Bills › 88th General Assembly
Relating to local government budgets and property taxation by modifying provisions governing the establishment and approval of county and city budgets, modifying provisions relating to the state appraisal manual, and including applicability provisions. Effective 7-1-19
Sponsored by the Senate Ways and Means Committee
Where it is now
- Done: IntroducedApril 11, 2019
- Skipped: SubcommitteeSkipped
- Done: Senate committeeApril 18, 2019
- Done: Passes the SenateApril 24, 201933–17
- Skipped: House committeeSkipped
- Done: Passes the HouseApril 24, 2019
- Done: To the GovernorMay 6, 2019
- Done: Signed into lawMay 23, 2019
Signed into law What’s a funnel?
What’s in it
Division I of this bill removes the property tax levy rate limitations on the general and rural funds for counties and on the general fund for cities and substitutes a limitation on the maximum amount of property tax dollars that may be certified for expenditure by a county or city for those funds for fiscal years beginning on or after July 1, 2020. The bill specifies various purposes and funds of the city or county that are not subject to the new property tax limitations. For the fiscal year beginning July 1, 2020, and subsequent fiscal years, the maximum amount of property tax dollars which may be certified for levy shall generally be an amount equal to the sum of the prior fiscal year’s actual property tax dollars certified by the county or city multiplied by the annual growth factor, as defined in the bill, plus the amount of net new valuation taxes, as defined in the bill.
Read the full explanation
Under the bill, the annual growth factor is determined by adding the annual growth percentage to 100 percent. Unless a higher annual growth percentage is approved by the applicable county or city, the annual growth percentage for each fiscal year beginning on or after July 1, 2020, is percent. The governing body of the applicable county or city may, by resolution, annually approve an annual growth percentage in excess of but not to exceed percent. Such resolution must be preceded by notice and a hearing where the governing board receives and considers public objections. Additionally, following approval of such a resolution that establishes an annual growth percentage of percent, the governing body may, by a separate resolution approved by a two-thirds majority of the governing body, approve up to one additional percentage point for the annual growth percentage if the governing body complies with the notice and meeting requirements similar to those for the other percentage increase. However, if at any time within days after the meeting, a petition is filed that is signed by a specified number of eligible electors, asking that the question of the additional increase in the annual growth percentage be submitted to the registered voters at a special election, the governing body, subject to election notice requirements, is required to either vote to abandon the resolution or shall direct the county commissioner of elections to call a special election upon the question. The proposition is approved if it receives a favorable majority of the votes cast on the proposition. Division I of the bill also makes conforming amendments to other provisions of the Code. Division I of the bill applies to fiscal years beginning on or after July 1, 2020. Division II of the bill directs the director of revenue to establish a property tax system advisory group to comprehensively analyze the existing property tax laws, rules, programs, and systems of this state. Based on the analysis conducted, the advisory group is required to annually provide input, feedback, and recommendations to the department of revenue and to the general assembly. The bill sets the minimum composition requirements for the advisory group. The department of revenue, in consultation with the department of management, is required to provide staffing assistance to the advisory group. The bill requires the activities of the advisory group, including all recommendations adopted, to be included in an annual report. The first such report shall be submitted to the department of revenue and the general assembly no later than January 1, 2020, with subsequent reports developed and submitted by January each year thereafter until January 1, 2025. Division II of the bill takes effect upon enactment. Division III of the bill modifies the eligibility for and the calculation of the amount of the property tax credit for persons ages and older under Code chapter 425, subchapter II. Under the bill, a person filing a claim for the property tax credit who is at least years of age and who has a household income of less than 250 percent of the federal poverty level is eligible to receive a credit against property taxes due on the claimant’s homestead.23(1)(a) as if the claimant was an eligible claimant for a credit under that provision; and (2) the difference between the actual amount of property taxes due on the homestead during the applicable fiscal year minus the actual amount of property taxes due on the homestead based on a full assessment during the first fiscal year for which the claimant filed for a credit calculated under the bill and if the claimant has filed for the credit for each of the subsequent fiscal years after the first credit claimed. Division III of the bill applies to claims under Code chapter 425, subchapter II, filed on or after January 1, 2020. Division IV relates to the state appraisal manual and the usage of the manual by local assessors. Current law requires the director of revenue to prepare, issue, and revise a state appraisal manual which each county and city assessor shall use in assessing and valuing all classes of property in the state. The bill requires each county and city assessor to use the most recently issued manual in assessing and valuing all classes of property in the state within two years of the publication date of the most recently issued manual. If requested, the department of revenue may grant an extension of up to two years to a county or city assessor upon request and demonstration of substantial hardship.
Changed since by amendments H-1300, S-3206; see Amendments.
Fiscal note
AI summary This bill limits the amount of property tax revenue cities and counties can collect for certain purposes to a 2.0% increase per year unless a two-thirds majority vote is reached. The act also requires assessors to use the most recent state appraisal manual within two years of its release. The fiscal impact of these revenue limits cannot be estimated, though the note mentions that property tax revenue for cities and counties has historically grown faster than 2.0% per year.2
Read the fiscal note
Description
Senate File 634 imposes additional limits on the amount of property tax revenue cities and counties may include in their budget, beginning with FY 2021. The Act also moves the annual certification deadline for city and county budgets from March 15 to March 31.
City Budgeting
The Act limits the amount of property tax dollars that may be levied for the upcoming budget year to no more than 102.0% of the amount levied in the current fiscal year if the budget is approved by a simple majority vote of the city council. If a city council approves an amount of taxes to be levied for the specified purposes that exceeds 102.0% of the amount raised in the current fiscal year, the vote must be by a two-thirds majority of the council. For the purposes of the limit, property tax replacement taxes collected through Iowa Code chapter 437A (gas and electric utilities) and 437B (water utilities) are also included in the calculation. Property taxes levied on agricultural property within a city are not included in the calculation. The limit does not apply to any voter-approved city levy established under Iowa Code section 384.12(19). Specifically, the limit applies to tax revenue raised through the following existing tax authorities of cities:
- City general fund (Iowa Code section 384.1)
- Employee pension and benefits (trust and agency, Iowa Code section 384.6)
- Emergency fund (Iowa Code section 384.8)
- City bridge contract (Iowa Code section 384.12(8))
- Municipal transit (Iowa Code section 384.12(10))
- Civic center lease (Iowa Code section 384.12(11))
- Civic center operations (Iowa Code section 384.12(12))
- Sanitary disposal project (Iowa Code section 384.12(13))
- City insurance (Iowa Code section 384.12(17))
County Budgeting
The Act limits the amount of property tax dollars that may be levied for the upcoming budget year to no more than 102.0% of the amount levied in the current fiscal year if the budget is approved by a simple majority vote of a board of supervisors. The limit applies and is calculated separately for county general purposes and county rural purposes. If a board of supervisors approves an amount of taxes to be levied for the specified purposes that exceeds 102.0% of the amount raised in the current fiscal year, the vote must be by a two-thirds majority of the board. For the purposes of the limit, property tax replacement taxes collected through Iowa Code chapter 437A (gas and electric utilities) and 437B (water utilities) are also included in the calculation. The limit does not apply to any voter-approved county levy established under Iowa Code section 331.425. Specifically, the limit applies to tax revenue raised through the following existing tax authorities of counties:
- Basic general county services (Iowa Code section 331.423(1))
- Supplemental general county services (Iowa Code section 331.424(1))
- Basic rural county services (Iowa Code section 331.423(2))
- Supplemental rural county services (Iowa Code section 331.424(2))
- Additions to basic county general or rural services (Iowa Code section 331.426)
Appraisal Manual
The Act requires county and city assessors to use the most recent state appraisal manual available within two years of it becoming available. Upon request, the Department of Revenue may allow an extension of up to two additional years to comply with this requirement. Background — FY 2019 City Property Tax Rate Components For FY 2019, the average city property tax rate in Iowa was $13.82 per $1,000 of taxed property value. Table 1 provides a statewide breakdown of that average rate. The Act applies to many, but not all, of the levy categories in Table 1. The levies for debt service and capital improvements are not included within the revenue limits established in the Act. The first year of the limitation is FY 2021 and that limit will be based on the revenue raised for the specified purposes in FY 2020.
City Levy
Property Tax
Collections
Statewide
Average City
Tax Rate $ per $1,000 General Levy ($8.10) 775.1$ 7.76$ General Levy Additional 75.7 0.76 Emergency Levies 9.1 0.09 Debt Levies 237.0 2.37 Trust and Agency Levies 281.9 2.82 Capital Improvement Levies 1.5 0.02 Total 1,380.3$ 13.82$ City Property Tax from Ag Property 1.5$ 2.89$ TIF Increment Revenue to Cities * 21.5$ Statewide Taxable City Regular Value 99,845.9$ Statewide Taxable City Ag Value 509.5$ *Does not include Tax Increment Financing (TIF) revenue that finances TIF. Property Value and Tax Collections in Millions of Dollars Table 1 FY 2019 City Levy Breakdown Background — FY 2019 County General Services Property Tax Rate Components For FY 2019, the average county general services property tax rate was $6.21 per $1,000 of taxed property value. Table 2 provides a statewide breakdown of that rate. The Act combines the revenue raised in the first three items in Table 2. The County Mental Health levy and Debt Service levy are not included within the revenue limits established in the Act. The first year of the limitation is FY 2021 and that limit will be based on the revenue raised for the specified purposes in FY 2020.
Background — FY 2019 County Rural Services Property Tax Rate Components For FY 2019, the average Iowa county rural services property tax rate was $3.32 per $1,000 of taxed property value. Table 3 provides a statewide breakdown of that rate. The Act combines the revenue raised in the first two items in Table 3. The levy for Unified Law Enforcement is not included within the revenue limits established in the Act. The first year of the limitation is FY 2021 and that limit will be based on the revenue raised for the specified purposes in FY 2020.
County Levy
Property Tax
Collections
Statewide
Average
County
General Rate
$ per $1,000 General Basic Levy ($3.50) 598.8$ 3.57$ General Supplemental Levy 286.1 1.70 Cemetery Levy 0.3 0.00 County Mental Health Levy 72.8 0.43 Debt Service Levy 86.3 0.51 Total 1,044.3$ 6.21$ TIF Increment Revenue to Counties * 6.7$ Statewide Taxable County Value 167,872.4$ *Does not include Tax Increment Financing (TIF) revenue that finances TIF. Table 2 FY 2019 County General Fund Levy Breakdown Property Value and Tax Collections in Millions of Dollars Background — Property Tax Revenue Limitation A discussion of the 18-year history of city and county property tax is presented in the Fiscal Note for HF 773 (City and County Property Revenue Tax Limitation Act), and that discussion is incorporated here by reference. The portions of the Fiscal Note for HF 773 that discuss city and county ending fund balances do not apply to this Act, as this Act does not limit city and county ending fund balances.
The statistics presented in the Fiscal Note for HF 773 may be summarized as follows:
- Over the past 18 years, the average annual rate of growth for property tax revenue has been:
- Cities = 4.1%
- County general services = 4.2%
- County rural services = 3.7%
- Property tax revenue increases and decreases are due to two factors: changes in the tax base and changes to the tax rate. Over the past 18 years, the average annual rate of growth in tax rates equaled:
- Cities = 0.4%
- County general services = 0.8%
- County rural services = 0.8%
- Changes to the tax base may be summarized in two broad categories, namely the revaluation of existing property and nonrevaluation changes (for the most part this means new construction). The average annual change in nonrevaluation over the past 18 years equals:
- Cities = 2.4%
- County general services = 2.1%
- County rural services = 1.5%
- Revaluation changes to taxable value result from the revaluation of existing property, modified by Iowa’s system of value rollbacks. The average annual change in rollback-modified revaluation over the past 18 years equals:
- Cities = 1.3%
- County general services = 1.3%
- County rural services = 1.5%
- The rate of growth in revaluation was not consistent across the past 18 years.
County Rural Levy
Property Tax
Collections
Statewide
Average
County Rural
Rate $ per $1,000 Rural Basic Levy ($3.95) 220.5$ 3.27$ Rural Supplemental Levy 2.6 0.04 Unified Law Enforcement Levy 0.5 0.01 Total 223.6$ 3.32$ Statewide Taxable County Rural Value 67,464.0$ Table 3 FY 2019 County Rural Fund Levy Breakdown Property Value and Tax Collections in Millions of Dollars
- For the first eight years, revaluation was dominated by low and negative growth in agricultural taxable value, combined with low growth in taxable value of residential property. The low residential taxable value growth was due to the residential rollback’s tie to the taxable value of agricultural property.
- The next 10 years witnessed the return of growth in taxable value of agricultural property, and that allowed residential taxable value to also increase.
- The increase in property tax rates over the past 18 years occurred during the initial eight years of slow growth in taxable value. Over the most recent 10 years, the average city and county general rates have fallen, and the average county rural rate is little changed.
Fiscal Impact
The Act allows city and county property tax revenue for the specified purposes to increase by up to 2.0% per year through a majority vote of the governing body, and the Act allows cities and counties to exceed 2.0% property tax revenue growth by a two-thirds vote of the governing body. The Act does not remove current tax rate limitations, so all decisions of governing bodies must also comply with existing limits on allowed maximum tax rates.
A 2.0% annual limit on the property tax revenue increases, that a simple majority of a city council or county board of supervisors may approve, has the potential to limit property tax growth in upcoming years. Over the past 18 years, city property tax revenue has increased by an average of 4.1% per year. For county general and county rural property taxes, growth has averaged 4.2% and 3.7%, respectively. This historical review is based on statewide totals for cities and counties (the composite result of more than 900 cities and 99 counties). In addition, the Act applies to the future and an historical analysis may provide minimal insight into what will happen in future years.
Sources
- Department of Management property tax files
- Department of Revenue property valuation reports
- Legislative Services Agency analysis
- Fiscal Note for HF 773 (City and County Property Tax Revenue Limitation Act)
- City and County Property Tax Revenue Limitation · September 17, 2019
- City and County Property Tax Limitation · April 23, 2019
- City and County Property Tax Revenue Limitation · April 22, 2019
Iowa Code it changes
Creates§331.423A§384.3B§421.1B
Amends§123.38§218.99§23A.2§28M.5§29C.17§331.263§331.301§331.421§331.422§331.423§331.424A§331.427§331.428§331.429§331.434§331.435§364.25§373.10§384.1§384.110§384.12§384.15§384.16§384.18§384.3§384.6§386.8§386.9§400.8§411.15§411.6§421.17§425.1§425.17§425.23§425.24§425.39§441.45
Lobbying
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88th General Assembly