March 7, 2025

This Week at the Capitol

• We are officially through the first legislative “funnel week,” which means bills have to pass through one full committee in either the House or Senate to stay eligible for consideration for the rest of the legislative session. So what made it through?

• A bill to “reboot” Iowa’s property tax system was introduced (more below).

League's Priority Legislation

• Public Notice Alignment SSB 1116 & HF 651 (previously HSB 154)
  

  • Both House and Senate bills passed full committees, making them funnel-proof.

• Sidewalk Liability SSB 1118 & HF 192

  • Disappointingly, both bills died in the legislative funnel. The Government Affairs team will elevate this issue with lawmakers for further discussion.

How to Read Legislative Link

• Includes all bills that have been identified by the Government Affairs team as potentially affecting cities. Bills are organized as follows:
  

• Newly Introduced Bills of Interest

  • We expect these bills to have a direct influence on local government, but may not affect all communities the same. Let us know of impacts to your city!
    

• Legislation with Scheduled Subcommittees

  • These bills will be heard in subcommittee next week. Please review for any impacts to your community for us to know as we attend and testify at these meetings. If you would like to testify yourself, we are happy to assist you. You can find the full list of scheduled subcommittees here.
    

New Legislation Of Interest

HSB 313 & SSB 1208 | Local Government Property Tax Reform

• Phases out rollbacks over a 5-year period

• Currently implements a 2% revenue restriction

• Revenue restriction excludes new growth

• Provides a $25k homestead exemption

• Lowers uniform levy to $2.97 while cutting property taxes by $400 million and streamlines the school funding formula

This legislation aims to amend the existing property tax framework for counties, cities, and schools. It introduces new levy rates for general and rural county services, as well as city general fund levies, effective from July 1, 2026. The bill also establishes a gradual reduction in school foundation property tax rates over several years, culminating in a significant decrease by 2030. Additionally, it outlines new definitions and provisions regarding 'new valuation' and the management of unexpended fund balances in school districts. The changes are designed to provide more predictable tax rates while ensuring adequate funding for local services.

Next Steps

The League is asking for your analysis of this legislation's impact on your city. Please provide feedback on both positive and negative items in this bill. We will need to speak to both points with these legislators. The League is also reviewing this proposal to aid local governments in considering the impacts of this legislation for their communities.

We ask that cities do not contact their legislators immediately after reviewing the proposed legislation, particularly regarding sections cities will find challenging to implement. Our goal is to gather this feedback and present proactive solutions to any challenging sections as well as encourage the positive aspects of the proposed bill.

It is essential that these lawmakers hear a calm, composed message that can head off unintended consequences and lift up improvements to Iowa’s property tax system.

HSB 303 | Establishment of the Foundation Property Tax Reduction Fund

• Establishes a foundation property tax reduction fund within the state treasury, which will be funded through various appropriations and transfers from existing funds. Starting from the fiscal year beginning July 1, 2026, the fund's balance will be used to reduce the foundation property tax levy rate for school districts. The bill also amends existing laws to replace references to the previous property tax levy rate with the new provisions related to the foundation property tax rate. This initiative aims to provide financial support to school districts by supplanting funds that would have been collected through property taxes.
  

HSB 304 | Property Tax Calculation Modification

• Adjusts how property taxes are calculated for residential, agricultural, commercial, and industrial properties. It establishes thresholds for tax increases, limiting them to 103% for residential and agricultural properties and 108% for commercial and industrial properties compared to the previous fiscal year. If property taxes exceed these thresholds, reductions will be applied proportionately among the taxing authorities. The changes are intended to provide more predictable tax obligations for property owners.

HSB 310 | Moratorium on Economic Development Funding in Iowa's Largest Counties

• Proposes a moratorium on all economic development programs administered by the economic development authority for the four most populous counties in Iowa. The moratorium is set to begin on July 1, 2025, and will last until June 30, 2028. This legislation aims to halt funding for economic development initiatives in these counties during the specified period. The bill reflects a significant policy shift regarding economic development funding in Iowa's largest urban areas, potentially impacting local economies and development projects.
  

HSB 305 & SSB 1205 | Iowa Economic Development Authority Bill (IEDA): Tax Credit Revisions and New Programs

• Seeks to revise the tax credit framework under the Iowa Economic Development Authority by setting an aggregate tax credit limit of $110 million for business development programs. It introduces new programs, such as the Business Incentives for Growth Program, which provides tax incentives to eligible businesses, and the Sustainable Aviation Fuel Production Tax Credit, aimed at promoting environmentally friendly fuel production. Additionally, the bill eliminates several existing tax credit programs, including the high-quality jobs program and the investments in qualifying businesses tax credit. The changes are designed to streamline economic development efforts and encourage job creation and investment in the state.
  

Legislation With Scheduled Subcommittees

HSB 231 | Disabled Veteran Homestead Tax Credit

• Subcommittee scheduled for March 10 at noon.

HF 362 | Designation of Emergency Medical Services as Essential County Purpose

• Subcommittee scheduled for March 11 at 8:30 a.m.

HSB 271 | Partial Property Tax Exemption for Disaster-Affected Residential Properties

• Subcommittee scheduled for March 12 at noon.

Key Dates for Session

• March 7 (today) | First Legislative Funnel

  • Bills must be approved by a committee in either the House or Senate to remain eligible for consideration. Bills that don't make it through a committee are effectively "dead" for the session, with some exceptions (such as budget and tax bills).

• Week of March 31 | Second Legislative Funnel
  

  • Bills must be approved by a committee in the opposite chamber to continue moving forward.

• May 2 | 110th Day of Session (per diem expenses end)

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).