May 6, 2025

Property Tax Bill Subcommittee on May 7

A subcommittee is scheduled for tomorrow, May 7, at 8 a.m. for the senate version of the property tax reform bill, SSB 1227. You can listen in on the subcommittee virtually using the link below.

The League Continues to Analyze This Bill

The League continues to model the impacts of this bill, including amendment language that implements:

• Phasing out the residential rollback by increasing it to 75% valuation in assessment year 2027, and then increasing by 2.5% annually to 100% valuation until assessment year 2036.

• A homestead exemption calculated at 25% of the properties assessed value, up to a $125,000 exemption.
  

• Buying down the foundation levy from $5.40 to $4.48662 (rather than the originally proposed $2.97).

The legislature is in the midst of negotiations on several large policy items including eminent domain, pharmacy benefit managers (PBMs), the Governor’s energy package, and the state budget. With this crowded legislative field and legislators continuing to work outside of their per diem, SSB 1227 has significant procedural hurdles to clear before being adopted. 

The League encourages city officials to listen in on this meeting and be prepared to share the talking points below with their legislators as the viability of this property tax system reform bill becomes clearer in the next several days. We will be highlighting updates in this week’s Legislative Link and sending out further alerts as more information becomes available.

Current Findings from the League

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: Well-Intentioned, 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.

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).