In 2013, the state adopted property tax reform legislation that was hailed as “the largest property tax cut in Iowa’s history.” That legislation included a promise to soften the negative impacts on local governments. Faced with mounting budget deficits and a desire for tax reform, some state leaders may soon be inclined to forgo that promise. If they do, it will shift the state’s budgetary problem to the local level and force us either to increase property tax levies or reduce needed public services.
The state recognized that its tax reform legislation would have a major effect on cities, counties and schools, and thus added backfill provisions to the legislation.
In short, the state agreed to soften the impact on local governments by providing “backfill” payments aimed to replace a portion of the lost revenue. In our three communities, these “backfill” payments amount to approximately $3.4 million per year. No sunset was ever placed on these backfill payments and local governments were assured by legislators and the Branstad/Reynolds administration that such payments would be protected.
In the face of significant budget woes in the last few years, the Iowa Legislature has plugged budget gaps totaling several hundred million dollars through budget cuts and reserve funds. Last week, the legislature approved yet another significant de-appropriation bill that will affect state agencies, including over $11 million in cuts to the University of Iowa and Iowa State University. This is a troubling trend which poses a daunting task for our state’s elected leaders.
Like many problems that face all levels of government, the best solution will require an honest review of the facts and data, compromise among differing perspectives, and ultimately the political will to make difficult, complex decisions.
Unfortunately, there is growing talk that Iowa’s budget woes and desire for further tax reform can be solved by retreating on the state’s promise to continue to provide the backfill payments. The $3.4 million per year that the cities of Iowa City, Coralville and North Liberty stand to lose would significantly affect the services that our residents depend on every day. The loss to the city of Coralville is greater than the entire budget of the Coralville Fire Department.
In North Liberty, the loss of backfill equates to more than 25 percent of its police department’s budget. In Iowa City, the loss of backfill equates to the staffing and operation of one of our four fire stations or the equivalent of 15 police officer positions.
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Passing the budgetary problem to local governments may be an easy way out for our state’s elected leaders. But make no mistake. Such action will hit close to home, not just in our three cities but in cities, counties and schools of all sizes throughout the entire state. Ironically, eliminating “backfill” payments that were adopted as part of the “largest property tax cut in Iowa’s history” will likely end up putting upward pressure on local property tax rates as residents will be reluctant to accept critical cuts to local services.
Residents depend on cities for essential public safety services. They also depend on the delivery of and quality of life amenities that support the state’s long-term economic health. Our three cities are part of one of the few regions in Iowa that are thriving economically and generating tax revenue that the state depends upon.
A key component of this continued economic prosperity is our ability to fund local services and create communities that are attractive to an increasing mobile workforce.
Please urge your state representatives and Gov. Kim Reynolds not to solve the problem of a broken state budget by eliminating the backfill and shifting the cost of that broken budget to cities, counties and school districts. Such a Band-Aid solution will only compromise the long-term economic health of our communities and the state as a whole.
• Terry Donahue is mayor of North Liberty. John Lundell is mayor of Coralville. Jim Throgmorton is mayor of Iowa City.