2019 LEGISLATIVE SESSION

'Soft cap' on property tax growth advances in Iowa House

Both Republicans and Democrats expected to still seek changes

The dome of the State Capitol building in Des Moines is shown on Tuesday, January 13, 2015. (The Gazette)
The dome of the State Capitol building in Des Moines is shown on Tuesday, January 13, 2015. (The Gazette)
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DES MOINES — After meeting behind closed doors for nearly two hours, an Iowa House committee agreed along party lines Tuesday to advance legislation allowing property owners to call for a vote if their city or county increases property tax revenues by 2 percent or more from one year to the next.

But House Study Bill 165 likely will be amended when it is debated by the full House to address concerns from city and county elected officials who say the bill could hamstring their ability to respond to community needs like flood control.

Currently, cities’ property tax levies are capped at $8.10 per $1,000 of taxable assessed valuation and counties have a general fund cap of $3.15 per thousand and a rural levy cap of $3.95 per thousand, according to bill manager Rep. Dustin Hite, R-New Sharon.

Under the measure approved by the House Ways and Means Committee, those would be replaced not with a levy limit but with a “soft cap” of 2 percent growth of property tax revenue.

That “soft cap” would exclude voter-approved levies, such as library levies, or revenue generated by new construction, expanded territory or property permanently coming out of a tax increment financing deal.

To improve transparency with property owners, its advocates say, HSB 165 would require city councils and boards of supervisors to approve a resolution if their revenue growth will exceed 2 percent. Local governments already are required to hold a public hearing on their budget and vote publicly three times to approve them.

If revenue exceeds the cap, property owners could call for a reverse referendum — if they get enough signatures — to force that down.

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The Iowa Senate also is considering a bill that deals with property taxes, but is taking a different approach.

Proponents of HSB 165 say some kind of cap is needed to address complaints from Iowans frustrated when they see their tax bills go up even when local levies remain constant or decline.

That can easily happen if, for instance, a city council votes to hold the tax rate steady but a city assessor raises the value of a property. That same rate applied to a higher value means a higher property tax bill.

Lawmakers are considering the bill as landowners are reviewing their latest assessments.

In the Corridor, many are seeing increases thanks in part to a strong housing market. Last week, assessors in Linn and Johnson counties said residential property assessments climbed by as much as 5 to 9 percent this year. Property owners will start paying taxes on those 2019 assessment in 2020.

As HSB 165 advances, House Republicans will offer an amendment to exempt money for city and county contributions to the Iowa Public Employees’ Retirement System and to police and fire retirement funds, according to Ways and Means Committee Chairman Lee Hein, R-Monticello.

That would address concerns from local officials that retirement payments would be competing with spending for public safety improvements, for example.

Democrats will offer an amendment to move the threshold for a reverse referendum from 2 percent to 4.75 percent.

Rep. Dave Jacoby of Coralville, the ranking Democrat on the committee, said that would reflect Democrats’ “pro-growth” philosophy.

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Rep. John Forbes, D-Urbandale, a former city council member, said he supports keeping taxes low “but I don’t really think this bill will do that.”

“I would prefer to allow elected officials — mayors, city council people, county supervisors — to make those decisions rather than this body dictate how they should run their county and city,” Forbes said.

As a former mayor, Hite said he believes the bill “is the very epitome of local control.”

“When the city is budgeting, we are stuck with the $8.10 cap,” he said. “This allows us to decide what revenues are right for our city and lets the people decide if we are overreaching.”

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

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