Guest Columnist

Property tax bills could harm local government

Incoming Hiawatha City Council member Aime Wichtendahl in the Council Chambers in Hiawatha on Tuesday, Dec. 29, 2015. (Stephen Mally/The Gazette)
Incoming Hiawatha City Council member Aime Wichtendahl in the Council Chambers in Hiawatha on Tuesday, Dec. 29, 2015. (Stephen Mally/The Gazette)

Well, it’s crunchtime again. The Iowa Legislature is set to adjourn within days, so it’s time to see which extreme pieces of legislation will get pushed through with limited debate and little public input. Among those pieces of legislation are the House File 773 and Senate File 634 — the so-called property tax reform bills.

You may ask, “Aime how can you be against property tax reform? Wasn’t this one of the signature issues you ran on in 2015?” The answer is yes. And it is an issue that the city of Hiawatha has taken very seriously. We have lowered the property tax rate by 21 cents in each of the last two years, dropping the overall levy rate to $14.99 per $1,000 of assessed value. But like a lot of legislation passed these last two years, the devil is very much in the details.

Let’s break it down.

To start with, your property taxes are levied by not one, but up to three entities (depending on where you live) — school/college districts, counties and municipalities, with each assessing their own levy rate. Over the last 20 years, property taxes have remained a consistent 3.5 percent of personal income. Property taxes increased, but property valuations also increased.

If valuations increase, you may pay more in taxes. But your home also is worth more. For the vast majority of middle class Iowans, a home is their most significant investment.

In their current form, HF 773 and SF 634 seek to limit local property tax revenue growth to no more than 2 percent annually, using what lawmakers call a “soft cap.” Local leaders who seek more than 2 percent growth would face new hurdles, and possibly a public vote. The Senate version of the bill would place a hard cap on property tax growth at 3 percent. Both bills may change in the session’s closing days.

In many places throughout the metro area, property value growth can be higher than 3 percent. Valuations depend on a variety of factors, including home improvements, the health of the local economy, and adjacent developments. Holding valuations to a manageable level requires smart development. But these bills would make smart development more difficult.

You might not be aware of it, but there is currently a housing crisis. If you earn between $25,000 and $50,000, you may have noticed a shortage of affordable places to live. Rents keep increasing and the number of affordable homes on the market is limited.

Developing these essential housing projects requires an investment from local government, from developing streets, water, and sewer lines to tax incremental financing, or TIF.

HF 773 and SF 634 could limit the amount of investment cities can make in their communities because the bills would eliminate a number of essential levies and limit general fund growth.

That means everything from having an officer at your door, road repair, streetlights, and employee benefits such as IPERS (more on this in a minute) all must be paid from the same general fund, and that fund is severely limited. It means that cities can’t make the critical investments to develop new residential and small business locations. While higher end commercial and residential developments may still continue, affordable space for business start-ups and middle income homeowners will remain frustratingly out of reach.

All of these problems get magnified after a natural disaster. Severe flooding has visited Iowa again and Washington, D.C., and Des Moines seem paralyzed by inaction. Even when there are federal and state dollars for recovery, they are largely for cleanup and mitigation. Once the disaster has passed, it often falls to local governments to pick up the pieces.

An analysis of this legislation showed that the City of Hiawatha could lose $652,000 after the passage of the bill. Imagine the impact on a large city like Cedar Rapids.

Property tax legislation could also mean a long, slow death for IPERS.

The House version eliminates the employee benefit levy and requires pensions to be funded by the general fund — a fund whose growth could be limited to 2 percent. IPERS contributions grow by an average of 3.2 percent per year, which will put cities in a position where they either have to carry new debt or choose between fixing roads and employee benefits. As long as I serve on the Hiawatha City Council I will work to ensure that our employee’s pension remains fully funded. If other cities and counties aren’t able to cover contributions to IPERS there will be shortfalls and funding gaps.

I ask you to call your legislators and ask them to oppose HF 773 and SF 634. Tell them you value the police and firefighters who keep your community safe, and you want them to have a fully funded pension. Tell them you support quality of life services like libraries, parks, and trails. And if they don’t listen I ask you to hold them accountable for it in 2020.

If property taxes are an issue for you, 2019 is an election year for all cities in Linn County. Ask the candidates if they have a plan to lower property taxes.

• Aime Wichtendahl is a member of the Hiawatha City Council.

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