DES MOINES — Advocated by lawmakers who say their constituents are complaining about rising property tax bills, the Iowa Legislature gave final approval early Thursday to a measure requiring local governments to take extra steps in approving their annual spending plans.
But a provision allowing a voter referendum to reverse an increase deemed too high was removed from the bill.
Local officials from around the state and critics in the Legislature opposed the bill, predicting the extra requirements would hamstring some governments and make it difficult to respond to community needs.
Under Senate File 634 passed Wednesday by the Iowa Senate and then at 2:52 a.m. Thursday by the Iowa House:
-- City councils and county boards would be required to document and hold a public hearing when they plan to increase property tax revenues through higher tax rates or increased property value assessments or both.
-- If a city’s or county’s tax revenues would increase by more than 2 percent, two-thirds of the council’s or board’s members — instead of a simple majority — would need to approve it.
A measure to place a 3 percent hard cap on increases — in addition to opening the door to a public vote — was stripped from the bill, which is awaiting the signature of Gov. Kim Reynolds to become law.
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Supporters said the measure is needed to bring transparency to local property taxes so taxpayers can understand why their bill is increasing. They say it would force municipalities to show when tax revenues are increasing and why.
“This is an opportunity for the taxpayers of Iowa to have some ability, some way they can reach out and have some say in what their property taxes should or should not be,” said Senate Ways and Means Committee Chairman Randy Feenstra, R-Hull, who managed the proposal in the Iowa Senate.
Opponents said it does nothing to lower taxes or increase transparency. It will instead, they warned, harm the Iowa Public Employees’ Retirement System and the police and fire retirement program.
Now, the trust and agency levy that covers local governments’ mandatory contribution to the retirement program can be raised as necessary to cover the employer’s share.
Under the bill, House Democrats argued, any increase in that levy would count toward triggering the requirement for supermajority approval of revenue hikes higher than 2 percent.
That could pit funding public employee pensions against funding public services, they said, and government officials may choose to lay off staff to free up money for pensions.
“Nothing could be farther from the truth,” countered Rep. Dustin Hite, a Republican who was the mayor of his 1,300-person hometown of New Sharon for seven years. “This bill is not about IPERS. It’s a property tax bill.”
A statement from IPERS on Thursday afternoon also disputed those accusations.
“This bill does not alter the employers’ obligation to pay the employer portion of IPERS’ contributions as established annually under (Iowa law). This bill does not affect a member’s or retiree’s pension,” the IPERS statement said.
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Supporters of the proposal said some local governments have enjoyed property tax revenue boosts because of higher property values even if they have kept tax rates the same.
They believe it will make local governments think twice about collecting more tax revenue.
“I’ve had numerous constituents concerned with (property) valuations going through the roof,” said Sen. Jake Chapman, R-Adel. “For far too long local officials have been able to get by saying, ‘We didn’t raise your taxes.’”
Opponents said the rules would place an undue burden on and infringe upon the authority of local governments.
“This is a red tape machine for city clerks and county supervisors to do their jobs that they were elected to do,” said Sen. Joe Bolkcom, D-Iowa City.
SF 634 passed the Iowa Senate 33-17 with Sen. Tony Bisignano, D-Des Moines, joining Republicans in support.
In the House, it was approved 53-46 after over four hours of debate.
Earlier this week, Reynolds declined to comment on the bill, but said she thinks leaders should be looking for ways to lower Iowans’ property taxes.