Bills › 91st General Assembly
Relating to economic development and housing by modifying provisions concerning economic development programs and modifying provisions concerning Iowa’s urban renewal law, and including applicability provisions
Topics:Business & economyHousing & propertyTaxesHousing supply & costsProperty taxesTax credits & incentives
Where it is now
- Done: IntroducedFebruary 26, 2025
- Done: SubcommitteeMarch 19, 2025
- Done: Senate committeeApril 28, 2025
- Skipped: Passes the SenateContinued as SF 652
- Next: House committee
- Next: Passes the House
- Next: To the Governor
- Next: Signed into law
Became SF 652 → Its progress continues under the new number. Go to SF 652 What’s a funnel?
What’s in it
AI summary This bill expands the definition of economic development to include the creation of workforce housing. It changes the rules for how cities use public money and tax incentives to support housing projects and residential development. Additionally, it modifies how certain property taxes are collected and distributed to school districts and municipalities.1
Read the official explanation
This bill relates to economic development and housing by modifying provisions concerning economic development programs and modifying provisions concerning Iowa’s urban renewal law. The bill amends the definition of “economic development” for purposes of Code chapter to also include the provision of workforce housing. _____ development of workforce housing to the list of factors required to be considered by the public body before public funds are used for grants, loans, tax incentives, or other financial assistance to private persons or on behalf of private persons for economic development under Code chapter 15. Under current law, any urban renewal area established upon the determination that the area is an economic development area, a division of revenue (tax increment financing) shall not be allowed for the purpose of providing or aiding in the provision of public improvements related to housing and residential development, unless the municipality assures that the project will include assistance for low and moderate income family housing, subject to certain municipality population thresholds. Under the bill, for municipalities of any population size, and notwithstanding any minimum low and moderate income family housing requirement, if the public improvement project is approved on or after July 1, 2025, and is related to housing and residential development in an economic development area containing property that has been located entirely within the corporate limits of a city for years or more, the amount to be provided for low and moderate income family housing for such projects shall not be required to be greater than an amount equal to percent of the original project cost. The bill also extends the division of the revenue for such projects to tax collections for fiscal years instead of the current law maximum of years.353 (workforce housing). The bill also modifies the defined term “low or moderate income families” in Code chapter 403 to “low and moderate income families” to align with the terminology usage within the Code chapter.19 (tax increment financing). The bill prohibits the foundation property tax from being divided and paid into the municipality’s special fund for the payment of urban renewal indebtedness but instead requires the tax to be levied, collected, and paid to the school district in the same manner as all other property taxes. The exclusion in the bill applies to property taxes due and payable in fiscal years beginning on or after July 1, 2027, that are levied against either of the following: (1) property located in an urban renewal area for which the ordinance providing for a division of revenue takes effect on or after January 1, 2026; or (2) property annexed or otherwise included in an urban renewal area after the effective date of the ordinance providing for a division of revenue if the annexation or inclusion occurs on or after January 1, 2026.22(5) (10 years), after years following the effective date of the bill or after years from the calendar year following the calendar year in which the municipality first certifies to the county auditor the amount of any loans, advances, indebtedness, or bonds which qualify for payment from the division of revenue, whichever is later, the amount of taxes that is authorized to be paid into the municipality’s urban renewal special fund shall not exceed percent of the amount otherwise authorized, but for the bill and such excess amounts shall be allocated and paid to the respective taxing districts in the same manner as other taxes.
Changed since by amendments S-3174, S-3173; see Amendments.
Senate subcommittee
Named March 19, 2025. On April 2, 2025 it recommended passage.
Three legislators hear a bill first and recommend what the committee should do; it’s the best time to weigh in. How to take part
Fiscal note
AI summary This bill updates urban renewal laws by expanding the definition of economic development to include workforce housing, changing how certain levies are collected through Tax Increment Financing (TIF), and placing limits on TIF revenue and the amount of property value that can be located within urban renewal areas. The fiscal impacts for most divisions of the bill are unknown, including the effects of excluding school foundation and emergency medical services levies from TIF and the long-term impact of revenue limitations. The fiscal impact of the statewide cap on property values within urban renewal areas cannot be estimated.3
Read the fiscal note
Summary
House File 1037 as amended by Senate amendment H-1346 is composed of six divisions that are related to Iowa’s urban renewal law that do the following:
- Division I expands the definition of “economic development” to include workforce housing and updates related definitions.
- Division II excludes the school foundation levy from Tax Increment Financing (TIF) collections for new or expanded urban renewal areas (URAs).
- Division III excludes emergency medical services levies under Iowa Code chapter 422D from being collected through TIF.
- Division IV places limits on the revenue that may be diverted into TIF funds for certain URAs without expiration dates.
- Division V allows certain housing-related urban renewal projects to provide reduced low-and moderate-income (LMI) housing assistance and extends the TIF collection period to 20 years.
- Division VI imposes a phased cap on the share of a city’s assessed valuation that can be located within URAs.
Note on Property Taxes
All property tax rates used in this document are reflected as rates that are applied per $1,000 of taxed property value. Taxed property value is the value determined through the assessment process, adjusted (reduced) for any rollback for the property class, and after property tax exemptions have been applied.
Division I — Housing
Description and Background
Division I of the Bill as amended expands the definition of “economic development” under Iowa Code section 15A.1 to include provisions for workforce housing for the use of public funds to aid economic development. The Division also requires the consideration of development policies that advance the development of workforce housing when considering when public funds are used for economic development activities.
Additionally, the Division changes the definition of “low or moderate income families” to “low and moderate income families” in Iowa Code section 403.17 to clarify that the definition includes households earning up to 80.0% of the higher of county or statewide nonmetropolitan median income. The Bill as amended also expands “low and moderate income family housing” to include housing that meets the requirements of the Iowa Economic Development Authority described in Iowa Code section 15.353, which expands projects to include:
- Four or more single-family, multiple-unit buildings, with each containing at least three or more units, or two or more units located above a multi-use space.
- The rehabilitation, repair, or redevelopment of a brownfield or grayfield site that creates new units, dilapidated units, or units located on the upper story of a multi-use building. New construction on green sites or construction in a county that has been declared a major disaster.
- The unit does not exceed the cost set by the Board each year.
- Units meet the U.S. Department of Housing and Urban Development’s (HUD’s) quality standards.
The Legislative Services Agency (LSA), in consultation with the Iowa Department of Management, publishes an Annual Urban Renewal Report (TIF) on February 15 of each year. The 2024 Report is available on the website. The Report indicates that the majority (52.2%) of TIF taxing districts in Iowa were created based on the exclusive finding of economic development need, and 64 local governments reported a total of 361 development agreements in place.
Fiscal Impact
The fiscal impacts of Division I of the Bill as amended are unknown. This Division would not impact any TIF agreements currently in use, and the LSA is unable to estimate how the expanded definitions would impact projects in future years.
Division II — Division of Revenue — School Foundation Levy
Description
Division II of the Bill as amended excludes the school district foundation levy under Iowa Code section 257.3 from TIF collection under Iowa Code section 403.19. The excluded levy must instead be collected and paid to the school district like all other general property taxes. This change applies to URAs created or expanded on or after January 1, 2026, with property taxes due in FY 2028 and beyond.
Background
The school foundation levy is a statewide uniform levy used to fund basic education and is equal to $5.40 per $1,000 of assessed property value. Under current law, TIF can redirect portions of this levy toward urban renewal debt. The regular and voter-approved Physical Plant and Equipment levy and Instructional Support Funding are protected from diversion under Iowa Code section 403.19(2)(a).
Fiscal Impact
The fiscal impacts of Division II of the Bill as amended are unknown. Many local governments currently have agreements with the school districts within their URAs to exclude the school foundation levy from collected TIF revenues. The number of such agreements is unknown and cannot be estimated.
Division III — Division of Revenue — Chapter 422D Property Tax Levy
Description and Background
Division III of the Bill as amended excludes the property tax levies for emergency medical services (EMS) imposed under Iowa Code chapter 422D from TIF under Iowa Code section 403.19. Similar to school levies, EMS levies have been subject to TIF diversion, reducing local funds for emergency response. Under Division III, these levies must be collected and paid directly to the taxing district. The change takes effect for property taxes due in FY 2027 and after.
In FY 2025, 24 counties had approved the establishment of optional taxes for EMS, and 12 of those had set levy rates that generated $4.5 million in total property tax dollars.
Fiscal Impact
The fiscal impacts of Division III of the Bill as amended are unknown. Any estimates would require parcel-level data to determine the property values that intersect both EMS and TIF districts. This level of data is unavailable at this time.
Division IV — Limitations on Division of Revenue
Description and Background
Division IV of the Bill as amended limits the portion of taxes from TIF districts that may be deposited into a municipality’s special fund in cases where no duration limits currently exist. After 15 years from the effective date of Division IV, or 15 years following the calendar year after a municipality certifies new TIF debt, whichever is later, only 75.0% of the available increment can be deposited in the municipality’s special fund. After six additional years, the limit decreases to 60.0%. The remaining funds are redirected back to taxing authorities. The FY 2024 Annual Urban Renewal Report indicates that local governments reported a total of 4,194 city, county, and Rural Improvement Zone TIF taxing districts with a total of $4.450 billion in outstanding debt expected to be repaid with future TIF revenue. Some URAs have no expiration, allowing indefinite redirection of revenue.
Fiscal Impact
The impacts of Division IV of the Bill as amended would begin in FY 2041 when the 75.0% limitation would begin, impacting all current TIF agreements that have incurred debt as of the passage of this Bill as amended. The 60.0% limitation would go into effect in FY 2047. The limitation would increase the portion of taxes required to be deposited into a municipality’s special fund. The fiscal impact of Division IV is unknown due to the extended implementation date.
Division V — Urban Renewal Area Housing and Residential Development Requirements
Description and Background
Division V of the Bill as amended creates a limited exception to the general rule requiring LMI housing components in TIF-funded housing projects. For eligible projects approved between July 1, 2025, and July 1, 2026, in economic development areas that have been within city limits for 20 or more years, the required LMI housing funding is capped at 20.0% of the project cost. The 10-year limit for the collection of TIF revenues for such projects is extended to 20 years. Under current Iowa Code section 403.22, municipalities must set aside a portion of TIF revenue for LMI housing when undertaking residential development projects using TIF. This obligation is the greater of the proportion of LMI residents in a county (as defined by HUD’s Section 8 income limits) multiplied by the project’s original cost, or a minimum of 10.0% of the project’s original cost. The specified percentage schedule varies depending on the population of the municipality. Municipalities with a population of 5,000 or less cannot have any required set-aside, while municipalities with a population exceeding 15,000 must at least contribute the minimum. The Iowa Code does not specify when the expenditure on LMI housing assistance must occur. Therefore, local governments that are required to expend funds on LMI housing but have yet to do so reflect the obligation as an outstanding debt.
According to the FY 2024 TIF Report, a total of 33 local governments reported $2.4 million in TIF Special Revenue Fund expenditures related to LMI housing during FY 2024. There are an additional 66 local governments with a reported total LMI financial obligation of $38.6 million that must be satisfied with TIF revenues in future years.
Based on data from the Iowa State Data Center, the 2023 poverty rate did not exceed 20.0% for any county in Iowa and only three counties had a poverty percentage over 15.0%.
Fiscal Impact
The fiscal impacts of Division V of the Bill as amended are unknown. The LSA is unable to estimate how the new project cost limitations and expanding the TIF collection timeline to 20 years would impact projects in future years. However, the extension of the collection timeline would likely decrease the yearly debt expense of any new projects, which may increase the utilization of residential development projects using TIF.
Division VI — Urban Renewal Area Limitations
Description
Division VI of the Bill as amended establishes a statewide cap on the total assessed value of property within URAs. Starting in FY 2027, no more than 96.25% of a city’s total assessed property value may be in URAs. This cap declines annually by 3.75% through FY 2047. Beginning in FY 2048, the annual cap is 20.0%. Under current law, cities and counties must report these percentages annually to the Department of Management as part of their urban renewal reporting.
Background
As the proportion of property in TIF districts grows, General Fund revenues available to schools, counties, and other services shrink. The FY 2024 Annual Urban Renewal Report indicates that local governments reported a total of $4.450 billion in outstanding debt expected to be repaid with future TIF revenue, highlighting the significant use of TIF financing. Across all 4,194 city, county, and Rural Improvement Zone TIF taxing districts reporting for FY 2024, 1,954 (46.6%) utilized some or all of the available increment value, and 1,715 (40.9%) had no increment value available and therefore could not receive TIF revenue. Of those that received TIF revenue, the utilization rates are as follows:
- 1,007 (24.0%) utilized 100.0% of the available increment.
- 939 (22.4%) utilized some, but not all, of the available increment.
- 8 (0.2%) utilized increment in excess of the calculated maximum.
- 525 (12.5%) did not use any of the available increment value.
Fiscal Impact
Division VI of the Bill as amended has no fiscal impact within the first five years of implementation. This Division will reduce the amount of TIF revenues collected by cities as the Urban Renewal Areas (URA) limit is phased in. Of the 416 cities in Iowa with a URA, 218 are estimated to have more than 20.0% of their total assessed property value located within a URA in any fiscal year through FY 2047.
The Department of Management would require a $5,000 one-time expense to update its local government and finance system to implement the Bill as amended.
Sources
- Legislative Services Agency calculations
- Annual Urban Renewal Report — Tax Increment Financing
- Department of Management
- Department of Revenue reports
- Iowa State Data Center
- Urban Renewal, Low and Moderate Income Housing · May 14, 2025
- Urban Renewal · May 12, 2025
Iowa Code it changes
Lobbying
10 for · 7 against · 36 undecided · Who →
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