New Updates - Property Tax Reform Bills
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The Legislature recently released a new version of the property tax reform bills: HSB 328 and SSB 1227. The League and its partners have updated our model and City Impact Reports to help you understand the changes locally. These reports show expected financial impacts for each city in Iowa based on a standard set of assumptions as ready-made PDFs. If you want to adapt the model to your specific conditions, the full ACGFL Model tool is available for download.
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- Review the bill and the current version’s impact to your community.
- We need assistance in identifying two specific TIF impacts across communities:
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We need to identify completed projects that would not have been able to be completed without TIF.
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What, if any, TIF deals would your city be unable to fund without either turning to your debt-service levy or withholding more increment from other entities than anticipated if the new bill goes into effect.
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Specifically, if there is a “project cost gap” whether that be dollars short, amount funded by the debt-service levy, or number of additional years TIF increment is withheld to make a project “whole,” we need these figures.
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Complete the brief survey here.
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Legislative outreach: if you discuss this bill with your local legislators, please share the early observations below as well as highlight the services your community will have to consider limiting to align with new budgets under the bill.
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Early Observations of the New Bills
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There is still a shift in tax burden from Commercial/Industrial and to Residential, which is notable and should be understood by legislators.
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Different Cities will see different results compared to current legislation based on property tax mix, use of TIF, and new growth assumptions.
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The updated legislation creates a Budget Adjustment Factor (BAF), which allows for a modest increase in revenue limits when the Consumer Price Index (CPI) exceeds 4%. However, the increase does not match the full rate of CPI growth. Due to the infrequent nature of this adjustment, cities may struggle to offer competitive wages, potentially leading to a gradual reduction in the level of services they are able to provide.
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If CPI (urban) is less than 4%, the restrictor is 2%
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If CPI is between 4-5.99%, the restrictor is 3%
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If CPI is between 6-7.99%, the restrictor is 4%
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If CPI is over 8%, the restrictor is 5%
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TIF has been complicated to evaluate. Each city should work through the mechanics of their TIF separately. A general consensus is that if the tax rates decrease and the valuations do not increase enough to offset the reduction to the rates (and they won’t), then TIF revenues will not be available to pay TIF obligations. The TIF obligations that are backed by the debt service levy will cause an increase to those taxes. The TIF obligations paid under certain agreements may not be sufficient to live up to the intentions of the original agreement.
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Next Steps |
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We expect further revisions to the legislation in response to feedback from stakeholders. Your city’s data is vital for helping lawmakers understand the real-world impact of individual communities. We encourage you to determine how the proposed changes would affect your operations and your ability to deliver essential services to residents. We are committed to advocating for smart, workable policy, but we need your help to do it. Again, please take the time to fill out this brief survey! |
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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). |
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