May 2, 2025

This Week at the Capitol

• Today, May 2, is the 110th day of the 91st General Assembly; the unofficial last day of session and the final day state lawmakers receive per diem. However, the Legislature is likely weeks away from sine die.

• The Governor’s office and Senate agreed to budget targets, totaling $9.417 billion for Fiscal Year 2026.

  • The House announced an overall budget target of $9.453 billion.

• 12 Senate Republicans have publicly declared they will not vote on a state budget bill unless an eminent domain bill is brought to the floor, among other issues.

• The Iowa Senate passed legislation designed to help rural pharmacies by placing stricter regulations on pharmacy benefits managers (PBMs). Critics warn this could result in higher health care costs. 
  

League's Priority Legislation

HSB 328 / SSB 1227 | Property Tax System Overhaul 

• Ways and Means Chairs have signaled a subcommittee will take place on Tuesday, May 6 to discuss amended versions of these bills. The official amendment language has not yet been filed, but here is a breakdown of the expected changes of interest to cities:

  • Residential Rollback Phaseout Extension: 

    • In Year 1, the residential & multi-residential rollbacks will increase to approximately 77.5%. Commercial/industrial will be taxed at 100% valuation in Year 1.

    • Over a 10 to 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 $100,000 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 our member cities are actively working to model forthcoming amendment language to better understand potential impacts and provide informed feedback. However, we do not expect modeling to be as simple as in past iterations of the proposal. 
  

• Specifically, fully understanding the impact of the homestead exemption is proving to be a challenge, as statewide data is not available, meaning the full effects will likely be unknown until implementation.
  

Rollback Elimination: Simplification with Consequences 

• Eliminating the rollback simplifies Iowa’s property tax system. 

• 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 77.5% and provides predictability for both cities and property owners, while still meeting legislative goals within the same time frame. 

Homestead Exemption: Good Intentions, but Challenging

• The proposed 25% homestead exemption (up to a $100k exemption) ensures property owners share in funding 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.
  

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 635 | Property Tax Abatement for Volunteer Emergency Services Providers

• Passed the Senate. 

• Allows volunteer emergency service providers who meet specific criteria, including years of service and income limits, to petition their county board of supervisors for a property tax reduction. The abatement is capped at $500, representing 10% of the property taxes and special assessments due, and a lifetime abatement is possible for long-term volunteers. The bill sets the process for petitioning, objections, and apportionment of the abatement.
  

SF 499 | Emergency Services Compensation and City Council Roles

• To the Governor. 

• Amends current law to allow lawful compensation for volunteer firefighters and emergency medical care providers holding city positions. Clarifies that city council members can serve as chiefs of volunteer fire departments with a majority council vote, requiring abstention from their own appointment votes. Enables cities to create funds for acquiring and maintaining major equipment for emergency services. Specifies that financial settlements for damaged emergency services equipment must be deposited into the relevant fund rather than the general fund.
  

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).