The bill passed by the Senate making changes to Iowa’s property tax system is not the final “compromise” between Senate and House Republicans on the issue — but House lawmakers took comments from the public on the proposal at a Monday subcommittee, and plan to hear more at a Tuesday public hearing.
A House subcommittee heard comments from the public on Senate File 2472, Senate Republicans’ property tax legislation that proposes several major changes to Iowa’s property tax system. The bill includes changes to the state’s “rollback” system for calculating property taxes, would repeal certain provisions from a 2023 property tax law, and increase the state’s homestead tax credit to 60% for Iowans age 60, adding an additional 10% in each following decade.
The bill also includes some new restrictions — and alternate revenue sources — for local governments. It sets a “soft” 2% cap on revenue growth, while also adding an inflation index to the state’s gas tax and allowing cities and counties to seek voter approval to raise the local option sales tax. Additionally, it makes adjustments to how residential, commercial and multi-residential properties are assessed.
When the measure was passed by the Senate with bipartisan support earlier in April, Sen. Dan Dawson, R-Council Bluffs, said the bill was “a departure of decades worth of property tax legislative history of having high property tax rates and carving out valuation based upon which donor class in any general assembly is trying to appease.”
While the panel of five House lawmakers heard from lobbyists, business owners and members of the public on the measure, the language being discussed is unlikely to be what lawmakers send to Gov. Kim Reynolds. On Thursday, House Speaker Pat Grassley unveiled House Republicans’ proposal for a “compromise” on property tax legislation through a proposed amendment to House File 2745.
The latest House language would establish a 2% “hard cap” on local government’s revenue growth — meaning there would not be any adjustments for inflation. It would speed up equity transfers from the Secure an Advanced Vision for Education (SAVE) funding stream that currently goes to school infrastructure, increasing the amount that goes toward property tax relief. It also proposes converting the homestead tax credit to an exemption, while keeping other exemptions for seniors, veterans and people with disabilities in place. The funding currently going to the homestead tax credit would be used to lower the state’s $5.40 uniform levy set for school foundation property taxes.
Rep. Carter Nordman, who chairs the House Ways and Means Committee, told reporters that while the subcommittee and scheduled public hearing Tuesday are discussing the Senate bill, he said if people want to attend the public hearing to talk about portions of the House proposal “and discuss some of those things that are already out there, then that’s fine.” He also emphasized negotiations were still ongoing as lawmakers aim to reach a consensus on how to tackle property taxes.
“Regardless of what vehicle that is chosen to continue negotiations here, whether it be this bill or the House File, amendments will be filed to those bills,” Nordman said.
Business groups, landlords criticize Senate bill
Advocates representing local government groups have largely said they prefer the Senate’s approach to changing the state’s property tax system — specifically highlighting the measures related to inflation adjustments and alternate funding streams. But speakers representing certain business groups and landlords spoke in opposition to the bill Monday, saying the measure would increase Iowans’ rent and their prices at the pump.
Anthony Lyne said he was representing the Iowa Association of Realtors, but said he was also speaking on behalf of “myself and also other multi-family and investment property owners across the state of Iowa.” Lyne said under the Senate’s proposed assessment changes to multi-residential properties, he would lose roughly $25,000 in equity on a four-unit apartment complex he owns. He said this equity has been what allows him and his family to buy and invest in other rental properties, and what allowed him to get into the real estate business 14 years ago.
“Unlike a lot of people, I didn’t come from a wealthy family, so this is something that we had to build ourselves,” Lyne said. He said he did not support having “big government” take away the income he built for his family through owning and managing properties, which he said caused him many sleepless nights — “literally sleeping on floors because I’ve been so tired ripping out trim, drywall, et cetera.”
Logan Murray with the Greater Iowa Apartment Association said the changes to multi-residential property taxes would result in rent increases for Iowans, saying a person renting at $1,000 per month would see their monthly rent increase to $1,150.
“This effect would also go beyond just rents,” Murray said. “When operating costs increase at this scale, owners must reduce spending in other areas, building maintenance, capital improvements and unit renovations are typically the first things that are deferred.”
In Senate subcommittee meetings on property tax legislation, Dawson has stated changes to multi-residential property taxes are needed to reverse parts of a 2013 law that lowered taxes for these properties, which he called “property tax cronyism.” Dawson shared data at these meetings from the U.S. Census Bureau that showed while taxes decreased for multi-residential properties after the 2013 law change, Iowa’s median rent increased at roughly the same rate as other nearby states.
Rep. Aime Wichtendahl, D-Hiawatha, said she believes none of the Republican proposals on property taxes tackle the issue of valuations,” which she said “is the root cause of property tax increases across the board.”
“Ultimately, I’m disturbed by the amount of regressive taxation buried within this bill,” Wichtendahl said. “I can’t, in good conscience ask my neighbors to to pay more in rent because of the changes in the rollback. … And certainly, I cannot ask my neighbors and our working-class citizens to pay more at the pump at the time when gas prices are continuing to increase without control. So I would say — my ask today of the committee would be to table this bill, and let’s really take a look at the things that will reduce property taxes and not shift the burden to working-class Iowans.”
Discussions on the measure will continue at the Tuesday public hearing, scheduled for 9 a.m. — in addition to the meetings between the governor, Senate and House leadership on crafting a final property tax bill. People who wish to speak at the public hearing can sign up on the Legislature’s website.
“We continue to negotiate with the governor and the Senate, we continue to work through all of these questions and concerns,” Nordman said.
