Central Iowa city officials are seeking solutions after Iowa legislature resolves to end backfill. This is part of a 2013 law that required the state to reimburse local governments for tax cuts on commercial property.
Backfilling totaled $ 152.1 million annually across the state. Local governments would treat the funds like property tax receipts. According to a major tax law passed by the legislature, these payments will expire over the course of four to seven years, depending on the growth in the tax base.
John Edwards, a Clive City Council member, said removing the backfill would have “big” effects on smaller communities. He estimated that Clive will lose about $ 525,000 in state-promised refill payments.
“The state has a lot of money,” he said. “But the cities are the ones who take it in the shorts.”
Des Moines will see an annual loss of $ 5.3 million from the backfill, according to City Manager Scott Sanders. This essentially eliminates the effect of a VAT hike in 2019 that allowed the city to cut property taxes by 60 cents.
“One step forward, one step back,” said Sanders. “It’s just very unhappy.”
However, some other communities like Bondurant expect the property development to make up for the loss. City administrator Marketa Oliver estimated the backfill accounted for about $ 81,000 of the city’s $ 3.58 million property tax levy.
“We’ll likely be able to outgrow this situation without making adjustments,” she said. “But for communities across the state that are not so lucky … they may have no choice but to adjust their property tax.”
Republican legislature in the debate on the bill said that land tax replenishment should never be a promise to last. MEP Dustin Hite, R-New Sharon, justified the change in the last few days of the session as a “compromise between property taxpayers and the other taxpayers who finance the state budget”.
Senator Claire Celsi, D-West Des Moines, attended the session on Wednesday. She criticized the Republican-led decision to remove the backfill, especially as the same tax code includes a new promise to fund mental health services through state funds.
“They make promises and then a new legislature will come in and sweep them away,” she said. “That makes me really skeptical.”
This article was republished by the Iowa Capital Dispatch.