14 years, limit local government taxes and spending, and raise the school foundation level from the current 87.5 percent state funding to 100 percent as a way to reduce the local property tax burden.

Scott Sanders, finance director for the city of Des Moines, said HSB 500 would cause a domino effect, putting pressure on local governments to raise tax rates in order to offset the impact of the rollback on commercial property taxes.

“Property taxes have two elements - the valuations and the tax rates,” Sanders said. Local government has control over only the tax rates, “so if valuations are being brought down the only option is to raise the (tax) rate.”

Cities recognize the problem the governor and legislators are addressing, “but don't solve it on our backs,” said Iowa League of Cities Executive Director Alan Kemp. He described the various proposals as “not so much property tax reform as property tax cuts.”

The League has backed Senate Democrats' plan to cut commercial property taxes by 45 percent for more than 80 percent of commercial property tax owners without shifting the burden to homeowners, because, among other things, it would be easier to administer.

Kemp said he is encouraged lawmakers are tackling the issue early in the session, but lawmakers “have got a lot of work to do to reach agreement.”

Toward that end, Sands said he plans another subcommittee meeting.

“We're interested in doing something significant,” Sands said. “We are serious about doing property tax reform.”