Don’t scramble local budgets

Legislative action to correct a miscalculation by the Iowa Department of Revenue will mean the loss of millions of dollars in property tax revenues for local governments and force swift budget cuts. Local government leaders are asking lawmakers to delay action for a year, giving them time to plan budgets that account for those losses. We see that as a reasonable request.

After all, news of the discrepancy is hitting local governments in the midst of setting property tax rates and building budgets for Fiscal Year 2024 that must be certified in March and April. It’s late in the game to rebuild those budgets and absorb funding cuts.

At issue is a pair of bills passed in 2013 and 2021 affecting the percentage of property values subject to property taxes. In 2013, lawmakers approved a measure that would lower property taxes on multifamily properties, such as apartments, to the same level of residential homes by 2022.

In 2021, legislation eliminated the multifamily designation and brought all residential property under a single designation for calculating what’s known as the “rollback,” or the percentage of a residential property’s value subject to tax.

But the change wasn’t reflected in the Iowa Code. So the Department of Revenue miscalculated the residential rollback. Local governments were told they could tax 56.5 percent of residential values. But under the legislation, the rate should be 54.6 percent.

So as a result, local governments built their budgets based on the higher rollback rate.

Republicans who control the Legislature are now moving a bill to correct the error and set the rollback at 54.6 percent. That would lower tax payments for Iowans but cost local governments millions.

Although we’re sensitive to the desire to avoid higher taxes, we believe correcting the error now throw the local budgeting process into a rushed scramble to make adjustments. The city of Iowa City, for example, could lose $1.7 million. Giving cities, counties and schools time to adjust is a good compromise, balancing the needs of taxpayers and those who rely on local services.

We think a swift legislative move now to correct the miscalculation would simply be yet another miscalculation.

(319) 398-8262; editorial@thegazette.com

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