Republican lawmakers at the Iowa Capitol sent a bill to the governor early Thursday they say will make local property taxes more transparent, despite concerns raised by Democrats that this would hurt the state’s public pension fund and trample on local control.
The bill requires cities and counties to inform residents that when property values increase overall, local officials could lower the property tax rate if they planned to spend the same amount of money on public services as the previous year.
If local officials need or want to spend more than the previous year, they would have to hold an additional public hearing on their plan to raise property taxes. To raise taxes by more than 2 percent, the council or board would need a two-thirds vote.
Rep. Dustin Hite, R-New Sharon, said it forces local officials to vote on the property tax rate if they want to bring in more money, instead of relying on rising property values.
“They can’t say, ‘We didn’t raise your property taxes, your assessment went up.’ We’re trying to take that part of it out,” Hite said.
The plan—a last-minute overhaul of earlier legislation to limit property tax growth—was released the day before the Senate and House Republicans approved it in back-to-back votes starting Wednesday evening and going into Thursday morning.
House Democrats said this plan is better than the original bills, but they claimed the proposal will hurt the state’s public pension program known as IPERS.
“This bill is subjecting that funding to this cap,” Rep. Todd Prichard, D-Charles City, said. “And it makes it an option in the political process whether they want to fund that.”
Democrats said it means IPERS funding would be explicitly competing with funding for other local services like road improvements, libraries and parks.
Republicans dismissed the argument that this affects IPERS and said they are standing by their promise to not change the public pension program. An amendment by Democrats to exempt a fund related to IPERS from the property tax “transparency” requirements narrowly failed by a vote of 49 to 51.
Sen. Randy Feenstra, R-Hull, guided the property tax bill through the Senate.
“This bill is all about truth in taxation and giving opportunity to the taxpayers of Iowa to have some ability, some way that they can reach out and have some say in what their property taxes should or should not be,” Feenstra said.
Sen. Joe Bolkcom, D-Iowa City, said the bill infringes on local control and doesn’t do anything to limit property tax growth, which Republicans had announced as a priority for this session.
“This is a red tape machine for city clerks and county supervisors to do their jobs that they’re elected to do,” Bolkcom said. “And they actually have the same constituents back home that we do that share concerns about property taxes.”
Sen. Pam Jochum, D-Dubuque, advocated for an interim study of Iowa’s property tax system, and for increasing the property tax credit for Iowans 65 and older. Republicans rejected both of those amendments, even though they were part of Senate Republicans’ original bill.
Sen. Tony Bisignano, D-Des Moines, was the only Democrat to join Republicans in the 33-17 vote.
Iowa League of Cities lobbyist Robert Palmer said the bill will create “bad optics” for cities, especially for those that are growing quickly. He said if local officials are budgeting responsibly, they will likely be able to get the two-thirds vote needed to raise taxes more than 2 percent.
“I think our concern with that 2 percent is, do you send the message to property tax payers that 2 percent is some number that we constructed based on these very relevant factors? But 2 percent isn’t related to any expenditure increase, it’s not related to any cost of living adjustment, it’s not related to any income threshold,” Palmer said.
The policy would go into effect July 1, 2020, if Republican Gov. Kim Reynolds signs it into law.