City and School Leaders Criticize Republican Property Tax Proposal at Public Hearing

From IowaPolitics.com 

DES MOINES — A dozen Iowa local government leaders Tuesday told lawmakers that a Republican plan to reduce property taxes will lead to service reductions, layoffs and increased tax rates, but a GOP lawmaker said the perspective from government officials only tells one side of the story. 

Mayors, city managers, county supervisors, and school and community college officials were among those who testified at a statehouse public hearing organized by Senate Democrats. Each of them shared how much tax revenue they’d lose under the GOP plan and what it would mean to them. 

“Within five years, we’d see a 20 percent increase in residential property tax … or it could mean a cut in services,” Ames Mayor Ann Campbell said. “We’d have 9 percent less coming into our general fund, $2.5 million. That’s equal, for example, to the payment of all of the employees at the Ames Public Library.” 

Angela Connolly, vice chairwoman of the Polk County Board of Supervisors, said the loss to the county’s tax base would be “crippling.” She said when fully implemented, the GOP plan would reduce Polk County’s tax base by $4 billion and decrease tax revenue by $21 million compared with current law. 

“To maintain our current service level, we would need to increase our tax rate by 20 percent, and this would definitely fall on the homeowners,” Connolly said. “Today, an owner of a $100,000 home pays $300 a year on property taxes. Five years from now, an owner of that same $100,000 home would pay $400.” 

Connolly said while homeowners will see their taxes increase, businesses would get a 10 percent tax break. If Polk County doesn’t increase its taxes, Connolly said 250 employees would be laid off and services would be scaled back significantly. 

Tuesday’s comments came a day after Gov. Terry Branstad called reducing property taxes for businesses a "critical priority" that must happen this year. The Iowa House on June 8 approved House File 697, a sweeping budget bill that also would cut commercial and industrial property taxes by 25 percent, reduce property taxes by increasing the state’s payment to schools, and lower the limit on residential and agricultural property-tax increases from 4 percent to 2 percent. 

Iowa Sen. Jack Whitver, R-Ankeny, a business owner, said the state would backfill a portion of the tax revenue loss by local governments, so the cuts won’t be as severe as they’re being portrayed by local government officials. 

But Iowa Senate Ways and Means Chairman Joe Bolkcom, D-Iowa City, said while the House Republican property-tax plan would cost an estimated $394 million, it only would provide $150 million to local governments to compensate for their loss of tax revenue. He said the $244 million shortfall will land on Iowa homeowners. 

“The Republican plan can fairly be described as a job killer for Iowa’s smaller towns and as the largest residential property increase in state history,” Bolkcom said. 

Advocates of the GOP property-tax plan have said the projected loss to local governments will be made up by a growth in taxable value. Even though commercial and industrial properties would be taxed at a lower amount, their assessed value still will grow, and the lower tax rates are expected to attract more business growth. 

Local government officials Tuesday disputed that assertion. 

“We can’t entice new businesses fast enough to make up for the loss that we would feel,” said Campbell, the Ames mayor. 

Whitver, one of the few Republican lawmakers at Tuesday’s event, said the so-called “open budget hearing” organized by Democrats only featured government officials and didn’t include the voices of those who support the property-tax plan. 

“The discussion will be one-sided and lead to a pre-determined conclusion,” Whitver said at the beginning of the hearing. “Republicans continue to fight for the taxpayers, the individuals that will be most affected by any tax plan that is implemented. The property-tax proposal recently passed by the House will allow for the creation of jobs and start putting Iowa’s unemployed back to work. I am disappointed that none of these individuals are here to speak today.” 

This past week at a public hearing in the Iowa House chamber, John Gilliland, senior vice president of government relations at Iowa Association of Business and Industry, which advocates for state businesses, was among those supporting the 25 percent rollback in commercial and industrial property taxes. He said property taxes have increased $1.75 billion in the past decade and cannot be sustained for the next decade. 

“For many Iowans that kind of relief will mean the difference between having a job and not having a job, having health insurance or not having health insurance,” Gilliland said. “If the 2011 Legislature is sincere in creating an environment for economic growth and job creation, the body must compromise and adopt substantive property tax relief for job creators.” 

But Bolkcom used Tuesday’s hearing to advocate for a far more modest property-tax reform plan by Iowa Senate Democrats that would create a property-tax credit for businesses at a cost of $50 million to the state in fiscal year 2013. The cost would grow incrementally to $200 million over four years, if state revenue increases by at least 4 percent in each of those years. 

-- By Lynn Campbell