BY CHUCK VANDENBERG
FORT MADISON – A proposed bill that would phase out payments to counties for commercial and industrial tax replacements is getting mixed reactions from area agency budget officials.
Senate File 2081 could potentially cut $176,000 in property tax revenues from the budgets of the Lee County Board of Supervisors, Fort Madison Community School District, and the city of Fort Madison combined in the next budget year beginning July 1.
Other county public schools and governmental agencies would also lose property tax dollars in the cut.
The bill calls for a 1/3 cut in repayments based on last year’s projected “backfill” in the fiscal year beginning July 1, 2018. The issue is that most of the budgets will likely be certified prior to the new backfill rates going into effect, if the bill is signed by Gov. Kim Reynolds. Reynolds had indicated in her Condition of the State address that she wanted to fulfill the state’s obligations to the program.
In 2013, the state rolled back commercial and industrial property tax rates to encourage growth in the state, and then offered to backfill county coffers with payments throughout the year to offset the reduced property tax revenue.
Lee County Budget Director Cindy Renstrom said if the bill is signed the county will lose about $90,000. The county was projected to receive $287,597 in 2018. Under the new bill, the county is projected to receive $197,606 in the fiscal year starting July 1, a budget that was approved by supervisors last week. In fiscal year 2020, that number would be further reduced to $98,803 and that would be the last year for the payments.
“That will just eat into the balance we’re carrying next year,” Renstrom said. “We would eventually have to look at cutting expenses out of people’s budgets to cover it.”
Lee County Auditor Denise Fraise said the county has only received about $242,000 of the $287,597 projected.
Fort Madison Peggy Steffensmeier said City Manager David Varley sniffed out that this may be coming so they only entered 75% of last year’s backfill payments into the budget. With the bill calling for only 2/3 of the previous year’s payments for the upcoming fiscal year, the city is looking at about an additional $10,000 in lost payments, if they got all the payments they were scheduled to get.
“This budget we didn’t budget hardly any because David said there was no guarantee on it,” Steffensmeier said. “We talked about it and heard (the state’s) budget scenario and thought maybe we shouldn’t do this.”
She said the city received about $96,300 in the 2016-17 fiscal year and the city only budgeted $73,850 this year. At 66% the city would anticipate getting $63,558, which is $32,742 less than last year. She said the most the city ever received was $109,700 in the 2015-16 fiscal year. The city’s general fund budget is close to $6.3 million.
Sandy Elmore, the Fort Madison School District business manager said the district would lose up to about $54,000 at a 66% reimbursement, but she said in some cases the district doesn’t get all the projected payments from the state.
“What you have to remember is that the state will allow us to levy for that money, so it could go back on the property taxpayers.”
The Iowa State Association of Counties issued a statement last week opposing the measure.
“SF 2081 would phase out those reimbursements over three years, leaving counties with a $29 million loss of revenue per year. Because fiscal year 2019 budgets are currently being finalized, counties may have to make drastic cuts to services if the state reimbursement is reduced,” according to a prepared statement from the group.
“It’s unfortunate the legislature is considering starting the phase-out of the backfill after most counties and cities have published their final budgets for FY 2019. County officials I’ve talked to don’t understand why the legislature would knowingly take an action that could put either the county budget or services in a precarious position. Our members would urge the legislature to follow the leadership of Governor Reynolds, fund the backfill for FY 2019, and then work with local officials to put a plan in place that meets both the state’s budgetary constraints in future years and local governments’ obligations to meet the service needs of their citizens,” stated Bill Peterson, Executive Director of the Iowa State Association of Counties.