New property tax law is a tough nut to crack

Have you ever read a legislative bill?

I’m a very humble person, but when I sit down to read something, I have a pretty decent ability to comprehend things. At least I did. I’m getting old and comprehension is a perishable skill.

I also haven’t been the greatest when it comes to brain health.

I smoked marijuana in college, not a lot, because I’m naturally paranoid anyway, but it did make for some interesting moments in time – moments I would certainly surrender to take back the poor decision.

I was a kid and curious. Never did anything narcotic because I feared it would stop my heart. With all the evidence in my family, I’m absolutely sure it would have.

But I felt like I need some narcotic trying to decipher the new property tax relief bill signed into law by Iowa Gov. Kim Reynolds on Thursday, prior to the Iowa Legislature adjourning the 2023 session.

It’s right here. If you want a mental scramble, give this a run: https://www.legis.iowa.gov/legislation/BillBook?ga=90&ba=HF718.

The law will cap, at some point, the county's and city’s ability to tax for general services. For the city, it’s at the current $8.10/$1,000 of assessed value. The county is capped at $3.50, but supervisors just passed a budget with that figure set at $5.85. That’s a 67% increase over the general cap.

The law says that cap goes into place with the first fiscal year budget beginning before July 1, 2024. I’m confused as to why it doesn’t just say beginning July 1, 2023 because that’s the only other remaining fiscal year budget prior to July 1, 2024. But… whatever.

There’s also language in the law about combining levies, using assessed valuation growth revenues to further reduce property tax demands, allowing an additional 30% borrowing, or bonding, capacity without going to voters.

The 68-page bill has calculations to figure growth and tax rates that were put together by actuarials at the state house. It now has a plethora of organizations, including the Iowa State Association of Counties, League of Cities, auditors' groups, and many others working to figure out what the actual impacts of the new law are.

It would appear that local governments will have some flexibility to add to the $3.50 cap until July 1, 2025 when the cap becomes a hard cap. That’s also, coincidentally or not, the same year that the new hyper-inflated assessments will kick in.

So it begs the question to me, fully admitting that I don’t yet have a decent grasp on this new law, is there going to any property tax relief at all? If they cap local government’s general fund levy at 33% of where it is now set for Lee County, and then property owners pay 20 to 35% more in taxes off the increased valuations of their homes, property, land, and buildings. Is there any real savings there?

Or does it just look like property tax relief. The assessed valuation growth caps also escape me since the state through calibrations essentially sets the values based on market conditions.  If the county is too low or too high the state will come in and equalize things. Assessors don’t just get to make up numbers for valuations, it’s based on market conditions. If the formula says they go up based on purchase prices, then they go up. The state would see the same thing.

The crazy thing is this law passed with one legislator voting against it…a Democrat.

But at the local level, Lee County Republicans, including Supervisors Garry Seyb and Tom Schulz, are full-throated against the move. They see it as seizing more local control from counties and cities and they’ve voiced those concerns to our area legislators, State Rep. Martin Graber R-Fort Madison and State Sen. Jeff Reichman R-Montrose. Clearly to no avail.

Seyb is also miffed that an amendment that would have given Lee County the ability to shutter one of the courthouses . Seyb said Thursday that he didn’t understand how that amendment, which was specific to Lee County, was dropped off at the end of the session.

We experienced the same type of pass-and-learn mentality with the Back the Blue bill several years ago. Many legislators admitted to not knowing the full impact of the law, which leveled out salaries of county sheriffs throughout the state when compared to other similar positions in the state.

The point here is that we have to have better comprehension of bills before they’re signed. I’m gonna wait to see the analysis of the bill before really jumping in on whether this will actually reduce property taxes at all. Maybe it will.

But with the increased assessments coming, and they are coming in 2025, we are looking at paying more in taxes based on the valuations. If taxing entities can reduce their levy because of the increased valuations then it could be closer to a zero-sum game if expenses can be controlled.

We purchased an ambulance service in 2021 and we had a hospital close its doors. An increase in revenue is needed to pay for those emergency services and governments experience inflationary pressures, too. Costs are going up.

Paying more in property taxes to keep county services solvent makes sense. You do it at the pump, at the grocery store, construction – it’s just the economy we’re in.

Writing a law we can understand makes sense, too. But that’s Beside the Point.

Chuck Vandenberg is editor and co-owner of Pen City Current and can be reached at Charles.v@pencitycurrent.com.