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Property tax bill removing rollback system passes House, Senate subcommittees • Iowa Capital Dispatch [1]
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Date: 2025-03-26
Promising that movement will continue to be slow, panels in both the Iowa House and Senate moved forward Wednesday with the major property tax proposal set forward by legislative Republicans.
Subcommittees for House Study Bill 313 and Senate Study Bill 1208 were held Wednesday, the first public hearings for the property tax legislation that Rep. Bobby Kauffman, R-Wilton and Sen. Dan Dawson, R-Council Bluffs introduced in early March.
The legislation would change Iowa’s local property tax system from a “rollback” to a “revenue-restricted” system, according to the legislators. Currently, residential property taxes are calculated by assessing the market value of a property, a portion of which is taxable. The Iowa Department of Revenue sets the rate of how much of the property’s value can be taxed each year based on the growth of statewide taxable properties — but the rollback system limits how much the aggregate value of residential property can grow each year to 3%.
The new system would remove this rollback restriction, allowing taxable property value to grow by a larger margin in the state. However, there would be new limits in place that would limit property tax growth, Dawson and Kauffman said, including measures that cap the increase of most property tax levy rates to 2% each year — excluding new construction — and that limits the amount of new tax revenues that local governments can collect. The new system would be phased in over the course of five years.
Several speakers at the subcommittee meetings expressed concerns about the 2% growth cap. Amy Campbell, representing Polk County, suggested that instead of a flat rate, the growth cap should be attached to the consumer price index (CPI) or the Midwest employee index “since human resources and employee costs are a large part of the budgets and county government.”
Jolly Omar with the city of Pleasant Hill said the 2% cap could have a negative impact on cities’ ability to keep up with inflation as it relates to services and staffing that residents.
“The 2% hard cap is a little too restrictive when you take into account CPI, when you take into account public safety costs — again, those are expanses that for Pleasant Hill, about 50% of our property tax dollars go towards the support of public safety,” Omar said. “So we just want to help bring some context with that.”
Scott Sanders, city manager of Des Moines, expressed similar concerns, saying that public safety makes up 60% to 70% of a city’s general fund spending. In Des Moines, he said, public safety costs grow 4% each year.
“The 2% will not reconcile with that,” Sanders said. “The 2% cap, coupled with the historic 4% growth in public safety, would force Des Moines to make about $2 million of additional cuts each year continuously.”
Sanders and other speakers also brought up concerns about the changes to revenues collected through tax increment financing (TIF) — a mechanism where increased property tax revenues in a designated TIF district from development in that area go toward public improvements in that district. He said he feared the change would stop cities from pursuing these projects.
“A new development within a TIF district will not generate the future additional general operating lending dollars that are needed,” Sanders said. “Obviously, those projects are breeding additional needs for services. There is no motivation at that point for communities to incentivize the projects, because they’re not getting any additional tax dollars for operations at any point.”
Dawson said he did not agree with concerns brought up about TIF districts, saying that if “TIF is your first concern on property tax reform, you’re not concerned about property tax reform.” He said while these projects may be financially beneficial for developers and cities, they do not benefit most taxpayers.
“The people involved in TIF are probably going to make some money off it, and everyone else has to have a bad system and a high TIF rate to support it,” Dawson said. “And by the way, from a state budget standpoint, we’re here to make you whole at the tune of $95 million a year right now, the state of Iowa is supplementing on TIF, which we are robbing from school districts.”
The bill also shifts $426 million funding for K-12 schools currently paid for using property taxes to the state. Dawson told reporters this would not result in an increased cost to the state, as these funds would be reallocated from existing tax credits that would be eliminated by the legislation.
Margaret Buckton, representing the Urban Education Network and Rural School Advocates of Iowa, warned that while the state taking over the levies funding public schools under the current formula will result in a lower cost for property taxes, it could make it more difficult for schools to get needed funding from the state.
“What that does is makes it a lot harder for schools to convince you and the public that they have enough money, because you see your line item going up in investment (from the state) and don’t necessarily see what the property taxpayer would have paid,” Buckton said. “We are struggling with adequate funding, and this doesn’t make it easier to do that, but understand that gives property tax relief.”
Rep. Larry McBurney, D-Urbandale, said he was glad to see the process of this bill going “a little bit slower” than previous discussions on property tax changes and that he still had issues with the legislation. However, he said the bill could be a good vehicle for needed changes to Iowa’s property tax law.
“I will give credit where credit is due, and that is, this is a very bold change to our property tax code,” McBurney said. “I think that there are a lot of things in here that are workable. There are concerns that I have, speaking with my city leaders and speaking with my school districts that I would like to see addressed. … (I’m) not ready to call it a property tax cut yet, because I don’t think we’ve seen a true cut since we started doing this in 2013, but I am hopeful.”
Kaufmann said he appreciated the feedback from local officials and advocate groups on the issue, pointing to multiple areas brought up by lobbyists that were areas “to work on” like TIF components and education funding consistency. He said these discussions were why he “committed to moving slowly on this.”
“That’s why there was two weeks in between subcommittee and the bill being released,” Kaufmann said. “There’ll be two more weeks in between subcommittee and committee, and then after that, I’m sure we’ll have a couple more weeks after that, where we will then continue to solicit feedback and hopefully put forth an amendment that most of us can agree on.”
House Speaker Pat Grassley said Republicans are “not trying to rush anything forward” and were still assessing the full impact of the proposed changes to Iowa’s property tax system.
“When you’re trying to tackle something of this magnitude, it isn’t something you should rush forward,” Grassley told reporters earlier in March. “But we’ve been having some good meetings with groups coming in … and I think we need to be very deliberate, because this is a significant change to the current system.”
Though legislators said they plan to take their time with the measure, Dawson said he believed moving forward with the measure was necessary to lower costs for Iowa taxpayers.
“I’ve got to say that, either we do something in this (form) or we do nothing at all and stay in the current system, which isn’t fair to the taxpayers,” Dawson said. “And I’m not sure some other entities out there can survive underneath that.”
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