DES MOINES – After debates that went full into early Thursday morning, a bill that requires Iowa’s cities and counties to secure a supermajority before increasing property tax revenues is in front of the governor.
A protracted debate on Senate File 634 ended with the bill moving to Gov. Kim Reynolds’ desk after it was approved by the full House at about 3 a.m. Thursday morning.
The bill would require cities and counties to take extra steps before approving budgets that include more than a 2% increase in property tax revenues from the current year.
If Reynolds signs the bill, it would become effective on July 1, 2020.
The bill is a watered down version of bills that were still being debated as late as Wednesday night. Several stipulations, including a 3% hard cap on property tax revenues and a provision for a voter referendum to reverse the approved increase and a 25% cap on end fund balances, were all pulled from the final approved version through amendments.
But local officials and Democratic legislators are still concerned.
Currently, municipalities and counties just vote on proposed budgets submitted from budget directors, city managers or administrators after public hearings are held on the budgets.
Under the new bill, the elected boards and councils of each city and county would be required to vote on any proposed increases in property tax revenues over 102% of the current budget year.
That vote would require a two-thirds majority. For the Lee County Board of Supervisors, that would mean three of the five supervisors would need to vote in favor of the increase.
Lee County Supervisor Gary Folluo said getting three of five supervisors to agree on a budget isn’t abnormal, but he said election years could make things difficult.
For the Fort Madison City Council, which has seven councilman, five of the seven councilman would need to vote in favor of the increase.
“I don’t think it would be a problem,” he said. “But you’ve got election years in there and some people are different in election years.”
He said the county is already facing shortfalls every year and this is just another potential pitfall for revenues to cover services to county residents.
“We’re faced every year with cuts in the area of $400,000 to $1 million that we have to scale back for. If there are other shortfalls or mandates that are unfunded, that’s problematic for the county and municipalities,” he said.
“Then if you add in unfunded rollbacks, you’re talking about a whole different story. We’re just being asked to do more with less every single legislative year.”
The rollback is the 2013 state property tax rollback that was implemented under the commitment that the state would “backfill” revenues to local governments for revenues lost as part of the rollback. State officials have been talking for the past several years about scaling back or eliminating those backfill payments.
Fort Madison City Manager David Varley wrote in an email to the Pen City Current on Wednesday, the move is essentially the state telling local governments how to go about business.
“This is a local control issue. The state should not put an arbitrary growth limit on cities. They should take care of their own house and let us take care of ours,” Varley wrote.
He said personnel costs, which represent about 70% of the city’s budget routinely grow by more than 2%.
“Our personnel costs for wages, health insurance, etc. go up more than 2% every year so that means we would have to make cuts somewhere else or everywhere,” Varley wrote.
“Over the long run you could end up with only enough money to pay for the employees but not enough for supplies for them to do anything or the reverse could happen. It just doesn’t make sense at all.”
State Rep. Jeff Kurtz (D-Fort Madison) said the bill hurts Iowa communities and is an indirect attack on public retirement funds.
“The thing is they group IPERS and 411 (police and fire retirement funds) into one general fund so it competes with things like public safety and puts IPERS and 411 in danger,” Kurtz said.
“The bill hurts communities because of these soft caps. They talked about it being a bill for property taxes, but it doesn’t mean you’re going to have lower property taxes. Other than us meddling in local business, I don’t know what they thought was supposed to happen.”
Varley said the remedy for citizens who don’t like what a city is doing is solved at the ballot box.
“If the citizens don’t like what a city is doing financially, then they could vote them out of office. You can’t run a city well if you have such little control over your own destiny. Iowa has a state government that seems to enjoy restricting cities instead of taking care of state business,” he said.
Fort Madison Mayor Brad Randolph said from his understanding of the changes, the bill doesn’t have that much of an impact. He said he didn’t think Fort Madison revenues had increased more than 2% since a Quality of Life bond was passed several years ago, but said during reassessments, like the county just experienced, you could find yourself in that situation.
He said the bill is being touted to increase transparency, but he said Fort Madison holds public hearings on budgets every year and residents have access to any information they need to educate themselves on their property tax bill.
“I think we do a decent job of being transparent and I would err on the side of being overly transparent,” Randolph said.
“I don’t want anyone to think we’re hiding something. I think we do a pretty decent job of justifying what we’re spending and why. People don’t like being taxed in general, including myself. But to make government function and provide services there has to be some taxes assessed.”