PDI Legislative Update: Property Tax & TIF Reform in Motion
In last week’s Policy Perspectives, we shared updates on initial property tax reform proposals—SSB 1208 and HSB 313—along with PDI’s official statement and a new TIF-related bill (SSB 1214) that proposes removing the $5.40 levy from the TIF increment and limiting urban renewal areas without sunset dates. We warned that, if passed, these proposals could reduce TIF capacity by an estimated 40%, especially if both the foundation levy and $5.40 levy are modified.
This past week brought significant developments, and we want to equip members with the tools to stay informed and engaged as the legislative session winds down.
Why This Matters
A quick reminder: Failure to pass property tax reform means cities and counties will continue to operate under HF 718, a law that’s already driving down local tax rates and limiting the amount of growth cities and counties can realize. The Iowa League of Cities has a helpful summary of HF 718.
While PDI supports reform, we believe it must be workable for local governments—and that includes preserving the flexibility of economic development tools like TIF.
PDI Meets with Senate Leaders
PDI President Angela Rheingans and board members Nick Hockenberry and Josh Laraby met with Senate Ways & Means Chair Dan Dawson to discuss SSB 1214. They were joined by:
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Steve Linder, City Administrator of DeWitt
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Matt Stoffel, PFM Financial Advisors
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Craig Patterson, PDI Lobbyist
The goal: To express concern about the proposed removal of the $5.40 levy and limits on perpetual TIFs, while also acknowledging that reductions in TIF capacity may be an expected consequence of broader tax reform. As Iowa has lowered income tax rates—from a top rate of 8.98% down to a flat 3.8%—PDI recognizes that trade-offs are inevitable, and our role is to help shape practical, forward-looking solutions.
A New Bill Emerges: SSB 1227 / HSB 328
Later that same day, new property tax legislation was introduced by Rep. Kaufmann and Senator Dawson: SSB 1227 / HSB 328. While the bill reflects some positive changes based on stakeholder feedback, it also introduces new concerns.
Here’s a breakdown of key provisions:
Bill Summary: SSB 1227 / HSB 328
Divisions 1 & 2: City & County Revenue Limits
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Beginning in FY 2027, local governments would face revenue growth caps:
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0.5% minimum growth for non-growing cities/counties
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2% cap for all others
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TIF is excluded from new valuation definitions
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Starting FY 2028, growth allowances would be tied to the Consumer Price Index (CPI):
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CPI 0–4% → 2% growth cap
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CPI 4–6% → 3%
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CPI 6–8% → 4%
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CPI >8% → 5%
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Division 3: School Funding Changes
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Shifts full responsibility for the foundation base from local taxpayers to the state (currently 88.4% state, 11.6% local)
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Reduces the $5.40 foundation levy to $2.97
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Estimated $426 million in tax savings for property owners
Division 4: Rollback Eliminations
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Ends all rollbacks except for agricultural properties (effective retroactive to Jan 1, 2025)
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Decouples residential and agricultural rollback rates
Division 5: Homestead Exemption
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Replaces the credit with a $50,000 exemption
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Retains the $6,500 elderly exemption and clarifies stacking
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Only disabled veteran credits will be reimbursed by the state
Division 6: Veterans Exemption
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Increases veterans' property tax exemption from $4,000 to $7,000
Division 7: Hospital & EMS Levy Adjustments
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Addresses limitations on levies for healthcare-related services
Division 8: Miscellaneous Levy Adjustments
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Applies 2% growth cap in FY 2027 to non-city/county levies (e.g., transit)
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Prevents bonding for general operations
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Creates an interim committee to review all property tax rates by Jan 15, 2026
Division 9: Senior Tax Credit
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Creates a property tax credit for seniors (age 70+) earning under 350% of the federal poverty level
Division 10: Cleanup Provision
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Eliminates the brucellosis and tuberculosis fund and levy