Government Entities - Iowa Property Tax Reform Bill Signed into Law

May 9, 2023

On May 4, 2023, Governor Reynolds signed House File 718, a bill aimed at reducing property tax growth in Iowa. There are significant changes to city and county levy limitations and financing. This client alert provides a general overview of certain provisions of the new law.

County Levies
HF 718 creates additional limits on the maximum allowed general and rural county services tax levies. Below is a chart summarizing the general services tax rate levy limits.

* Adjusted General County Basic Levy Rate (AGCBLR) is defined as a rate/$1,000 of assessed value equal to the sum of $3.50 + the amount/$1,000 of assessed value levied for general county services under section 331.426 for the FY 23/24.

HF 718 puts additional limitations on levies for FY 24/25 – FY 27/28 as summarized below:

If total assessed value for the budget year exceeds 103% but is less than 106% of assessed value for the current fiscal year, the AGCBLR is reduced to a rate per $1,000 of assessed value equal to:

If total assessed value for the budget year is equal to or exceeds 106% of assessed value for the current fiscal year, the AGCBLR is reduced to a rate per $1,000 of assessed value equal to:

If the actual levy rate for the current fiscal year equals $3.50/$1,000 or less of assessed value AND the total assessed value for the budget year exceeds 103% but is less than 106% of total assessed value used to calculate taxes for the current fiscal year, the levy rate shall not exceed a rate per thousand dollars of assessed value that is equal to:

If the actual levy rate for the current fiscal year equals $3.50/$1,000 (or $3.95/$1,000 for rural services levy) or less of assessed value AND the total assessed value for the budget year is equal to or exceeds 106% of total assessed value used to calculate taxes for the current fiscal year, the levy rate shall not exceed a rate per thousand dollars of assessed value that is equal to:

Note that for each of these calculations, for the budget year beginning July 1, 2024, only, the current fiscal year’s actual property tax dollars certified for levy will also include property tax dollar amounts levied for general county services under section 331.426 for the fiscal year beginning July 1, 2023.

Below is a chart summarizing the rural services tax rate levy limits.

* Adjusted Rural County Basic Levy Rate (ARCBLR) is defined as a rate/$1,000 of assessed value equal to the sum of $3.95 + the amount/$1,000 of assessed value levied for general county services under section 331.426 for the FY 23/24.

The same additional limitation calculations explained above for general services apply to FY 24/25 – FY 27/28 rural services.

City Levies

HF 718 creates additional limits on the maximum allowed general fund levies.

Below is a chart summarizing the general fund levy limits.

* Adjusted City General Fund Levy Rate (ACGFLR) is defined as a rate/$1,000 of assessed value equal to the sum of $8.10 + the sum of the following, as applicable:

The amount per $1,000 of assessed value levied by or on behalf of the city under section 384.8 for fiscal year beginning July 1, 2023.
The amount per $1,000 of assessed value levied by or on behalf of the city under section 384.12, subsection 1, 2, 3, 4, 5, 6, 7, 8, 9, 11, 12, 13, 15, 16, and 20, for the fiscal year beginning July 1, 2023.
The amount per $1,000 of assessed value levied by the city under section 24.48, for the fiscal year beginning July 1, 2023.

The same additional limitation calculations explained above for County general and rural services levy limitations apply to FY 24/25 – FY 27/28 city general fund levy limitations [note that you will need to substitute $8.10 in the formulas when required].

Budgets

All political subdivisions are required to file a report relating to property tax calculations with the Department of Management on or before March 15 of each year.
HF 718 requires political subdivisions to have a public hearing on proposed property tax amounts for the budget year. This public hearing is separate from any meeting related to the budget or other business not related to the proposed property tax amounts. After the hearing, the governing body may decrease, but not increase the proposed property tax amount included in the budget.
Local budgets for political subdivisions must be certified by April 30 of each year.

Bond Elections

All elections on the question of issuing bonds or other indebtedness are to be held on the first Tuesday after the first Monday in November
Commissioner of Elections is required to mail notice to each registered voter in the applicable jurisdiction and the notice must include the full text of the public measure to be voted on at election
Applicable for elections occurring on or after July 1, 2023

County Financing

30% increase to the limits to enter into lease and lease purchase contracts payable from the general fund
30% increase to the limits to enter into loan agreements payable from the general fund
30% increase to the limits for ECP building projects
Eliminates the GCP “catch all” provision: “Any other purpose which is necessary for the operation of the county or the health and welfare of its citizens”
30% increase to the GCP reverse referendum thresholds
Takes effect July 1, 2024

City Financing

30% increase to the limits to enter into loan agreements payable from the general fund
30% increase to the limits for GCP reverse referendum thresholds
Eliminates the GCP “catch all” provision: “Any other purpose which is necessary for the operation of the county or the health and welfare of its citizens”
Takes effect July 1, 2024
Eliminates various levies in 384.12

Requirements Applicable to both Counties and Cities

Requires the governing body to include specific information relating to debt obligations in the County or City’s annual financial report, beginning with the annual financial report filed by December 1, 2025.
Requires the governing body to include the following in its notice of the proposal to issue bonds: an estimate of the annual increase in property taxes as the result of the bond issuance on a residential property with an actual value of one hundred thousand dollars. (Effective July 1, 2024).

Limitations on Tax Abatement under Iowa Code 404

For revitalization areas established under Chapter 404 on or after July 1, 2024 AND for first-year exemption applications in existing revitalization areas filed on or after July 1, 2024, a commercial project will not be eligible for abatement under the revitalization plan unless the owner enters into a written assessment agreement with the municipality specifying a minimum actual value for the completed improvements, which minimum actual value must be certified by the applicable assessor.
For revitalization areas established under Chapter 404 on or after July 1, 2024 AND for first-year exemption applications in existing revitalization areas filed on or after July 1, 2024, the increased value added by a residential project will not be exempt from taxes levied by a school district.

This client alert includes a general summary of some of the provisions of the new law. Public entities should contact their legal counsel with questions regarding this new law.

About Ahlers & Cooney's Client Alerts
Our Client Alerts are intended to provide occasional general comments on new developments in Federal and State law and regulations which we believe might be of interest to our clients. The Client Alerts should not be considered opinions of Ahlers & Cooney, P.C., and are not intended to provide legal advice as a substitute for seeking professional counsel. Readers should not under any circumstance act upon the information in this publication without seeking specific professional counsel. Ahlers & Cooney will be pleased to provide additional details regarding any article upon request. Additional copies of this Client Alert may be obtained by contacting any attorney in the Firm or by visiting the Firm's website at www.ahlerslaw.com. ©2023 Ahlers & Cooney, P.C. All Rights Reserved.

NOTICE TO THE PUBLIC
The determination of the need for legal services and the choice of a lawyer are extremely important decisions and should not be based solely upon advertisements or self-proclaimed expertise. This disclosure is required by rule of the Supreme Court of Iowa. Memberships and offices in legal fraternities and legal societies, technical and professional licenses, and memberships in scientific, technical and professional associations and societies of law or field of practice does not mean that a lawyer is a specialist or expert in a field of law, nor does it mean that such lawyer is necessarily any more expert or competent than any other lawyer. All potential clients are urged to make their own independent investigation and evaluation of any lawyer being considered. This notice is required by rule of the Supreme Court of Iowa.