2019 LEGISLATIVE SESSION

Cities, counties wary of Iowa Legislature's property tax cap plan

The reflection of the dome of the State Capitol building is seen in a puddle in Des Moines on Monday, Dec. 14, 2015. (Adam Wesley/The Gazette)
The reflection of the dome of the State Capitol building is seen in a puddle in Des Moines on Monday, Dec. 14, 2015. (Adam Wesley/The Gazette)

DES MOINES — Local government groups urged state lawmakers Wednesday to use caution as they consider limiting the growth of property taxes that pay for city and county services.

Limiting revenues could restrict services that constituents “require, want and need,” Robert Palmer of the Iowa League of Cities said during a House Ways and Means subcommittee hearing on House Study Bill 165.

Cities need a property tax system that is “fair, flexible and predictable, so like homeowners, (cities) can plan into the future, so we can make the right financial decisions,” he said.

Some taxpayers, however, called for a more radical approach.

“What I would suggest you folks do is scrap all your tax laws and start again and make them reasonable,” said Jim Fitts of Urbandale, adding that his property taxes have gone up from $3,000 in 1993 to $6,492 in 2018.

“That’s a lot of money for fire and police,” Fitts said. “There are a lot of people in this state who are old like I am, they can’t afford the taxes they are paying. That’s criminal. That should not happen.”

Under the bill, county boards and city councils could increase property tax collections by as much as 2 percent before voters could call for a reverse referendum. The petition for the referendum would have to be signed by a number of voters equal to 20 percent of the ballots cast in the previous presidential election.

Cities already are feeling the effect of previous legislative tax “relief” actions, including a 2013 commercial property tax relief bill that “all negatively impacted local revenues, which have put more of a burden on property taxes,” Palmer said.

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The one-size-fits-all approach of HSB 165 will not serve cities well, Palmer said. Of the state’s 942 cities, 784 have fewer than 2,000 residents and 496 have fewer than 500. Between 2010 and 2017, he added, 682 cities lost population.

County government officials share legislators’ concern about property tax bills but “we live in a society where everyone chips in to pay for those services that people want and depend on,” said Lucas Beenken of the Iowa State Association of Counties.

Statewide, 52 percent of county revenues come from property taxes, with 50 percent from homeowners and 20 percent from agriculture land owners.

Beenken encouraged legislators to have a broader discussion not just addressing property tax relief but local government finance as a whole. That could include diversification such as local-option sales taxes, local-option income taxes — “things that voters could choose to impose on themselves with the goal of providing themselves with property tax relief,” he said.

Gretchen Tegeler, a former director of the state Department of Management, chairwoman of the State Appeal Board and associated with a central Iowa taxpayers’ group, endorsed HSB 165 as a way to “put growth in check.”

Property taxes have gone up much faster than personal income, inflation or population growth, she said. Shifting attention from the tax rate to revenue collected will increase transparency. She also supported the reverse referendum that would allow taxpayers to overrule local governments’ tax decisions.

The Iowa Taxpayers Association supported the “overall concept” of the legislation, Jennifer Kingland told the panel. It incorporates some of the groups principles of tax policy, would promote stability and predictability, as well as transparency.

Current protections are not keeping property tax bills in check, said Iowans for Tax Relief President Chris Ingstad.

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“Assessments have increased dramatically and, in turn, have grown government revenue,” he said, adding “property tax increases are on autopilot.” Revenues will continue to grow under HSB 165, he said, but the legislation will control the growth.

Rep. John Forbes, D-Urbandale, was the only subcommittee member to speak to the legislation. He said the 2 percent cap on property tax revenue increases could be a problem for growing cities.

“It all boils down to quality of life in our communities, and with quality of life it costs money,” the former city council member said.

l Comments: (319) 398-8375; james.lynch@thegazette.com

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