Entering this week, members of the Iowa House had introduced 261 bills while Senate saw 267 bills put into play. While a typical session features little debate over the first few weeks, both Chambers took the unusual step to fast track the Governor’s School Choice bill (HF 68) last Monday. It was signed into law the next day. House leadership chose to pass a special rule prior to debate which allowed the bill to skip consideration by the Appropriations and Ways & Means Committees. Typically, this is required for bills that contain provisions dealing with spending, taxes or fees.
This week an Iowa Senate subcommittee already moved forward SSB 1056, a bill that attempts to resolve how the property tax rollback on residential property is calculated. This bill will have negative impacts on many local government budgets, including the City of Marion. According to Marion City Manager Ryan Waller, the bill would eliminate $437,000 of revenue owed in FY 24 to the community because of positive growth. You can read coverage by the Cedar Rapids Gazette HERE.
This issue is complicated, but stems from a provision in the 2013 property tax bill to convert multi-residential properties (like apartments) from being taxed as commercial enterprises to being taxed as residential. Residential and commercial properties in Iowa are taxed on a percentage of their value; the percentage, or rollback, on residential property tends to be in the 44-57% range from year to year while the commercial rollback is set at 90%. That’s why it’s advantageous for an apartment building owner to be able to pay residential taxes on their investment instead of commercial taxes.
Converting multifamily properties from one to the other required setting up a temporary special multi-residential tax class and then phasing this in over a period of years. After the conversion was completed last year, the multi-residential classification was eliminated and those properties were recognized as residential properties for taxing purposes. Unfortunately, when the Dept of Revenue calculated the residential rollback, the change altered the calculation to cause it to be 1.9% higher than it should have been (56.5% instead of 54.6%).
Passing the bill in its current form will cause a drop in revenue for a number of communities. However, failing to pass it this year and needing to pass it instead next year could make the problem worse if, as predicted, the new correction ends up being 3 or 4 times this year’s 1.8% shift.
Allowable Growth
Legislators in both chambers will be working to get allowable growth for schools signed into law within the next couple of weeks. They are required to get this done during the first month of the session, but this debate has been delayed in previous years.
The Senate currently has a bill (SSB 1081) that would increase school funding by 2% next year. The Governor budgeted for a 2.5% increase, but the House has not yet released their proposed increase.
Tort Reform
One of the Governor’s top priorities this year is tort reform, a topic the Legislature has pursued unsuccessfully in the past, including just last year. This year’s efforts seem to be shaping up around tort reform for the commercial trucking industry and medical malpractice, but to address them in different bills. Both chambers have bills starting to move on the issue, but both have a long way to go to enactment.
Government Realignment
As we discussed in the last update, the Governor also wants to pass a major government realignment bill this year that brings Iowa more into line with what she has seen in other states. The bill has not yet been formally introduced, but many legislators and lobbyists have seen draft copies of the 1,573 page bill. It would make several changes to state government, including bringing the number of department heads from 37 down to about 16. Keep an eye out for that bill to become public very soon.
Follow these and other bills tracked by Marion Economic Development & Professional Developers of Iowa by using the Billtracker tool at https://www.ialobby.com/billtracker/pdi.