“Rollback” means homeowners to pay more in property taxes

CEDAR RAPIDS - Local governments and school districts will take in more property tax revenue from residential property owners in the fiscal year beginning July 1 even if elected officials are able to tell residents they will not raise the local tax rate.

The reason: On Friday, the Iowa Department of Revenue announced that the percentage of residential property subject to property taxes will increase 2.4 percent in the next fiscal year as a result of a change in the state agency's annual 'rollback” determination.

This fiscal year, 54.4 percent of a residential property's value is subject to property tax, while next fiscal year, 55.7 percent of value will be subject to property tax, the state agency said.

With all other factors that go into a property owner's tax bill being unchanged, the city of Cedar Rapids will see residential property tax revenue increase $1.2 million above the $49 million it is taking in this fiscal year, city manager Jeff Pomeranz said Friday.

The additional revenue would equate to the pay and benefits, for instance, of about 15 new police officers, he said.

'From a budget perspective, it certainly is a positive,” Pomeranz said.

All other factors being equal, Marion will take in $307,000 more; Linn County, $487,860 more; and Iowa City, $776.909 more, according to city and county officials.

The state rollback - the percentage of a property's value subject to property tax - is one of three factors in Iowa that go into computing a property owner's property tax bill.

A second factor is the total value of a property as established by the city or county assessor and the third is the tax rate set by local governments and school districts.

In times when the state's rollback subjects more property value to tax or when the local assessor is increasing the overall value of properties, it is easier for elected officials to keep the tax rate steady.

More is going on in Iowa's local property tax landscape than the state's annual determination of the rollback.

State legislation has dictated that commercial and industrial property owners, who typically have been paying tax on 100 percent of a property's value, pay tax on 95 percent this year and 90 percent beginning in the next fiscal year.

The state law also limits increases in the residential rollback to 3 percent a year.

Julie Roisen, the Department of Revenue's property tax division administrator, on Friday said the agency arrived at the 2.4 percent increase for the residential rollback by a formula that compares total assessed value of property in Iowa this year and last year.

Marion City Manager Lon Pluckhahn on Friday said the state has agreed to reimburse local jurisdictions for revenue lost to the rollback on commercial and industrial property for a 'phase-in” period. But the amount returned to local jurisdictions is capped so the state won't return 100 percent of revenue lost as the valuations of commercial and industrial properties increase over time, he said.

For now, Friday's announcement on the residential rollback is the second good piece of revenue news for Iowa's bigger cities in a week.

The first came from the Municipal Fire and Police Retirement System of Iowa, which announced that cities will have to contribute into the pension system a smaller percentage of the amount paid in salaries to police officers and firefighters.

In dollar numbers, Cedar Rapids is paying $7.2 million into the pension system this year for its 350 police officers and firefighters, an amount that will decrease by $625,000 in the next fiscal year, the city has estimated.

'Locally, it may be a net revenue gain for us, and we can adjust our tax rate accordingly, depending on how we're looking at our budget next year,” Cedar Rapids Mayor Ron Corbett said Friday of the residential rollback and the pension changes. 'We've kept the rate flat the last six years, and that would be the goal next year.”