2019 LEGISLATIVE SESSION

Property tax 'awareness' now Iowa law

But Corridor officials see little consequence

Kim Reynolds speaks to The Gazette Editorial Board at The Gazette in Cedar Rapids on Thursday, Jan. 14, 2016. (Gazette photo)
Kim Reynolds speaks to The Gazette Editorial Board at The Gazette in Cedar Rapids on Thursday, Jan. 14, 2016. (Gazette photo)

CEDAR RAPIDS — Local governments in the Corridor foresee little impact from legislation signed into law Thursday by Gov. Kim Reynolds that advocates hope will temper the growth of property tax bills.

Under Senate File 634, city councils and county boards will be required to document and hold a public hearing when they plan to increase property tax revenues through higher rates, increased property values or both. Hearing notices must include a “statement of the major reasons for the increase.”

If revenues would increase by more than 2 percent, a two-thirds supermajority vote by the local board or council would be required — not a simple majority.

“This bill creates an additional public hearing prior to the approval of a city or county’s budget, allowing more public input and helping increase awareness and transparency to the budgeting process and Iowa taxpayers,” Reynolds said in a statement.

Leaders in the Corridor say they already do most if not all of the public notification requirements. Councils routinely pass budgets — in many cases exceeding 2 percent revenue growth — with little objection.

“If this is to drive transparency, I feel like we always have been transparent,” said Cedar Rapids Finance Director Casey Drew. “I don’t feel like it will be a negative.”

North Liberty Mayor Terry Donahue worries the law could led to a “series of consequences.”

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“It will finally hit the point where I believe you will have to choose between people and services,” he said.

Donahue said North Liberty’s revenues have increased between 3.5 and 5 percent per year. That has allowed the fast-growing city to maintain its tax rate while serving more people and businesses, he said. While previous councils have unanimously approved those budgets, he said that could change.

The Iowa League of Cities has been developing a spreadsheet to assist cities in calculating the impact of the law and has recorded a webinar to post now that the governor has acted.

Alan Kemp, executive director of the league, said the organization’s initial assumption is that many cities may routinely have revenue needs of more than 2 percent.

“Since the legislation does not allow cities to capture net new valuation increases due to new construction, fast growing cities will even more likely see revenues needs exceeding 2 percent — just to capture the new growth and its corresponding expenses,” he said.

Supporters say the proposal is needed to require more transparency in property taxes so taxpayers can understand why their bill is increasing. They say it may make local leaders think twice about spending.

“Anytime you add transparency and community input and a little more accountability at the local level, that is a good thing,” said Chris Ingstad, president of Iowans for Tax Relief.

There long has been a disconnect between local governments and taxpayers over tax bills. For example, local officials may say the property tax levy is being held flat, yet taxpayers wind up paying more money anyway as property values increase.

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Ingstad said the intent was never to stop growth but rather to raise awareness of how budgets impacts property taxes, and he believes the legislation does that.

Critics had contended the law would place an undue burden on and infringe upon the authority of local governments.

But measures to put a 3 percent hard cap on increases, and allow for a voter referendum to reverse the increase, were stripped from the bill before it passed.

Rod Boshart of The Gazette Des Moines Bureau contributed.

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