Today marks Session Day 106 of the 110-day scheduled session. Friday will be the last day legislators receive per diems and the last day clerks will serve this session. As we have said many times, the legislature almost always goes past their scheduled date. So, what about this year? 

During the tail end of this past week, the House and Senate reached joint budget targets. This means that, while the line items within the budgets will still need to be decided, the budget bills will start to take shape this week. 

Both chambers passed major property tax reform last week. Procedurally though, seeing reform enacted this session is up in the air. Why? Bear with us for a brief parliamentary process explanation.

In order for legislation to advance to the Governor, it has to follow the committee process in both chambers and be passed in identical form by both chambers. A common way for bills to avoid the committee process in the second chamber is for the second chamber to introduce a similar (or companion) bill that gets considered by committee. The two bills then get linked to each other in the legislative system as companion bills (even if they aren’t always identical).

During the debate, the second chamber will bring up their own bill (which has passed committee in their chamber), pass an amendment (a “conforming amendment”) to make their bill identical to the first chamber’s bill, and then “swap” the bills during debate so they end up taking action on the first chamber’s bill. This process is what happens with the vast majority of bills that advance to the Governor. 

On rare occasions, the House and the Senate will opt to NOT swap their bill for the other chamber’s bill and instead just pass their own. In the lobby, we often call this “ships passing in the night” because both bills then need to go to committee in the other chamber rather than going directly to floor consideration. THIS is what happened this week on property tax reform. 

Within about an hour of each other this past Wednesday, the Senate took up and passed their Property Tax Reform Bill (SF 569) by a vote of 48-1, and the House took up and passed their own version (HF 718) by a vote of 93-1. Even though the bills were “linked,” since neither chamber swapped bills during debate, the Senate bill now goes to the House Ways & Means Committee and the House bill goes to the Senate Ways & Means Committee. The Legislature can still enact property tax reform in the waning days of the session, but they need to pick which bill to use and which components of those two bills to include. Both bills are VERY different. Here is what each one does:

House File 718

You can review the non-partisan Legislative Service Agency’s (LSA) Fiscal Analysis of HF 718 HERE. Briefly, the bill would do the following: 

• Reduce property taxes statewide by about $200 million by decreasing the school foundation levy ($5.40/1000) by one dollar; this gap to schools would be covered by the State in the form of a “backfill.”
• Cap property tax increases for individual homes and farms at 3%/year and businesses at 8%/year. Growth attributable to urban renewal area (URA), previously abated property, "net new" or improved property sits outside of the above-described growth cap.
• Requires property tax collecting entities to mail each property owner annual notices, which includes the entity’s prior taxes levied, prior effective tax rate, proposed taxes levied, proposed tax rate, a reason for an increase of taxes if there is one, and several other details.
• Require all bond referendums to only take place on the general election date in even-numbered years. If you had a county project, city project and school project that required bonding, they would all have to appear on the same ballot.

Senate File 569

Unfortunately, there is not yet an updated LSA Fiscal Analysis of SF 569, but keep checking back HERE along the left frame under “Fiscal Notes” for one to be posted. The Iowa League of Cities put together a tool HERE for analyzing SF 569 for your community. Briefly, SF 569 would do the following: 

• Division 1 makes several changes to Iowa Code relating to counties, including: Provides for a taxable valuation growth limitation and automatic levy rate adjustment. For counties at or below the $3.50 per $1,000 limit for the General Basic fund, taxable valuation growth over 102.5% would trigger a calculation of current year taxes certified divided by 102.5% of assessed value to get effective tax rate. For counties over the $3.50 limit the threshold would be 103.25% of taxable valuation. The same would apply to the $3.95 per $1,000 limit for the Rural Basic Fund.
• Division 2 makes several changes to Iowa Code relating to cities, including: This bill would eliminate about 15 city levies – the local library levy, civic center levy, and many others – and leave cities with five levies to utilize. The general levy (often called the $8.10 levy) would be replaced with one larger levy that would be capped and allowed an annual percentage increase of up to 2.5%.
• The bill also increases by roughly 30% the allowable bonding thresholds for cities and counties, and applies a cost of living increase thereafter. These bonding thresholds have not been increased in many years.
• Division 3 eliminates the voter-approved public education and recreational tax levy (current maximum 13.5 cents).
• Division 4 would eliminate the brucellosis and tuberculosis eradication levy (current maximum 33.75 cents). 
• Division 5 would allow Lee County to make a local county decision with regard to its county seat and which county court buildings they must maintain.
• Division 6 eliminates the current requirement that an annual report from the Iowa state sheriffs’ and deputies’ association be produced that details, based on a sampling of specified county data, the total annual county budget allocation to the sheriff and similar data.
• Division 7 establishes a new homestead property tax credit specifically for Iowans 65 years of age and older. The credit would be in addition to the existing homestead credit and would be $3250 in the first year and $6500 in each successive year.
• Division 8 makes changes to the elderly property tax credit calculation to take into account the homestead credit.
• Division 9 increases the military service property tax exemption to $4000 and removes the State’s responsibility for funding the exemption. 
• Division 10 disallows commercial property in a new urban revitalization area from receiving a tax exemption unless the local government and the owner of the qualified real estate enter into a written assessment agreement specifying a minimum actual value until a specified termination date for the duration of the exemption period. The bill would not allow residential properties in new urban revitalization areas to receive an exemption from school property taxes.
• Division 11 allows cities over 200,000 to impose an additional 2.5 percent franchise fee (above the generally capped 5 percent) for public transit as long as those revenues are used to provide property tax relief.
• Division 12 requires each county auditor to make an annual report to the department of management of the valuation by class of property for each taxing district in the county, which shall be used for determining the levy rates necessary to fund the budgets of the taxing districts for the following fiscal year. In addition, the county auditor is required to make an annual report to the governing body of each taxing district in the county of the assessed valuations of taxable property in the taxing district as reported to the department of management.
• Division 13 moves the budget certification deadline for cities and counties to April 15 (from March 31). This division also requires cities, counties and school districts to supply information that can help county auditors put together taxpayer information. Contains additional requirements including public budget hearings.
• Division 14 allows counties to charge a $10 convenience fee for issuing driver’s licenses or non-operators identification cards to non-residents of the county.
• Division 15 increases from $1.25 to $2.00 the writing fee assessed by county recorders for transactions involving all-terrain vehicles, water vessels and snowmobiles.

To follow other bills being tracking by Professional Developers of Iowa, visit www.ialobby.com/billtracker/pdi.