By Attorney Jenna Bishop
During the 2019 session the Iowa legislature spent considerable time discussing changes to property taxes and limits on local governments' budgets. The Iowa House of Representatives approved a bill addressing these points, Senate File 634, in the early morning of April 25, 2019, after the Iowa Senate amended and approved the bill the prior day, and the Governor signed the bill into law on May 23, 2019.
In the form it was adopted, Senate File 634 (the "Act") enacts less dramatic changes to local government budgets and property tax levies than were originally proposed. However, the Act adds additional notice and public comment requirements to the budgeting process for Iowa's cities and counties in an attempt to add transparency to budget and property tax increases. The Act requires local governments to pass a resolution identifying "a total maximum property tax dollars" to be derived from certain levies in their budget for the next fiscal year, and if that maximum amount is more than 2% higher than the current fiscal year's actual property tax dollars certified from the same levies, then the governing body must approve the proposed maximum by a two-thirds majority vote (two-thirds of all seats of the city council or board of supervisors, which may be more than two-thirds of those members present).
The Act also revises budget certification and budget protest dates for cities and counties under Chapter 24, Code of Iowa. Budgets must be certified to the county auditor by March 31 (extended past the prior March 15th deadline), and affected residents/persons will have until April 10 (extended past the prior March 25th deadline) to file a written protest with the county auditor regarding the certified budget.
The Act's changes apply to budgets and taxes for fiscal year 2020-2021 and later.
New Budget Approval Process:
In planning for fiscal year 2020-2021, Iowa's cities and counties will need to include additional steps in their budget approval process, including an additional public hearing on the resolution establishing the "total maximum property tax dollars" before the public hearing on the budget, and additional notice requirements. For a detailed list and explanation of the steps that will now be required for budgeting processes, please click here.
In order to accomplish this lengthened budgeting process by March 31, cities and counties should plan to start their fiscal year 2020-2021 budgeting early, including any pre-levy planning, to ensure compliance with the deadlines.
Possible Impact on Public Financing:
Beyond changes to budget processes, consideration should be given to practical impacts of the Act, particularly in relation to public financing by cities and counties. Some possible impacts due to the Act include that a city's or county's ability to issue loans or other obligations secured by the general fund may be hindered. Further, this change may need to be included in disclosures on future issuances of bonds or notes because, even though the debt service fund is not directly affected, the general financial health of the municipality may be impacted.
Cities and counties with questions related to impacts on public financing should consult their bond counsel, disclosure counsel, and/or municipal advisor.
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