(The Center Square) – Gov. Kim Reynolds on Monday signed a bill, SF 181, reversing the state’s 2021 property tax legislation.
The 2021 legislation inadvertently increased property tax contributions to Iowa’s school finances by about $21.4 million annually, beginning in fiscal year 2024, and decreased the state aid appropriation by that amount, SF 181’s fiscal note said.
A JD Supra article said the 2021 legislation combined valuations for multi-residential and residential property when calculating the rollback rate, or an adjustment Iowa makes to limit how much residential property taxes can increase in a given year. The legislation Reynolds signed Monday reduces the rollback rate by 1.84 percentage points, from 56.49 percent to 54.65 percent.
Most local governments have already done their budgeting for the upcoming year with the erroneous information, the article said.
The 2021 legislation probably also increased property taxes owed for fiscal year 2024 and beyond by increasing properties’ taxable value, the fiscal note said.
“The impact on those two classes of properties is a projected maximum annual property tax increase of $111.8 million each year,” the note said.
The actual increase would be lower than that since, in some cases, extra taxable value would lower property tax rates.
The Iowa League of Cities reports that the law would reduce annual city property tax revenue of as much as $39.0 million, which matches up with the potential impact of the 2021 legislation, the fiscal note said.
The League also pointed out that since many cities have begun working on fiscal year 2024 budgets, the timing of the bill could raise cities’ financial planning costs because of additional costs for meetings and staff time for budget modifications, the note said.
County auditors will report the valuation by class of property for each taxing district for the 2022 assessment year to the Iowa Department of Management. Valuations will determine levy rates for funding political subdivision budgets for the 2024 fiscal year. Political subdivision budgets must be certified or recertified by April 30 this year. If political subdivisions certify budgets after March 31, protest and appeal time limits must be extended accordingly.
Iowa Department of Management and county auditors will inform cities of how the law will impact budgets, the League said in a Feb. 17 e-newsletter.