DES MOINES – Despite heavy opposition from municipal governments, the Iowa Legislature debated through the night before approving a proposal to require local governments to take extra steps before they increase property tax revenues -- whether because of a higher tax rate or rising property values.
Under the proposal passed Wednesday by the Senate and then at 2:52 a.m. Thursday by the House:
City councils and county boards would be required to document and hold a public hearing for residents when they plan to increase property tax revenues through higher tax rates or reevaluated property value assessments.
If a city’s or county’s tax revenues will be increased more than 2 percent, the vote would require two-thirds of the board's members instead of a simple majority.
A measure that would put a 3 percent hard cap on increases, and allow for a voter referendum to reverse the increase was removed from the bill.
Supporters say the proposal is needed to require transparency in local property taxes, so taxpayers can understand why their bill is increasing. They say it would force municipalities to show when property 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.
However, opponents said it does nothing to lower property taxes or increase transparency. It will, they warned, damage IPERS, the state’s public employee retirement system, and the police and fire retirement program.
“Nothing could be farther from the truth,” said Dustin Hite, R-New Sharon, who was the mayor of his 1,300-person hometown for seven years. “This bill is not about IPERS. It’s a property tax bill.”
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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 will count toward triggering the requirement for super-majority approval of revenue hikes higher than 2 percent. That would put the employer’s share of retirement program funding in competition with other local government expenses, they said, and government officials may choose to lay off staff members to free up money to make IPERS and police and fire retirement costs.
Supporters of the proposal said some local governments have enjoyed property tax revenue boosts because of higher property values while passing the blame for increases to property owners’ tax bills.
They believe it will make local governments think twice about collecting more property 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 of the proposal said it 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.
The Senate approved Senate File 634 passed the Iowa Senate 33-17 with Sen. Tony Bisignano, D-Des Moines, joining Republicans in support.
In the House, SF 634 was approved after more than four hours of debate 53-46.
It now goes to the governor.