May 10, 2025

This Week at the Capitol

• House and Senate Republicans found agreement and released the target numbers for their budget agreement for the Fiscal Year 2026 budget; a total of $9.425B.

• Legislation addressing eminent domain usage deferred by Senate, signaling at least another week of work at the Statehouse.
  

• House Democrats selected Brian Meyer as new minority leader, following Jennifer Konfrst’s announcement that she will run for Congress.

League's Priority Legislation

HSB 328 / SF 651 | Property Tax System Overhaul 

• The Senate has passed an amended version of SSB 1227, refiled as SF 651, that is now eligible for a vote on the Senate floor. House and Senate members continue conversations about the bill Updated bill highlights include:
  

  • Residential Rollback Phaseout Extension 

    • In Year 1, residential and multi-residential rollbacks will increase to 75%. Commercial and industrial will be taxed at 100% valuation in Year 1.

    • Over an 11-year period, the residential rollbacks will increase by approximately 2.5% annually until they reach 100%.

  • Homestead Exemption Changes

    • 25% of a homestead would be exempted, up to a $125,000 exemption. 

  • Budget Limitations Remaining in the Bill 

    • 2% revenue restriction.

    • CPI-based budget adjustment factors

    • 0.5% budget guarantee

Regarding the Property Tax Bill

Amendment Modeling in Progress

• The League and its member cities are actively working to model forthcoming amendment language to better understand potential impacts and provide informed feedback. However, we expect modeling to be more complex than past iterations of the proposal, and have communicated to legislators we will not be able to deliver statewide modeling on the current iteration of the bill.

• Understanding the impact of the homestead exemption has been particularly challenging, as statewide data is not available. As a result, the full effects will likely be unknown until implementation.

Rollback Elimination: Simplification with Consequences 

• Eliminating the rollback simplifies Iowa’s property tax system, which the League supports. 

• However, increasing the taxable valuation of residential properties to 100% while capping city revenue growth at 2% will likely hinder cities’ ability to meet financial obligations, particularly those tied to tax increment financing (TIF) agreements for economic development. 

Gradual Phase-Out of Rollback Preferred

• A more stable approach would be to phase out the rollback gradually, raising it incrementally over 10 to 11 years. 

• This avoids the disruption of a sudden jump to 75% and provides predictability for both cities and property owners, while still meeting legislative goals within the same time frame. 
  

Homestead Exemption: Well-Intentioned, but Challenging

• The proposed 25% homestead exemption (up to a $125,000) ensures property owners contribute to the services they receive. 
  

• However, the implementation would be complex, and accurately identifying homesteads is critical to assessing the true impact on city budgets. 

Revenue Growth Restriction is Too Low

• Even though there are levies outside of and not subject to the revenue restriction, such as debt service, trust and agency, and insurance, the current 2% restriction is misaligned with the actual inflationary pressures cities face, including increased costs for public safety, wages, and infrastructure materials. 

• This restrictor risks eroding cities’ ability to maintain service levels over time. 

CPI-Based Budget Adjustment Factor (BAF)

• The inclusion of a CPI-based BAF is a step in the right direction and reflects League advocacy. 

• However, the BAF must more closely mirror actual inflation to be effective, especially in high-growth or high-cost environments.

Legislation that Advanced

SF 651 | Property Tax Reform

• Eligible for floor debate in the Senate.

• Enacts significant changes to Iowa's property tax system, impacting counties, cities, and school districts. It introduces levy rate limitations based on budget adjustment factors and new valuation calculations for counties and cities.
  

• For schools, the bill increases the foundation base per pupil while reducing the foundation property tax levy rate, and it establishes new restrictions on school district management levy fund balances.
  

• The legislation also reclassifies certain residential properties, adjusts assessment percentages, replaces the homestead credit with an exemption, and modifies the military service property tax exemption.
  

• Finally, it places limitations on property tax levies for hospitals and emergency medical services and establishes a legislative study committee to review property taxation rates.
  

SF 652 | Tax Increment Financing (TIF) Reform

• Eligible for floor debate in the Senate.

• This bill updates Iowa's economic development and housing laws by including workforce housing as part of economic development efforts and setting new requirements for urban renewal projects. It limits how much property value can be included in urban renewal areas over time and ensures that certain taxes, like those for school funding and emergency services, are not diverted to urban renewal funds.
  

• Additionally, it allows municipalities to provide less assistance for low and moderate income housing in specific circumstances, aiming to encourage housing development in areas that have been stable for a long time.
  

SF 656 | Solid Waste Collection Opt-Out

• Eligible for floor debate in the Senate.

• This bill allows homeowners who qualify for a homestead credit to temporarily opt out of county or city solid waste collection services for up to five months. During this opt-out period, any fees for these services will be suspended. Homeowners must submit an application at least eight weeks in advance, and they can only opt out once per year.
  

SF 655 | Land Redevelopment Trusts

• Eligible for floor debate in the Senate.

• This bill allows cities and counties in Iowa to create "land redevelopment trusts" to help revitalize abandoned, dilapidated, or blighted properties in their communities. These trusts can acquire properties, manage them, and return them to productive use, while also receiving some tax benefits. The bill outlines the powers, governance, and procedures for these trusts to operate effectively.

House Debate Calendar | May 12

• HF 702 | Sale and Regulation of Consumer Fireworks

  • This bill limits a local government’s ability to prohibit fireworks usage on July 3 and 4 and December 31.

• HF 1017 | Actions Taken By Certain International Organizations

  • Declares that rules, regulations, fees, taxes, policies, or mandates of the United Nations, its agencies, or the World Economic Forum are not binding on Iowa and prevents Iowa state entities from enforcing or implementing such actions.

• HF 1037 | Modifications to Economic Development Provisions for Housing and Residential Development
  

  • This bill updates Iowa's economic development laws to include workforce housing as a key focus. It allows cities of any size to reduce the requirement for low and moderate income housing assistance in certain housing projects to 20% of the project's cost on land that has been within city limits for 20 years, and extends the time frame for tax revenue collection from these projects to 20 years.

You can view all editions of Legislative Link at iowaleague.org/resource/legislative-link.

Like our membership, the Iowa League of Cities is a non-partisan, service-oriented organization that does not participate in elections, make campaign contributions, or have a political action committee (PAC).