February 28, 2024

Iowa’s property tax reform law comes at a cost for local governments

‘Ramifications’ of House File 718 complicate budgets for cities and counties, lawmakers discuss bills at legislative gathering

From left: Iowa House Rep. Barb Kniff McCulla, Iowa House Rep. Jon Dunwell and Iowa State Sen. Ken Rozenboom speak to constituents during a legislative gathering hosted by the League of Women Voters of Jasper County on Jan. 20 at the Newton Public Library.

Doug Bishop picked one helluva time to run for mayor of Baxter. In addition to managing his office as the county treasurer and trying to find solutions to his town’s ongoing struggles with EMS service, state laws are making budgeting sessions extra tough for local governments these next few years.

He anticipates Baxter’s city officials will have to make some really hard decisions in the coming months and so forth, and it is in large part because of House File 718. Outcry from property assessments last year forced the Iowa Legislature to pass a bipartisan property tax reform law that have some city leaders on edge.

Newton City Administrator Matt Muckler has repeatedly criticized the law for penalizing city growth. Bishop is not too fond of the law either, and he lobbed his criticisms directly in the faces of Jasper County’s statehouse legislators during a legislative gathering Jan. 20 at Newton Public Library.

State Sen. Ken Rozenboom mentioned in a previous, unrelated topic that most Iowans — including himself — would not like it if the federal government told Iowa how to govern its state. Bishop suggested House File 718 does the same thing, only it is the state telling city and county governments what to do.

“We’re seeing everything first hand everything that you’re talking about,” Bishop said. “I heard you, Senator, say you don’t want the feds coming down and telling us what we’re going to do with ourselves … but House File 718, the state came down and told us what we could or couldn’t do as far as taxing our citizens.”

Bishop condemned the bill for being a “slammed through, middle-of-the-night deal” to appease citizens over their high property assessments. But Bishop said lawmakers may not have fully understood what they were voting on other than they were going to provide relief for Iowans. As treasurer, he understands that.

“But there has been ramifications since,” Bishop said.

The City of Baxter has a full-time public works director, one police officer, a fire department, a city clerk, a librarian and full-time EMS director. Bishop said House File 718 is driving down what municipalities can tax their citizens. For Baxter, the only place the city has room to cut is people. But doing so potentially comes at a loss of service.

To make matters even more complicated, the City of Baxter has already combined resources and shares its librarian with the school district. Bishop said what House File 718 has done is taken away the city’s local authority to tax its citizens more to maintain services. To him, the bill needs to be readdressed.

“We need to get back to local control,” Bishop said. “I understand the thoughts of y’all passing it, but we’re in crisis right now in our little town. The bigger ones can absorb it a little bit better. But it’s going to happen there by 2029. Y’all voted for it. Y’all supported. What can you do for us to fix it?”

Iowa House Rep. Jon Dunwell said the bill does sunset in 2029, and it was meant for lawmakers to have another discussion about it prior to the sunsetting to set up the new Iowa property tax bill. Dunwell said he has met with different cities to see what can be adjusted if necessary.

Those meetings are also helping him prepare for a more long-term property tax bill. The challenge Iowa has is its complex property tax system, Dunwell said. But he pushed back against some of the faults against the bill, saying it was passed with almost unanimous bipartisan support in both the House and Senate.

Only one person voted against it.

“Property taxes concern people. They saw their assessments go up. We already have a mechanism in government that drops that down; it’s called the rollback So your next tax bill you were maybe taxed on 52-some percent of your home’s taxable value … because the assessments went up so high,” Dunwell said.

House File 718 made it so the taxable assessed value of a city or county went up more than 3 percent, 2 percent of that growth had to be used to drop the levy.

“It does get to be a challenge if you’re a city growing at 3.1 percent,” Dunwell said. “You could have used those dollars. Instead, what happens is they now have to go toward, basically, a 1.1 percent growth. I met with some larger cities and I’m meeting with my smaller cities in the next month to have a confab.”

Dunwell added it is a struggle to have a mechanism that drops the rollback down and then another mechanism that drops it further. But the House representative said the piece he fought for in the bill was a provision for truth in taxation, which he suggested is giving more local control and increases transparency

“What I ultimately want to see in property taxes is you get a statement prior to the approval of the budget and prior to approval of the levy that says, ‘Here’s what you paid last year in taxes, the proposed combined levy and if that’s approved here’s what you would pay, here’s all the public meetings,’” Dunwell said.

There is a way around House File 718. But it’s a complicated one that requires the will of the voters to officially authorize through a referendum.

“We’re going to get more input on that, and the idea on that sunset is to actually write a new bill going forward,” Dunwell said.

Bishop said the 65-and-older and veterans tax credits were not backfilled, and he cautioned that if lawmakers have not heard from their county supervisors yet they will soon. According to Bishop there was a trigger in the bill for rural services — which Dunwell confirmed — and the cap was leveled off of last year’s askings.

Which could pose problems for more conservative counties who kept tax levies low and did not take in more money than they had to. In a follow up interview with Newton News, Jasper County Supervisor Brandon Talsma confirmed there have been some complications with the rural services levy.

Typically, Jasper County plays a balancing act with three major funding sources: rural, general and general supplemental. While some things can be paid for via a singular levy, others can be paid for with a mixture of funds. The balancing act the county plays thus changes from year to year depending on a number of factors.

Coupled with the county’s practice to alter its levies so that it is taking in the same amount of property tax as previous years despite high assessments, the levies often alter from year to year. High reserves and good fiscal management have provided Jasper County the luxury of some wiggle room in past budgets.

Talsma said that has changed during this year’s budget sessions. House File 718 established a new hard cap for the county’s rural levy, so it can only take in funds from the levy used for the last certified budget. In this case, the rural services levy would be set at roughly $3.05. In the past it could go as high as $3.95.

“So the problem is now the county found out we don’t have the wiggle room we thought we did,” Talsma said. “This could potentially cause an issue.”

The county’s road deputies and maintainer salaries come out of the rural services levy, while their benefits come out of general supplemental. But with union contracts solidifying required pay increases year to year, the county may struggle to find that wiggle room supervisors were relying on.

Even so Talsma stressed the county is not terminating any employees or programs, but House File 718 does limit what Jasper County can do.

“It changes the picture for what we can do going forward,” Talsma said, adding he is hoping the Iowa Legislature will make some corrections to House File 718.

Bishop claimed if the City of Baxter miraculously grows by about 15 houses this year, the city cannot even capture that growth. It feels like cities have been “bushwhacked,” he said. If lawmakers have not been receiving phone calls from their county supervisors, Bishop suggested they will soon.

“So we are where we are. We’re never going to be doing any better, even if our citizens say I’d like to have a school resource officer, because if the answer is the only way to a bad guy with a gun is a good guy with a gun, then we can’t even tax to put a guy with a gun in our schools,” Bishop said. “We’re in trouble.”

Christopher Braunschweig

Christopher Braunschweig

Christopher Braunschweig has a strong passion for community journalism and covers city council, school board, politics and general news in Newton, Iowa and Jasper County.