Jessica Harder, Davis Brown Law Firm
Erin Mullenix, Iowa League of Cities
Handouts and presentation are available online at
www.iowaleague.org
Iowa League of Cities Annual Conference: Thursday,
September 22 2011 9 - 10 a.m.
2
 Session timeline
 Who were we up against and what messages were they
sending?
 What was our message and how can you respond?
 Specific talking points
 Tools to use when speaking to legislators
 Interim “to dos”
3
 First Day: January 10
 110th Day of Session & Per Diem Ends: April 29
 Final Day: June 30
 9 weeks of overtime
 A major new piece of property tax legislation--HSB240--
was filed on April 26 (just days before the scheduled last
day of session).
 Discussions on property tax legislation went all the way
until the last day of session.
4
 Full agreement among House, Senate, Governor:
 Something needs to be done
 Commercial property taxes are too high
 These premises were a strong starting point/driving
force for compromise throughout session.
5
 What kind of property tax relief is needed
 Tied directly to the question WHY do we need it
 Commercial? General?
 How to accomplish property tax reform
 Very different approaches/ mechanisms to accomplish
property tax reform among Governor, House and Senate
 No real agreement even between Governor’s office and
House Rs
6
 House Rs:
 Property tax reduction for all classes
 Smaller government; less government spending (cities
spend too much on unnecessary things)
 Create better business climate through tax cuts—tended
to downplay role of cities in economic development
7
8
This chart is a generalization—an average. Each city has its own story.
• Tell YOUR city’s story.
• High growth cities have expanded their tax bases, and skew the tax
chart upward. They shouldn’t be punished for growing!
• Cities with average growth have kept levy rates low, and fund public
services to increasing numbers of households.
• Cities with declining populations have a smaller tax base from which to
fund services.
• Examples….
9
 Property tax dollars collected are about average statewide (2001
– 2011)
 16.2% increase in population (2000-2010, US Census) = increase
in city tax base (8.10 levy)
 Ames has experienced an average of over $88 million in new
residential, commercial, and industrial construction valuation over
2002-2009 (Ames City Assessor, Aug 2010)
 Budgeted property tax levy rates low, at $10.84 per $1,000 of
taxable valuation
 Largest areas of increased expenditure over the past 6 years were in
public safety and culture and recreation services
 Police & Fire retirement system levy doubled in order to help
meet mandated city contributions under the system that
currently leaves city obligations limitless (comparing fiscal years
2002 and 2012)
 Ames’ actual contributions to the police & fire retirement system
increased 77% (comparing fiscal years 2001 and 2011)
 Ames currently contributes 24.76% of eligible earned compensation dollars
to this pension system
10
 Property taxes collected skew the chart higher. Why? Waukee
is a high growth community!
 169% increase in population (2000-2010, US Census) = increase
in city tax base (8.10 levy)
 In order to support a 169% increase in population, additional services were
critical, particularly in public safety
 Largest areas of increased expenditures over the past 6 years were in public
safety (particularly in crime prevention and the fire department) as well as
culture & recreation
 In FY2011 alone, Waukee experienced rapid new construction
growth:
 841 new building permits (145 single family homes, 180 new townhomes, 58
commercial structures, 1 tax exempt, and 457 other). This equates to about $101
million in valuation.
 Over the 2001-2011 time period represented in the chart, Waukee
had 5,782 new building permits, representing $729 million
valuation.
 The ‘Other Employee Benefits’ levy has increased 55% over
2001-2011
11
 10% decrease in population
 Fewer taxpayers share burden
 32% increase in property tax dollars collected (2001 – 2011)
 NO property tax levy rate increase since 2007, when debt
services levy more than doubled
 Largest areas of increased expenditures over the past 6 years were
in culture & recreation (library, parks, and cemetery funding)
 Over a 10-year period, the average increase closely matches the rate
of normal inflation (CPI indices)
 The FICA & IPERS levy, and the ‘Other Employee Benefit’ levy
approximately doubled, in order to help meet mandated city
contributions.
12
 Mandated costs are not cheap!
 Rising personnel costs
 Health care costs
 Public pension costs (FICA/IPERS, police & fire retirement
system)
 Public safety (i.e. roughly half of average city general fund
expenditures are for public safety functions)
 Other cost drivers include






Rising fuel costs
Rising construction costs and shortfalls in road funding
Federal environmental rules/mandates
Newspaper publication costs
Mandated boards/commissions
Tax exempt property
13
 Governor
 Campaign promise to cut commercial property taxes by
40 percent
 Create 200,000 jobs in part by drawing in businesses;
Compete better with other states for large companies
with lower tax rate
 Cities must have “skin in the game”
14
 “If NOTHING changes in current property tax law,
local governments may collect up to $1.3 billion in
cumulative property tax increases over the next five
years.”
15
 $1.3 billion figure – unclear on how this figure was derived
 City governments make up only about 23% of the local government
property tax distribution. Therefore, if the $1.3 billion number
were correct, cities account for only $300 million of this number.
 “Their assumptions” have been that assessed values and the
residential rollback will increase to compensate losses. Here’s why
16
those are flawed…
• Assessed valuations are dropping
statewide.
• For example, according to the Polk County
Assessor, residential valuations are declining
~3-4% average for cities within the county.
• The impact on individual cities varies. For
example, Alleman is experiencing
residential assessed values dropping around
10%. Des Moines reports decreases near 5%.
Some cities, such as Carlisle have seen
increases near 5%.
• Commercial assessments are also declining
an average of about 5%, with wide variation
statewide. As an example, the downtown
Des Moines core commercial assessments17
have declined about 28%.
• A 2009 LSA estimate shows predicted residential
rollback will continue to decline
18
 The League of Cities’ numbers projecting city losses
are wrong, because they do not include backfill.
19
 The Governor’s calculations include backfill from the
state.
 Cities cannot rely completely on the state to provide
backfill.
 “Intent” is much different than an actual appropriation.
 Original bill included no mechanism in for backfill
distribution
 The state may choose NOT to fund the backfill at any time.
 Later bills with somewhat stronger backfill
mechanism contained complex formula with only 1/3
maximum recovery.
20
 Under the HF697 Omnibus Budget Bill, with a commercial and
industrial rollback to 75 percent, phased-in at 5 percent per year over 5
years, the following estimates represent levy revenue losses for all cities
collectively (non-cumulative):





$20.9 million in FY2014
$41.8 million in FY2015
$62.6 million in FY2016
$83.5 million in FY2017
$104.4 million in FY2018
 These include the maximum backfill referenced in the bill. The
maximum backfill amounts to roughly 30% of losses. However, if
commercial and industrial valuations grow, backfill received would be
reduced. This would result in higher potential levy revenue losses.
21
 Governor’s plan puts cities at risk:
 Bond ratings
 TIF
 Ability of cities to be partners in economic development
and job creation evaporates
 “This entire issue comes down to one fundamental
question. How will the State be able to recruit
companies without the active and financial participation
from cities? “ (Mark Jackson, City of Story City)
22
 What do businesses coming to your city ask about—quality
of life? incentives your city offers?
 Are property taxes even mentioned?
 Examples:
 Greater DM ranks #2 as the “Best Place for Business and Careers”
(Forbes)
 DM-WDM ranks #1 as “America’s Best Place to Raise a Family
(Forbes)
 DM is 17% below the national average for cost of doing business
(Moody’s Economy.com)
 Talk about how economic development really happens in
your city
 Talk about potential impact to existing TIF areas
23
 Senate Ds:
 Focus on small main-street businesses, not big out-of-
state corporations
 Tax credit approach rather than drastic cuts; amount of
credits grows with state budget growth
 Do not do major harm to cities
24
 “SF 522 would have provided $200 million annually in
commercial property tax relief without shifting the
burden to homeowners.”
 “Four out of five businesses would have done better
under the Senate plan because it targeted the greatest
benefit to Iowa’s small businesses.”
25
 “Republicans proposed a large corporate tax break that
would give millions to large out-of-state corporations,
create the largest property tax hike for homeowners in
the state’s history, and eliminate job-creation efforts in
many Iowa communities.”
26
• The League supports the overall goal of commercial
property tax relief. The bill holds local governments
harmless and still meets the goal of commercial
property tax reduction.
 Other more drastic proposals, such as a 40 percent
commercial rollback, would hit local government
budgets very hard.
 This bill will help small businesses in cities and
possibly draw in others to Iowa.
27
 Governor’s plan would cause a shift in local property taxes
to residential property, to make up for this loss in
commercial and industrial valuation.
 It is estimated that YOUR CITY’s tax levy rate could go up
about $_____ per $1,000 in taxable valuation if the tax relief
bill unveiled by Governor Branstad goes into effect.
 This represents an estimated city tax levy increase of
______%, comparing the current city tax levy rate to the
rate projected for 2016.
 (See the League website for YOUR CITY’s data, and add
your own story)
28
Scenario:
Under
Commercial/Industrial
Rollback to 60%
Source: LSA (2011)
29
 On detrimental property tax legislation:
 Registered FOR:
 Ia. Association of Business and Industry (ABI)
 National Federation of Independent Business (NFIB /IA)
 Farm Bureau
 Iowans for Tax Relief
 Iowa Taxpayers Association
 Iowa Bankers’ Association
 Associated General Contractors
 Master Builders
 IA. Commercial Real Estate Assn. (ICREA)
30
 Chambers
 Iowa Chamber Alliance –FOR Governor’s plan/House
plan
 Greater Des Moines Partnership—undecided
 PDI-wrote position letter more favorable to cities-undecided
31
 John R. Gilliland (@John4ABI)




8/31/11 1:48 PM
Iowa local gov't payroll tops $414 million http://t.co/cHfQLzi
John4ABI
No property tax relief for you! Local governments prevail over taxpayers
http://t.co/fphThMY
6/30/11 9:49 AM
John4ABI
CR city administrator complaining of state mandates on city costs for increased
pensions and health ins. Plays the "layoff" card. #ialegis
6/14/11 11:27 AM
John4ABI
Calisle mayor prefers the $600 per parcel tax credit instead. Says it won't impact
the city budget. What about taxpayers budget? #ialegis
6/14/11 11:17 AM
John4ABI
Ames Mayor doesnt like the cpi limitation on the property tax revenue growth.
Wants to be able to increase faster than inflation. #ialegis
6/14/11 11:10 AM
32
 John4ABI
Can't believe how the cities fighting property tax reform. Many invest
$1,000s into local econ development - won't this help them?
6/13/11 4:07 PM
 John4ABI
Cities saw a 74% increase in prop tax revenues in past decade. Anybody
else have that kind of growth? #firemenfirstscaretactic
6/10/11 2:06 PM
 John4ABI
Really getting tired of city officials talking about laying off police and
firemen - #firemenfirstscaretactic
6/10/11 2:05 PM
 John4ABI
Its so maddening to hear legislators say "how much does property tax
cut 'cost' local gov'ts". Reducing their tax revenue is NOT a cost
6/8/11 11:14 AM
33

Provide tax relief for commercial and industrial properties
Property taxes are non-competitive for commercial and
industrial properties in Iowa. In the latest 50-State Property Tax
Comparison Study,* Iowa’s urban commercial property tax rates have
remained the same from the previous year at 2nd highest. However,
Iowa’s rural commercial property tax rates have moved up from 7th in
2008 to 2nd highest in 2009. Iowa’s industrial property tax rates are not
much better, ranking 10th highest in the U.S. for urban areas and 7th
highest for rural. Meanwhile, several neighboring states are enjoying
more competitive commercial and industrial property tax rates.
Delaying reforms to Iowa’s property tax system is increasing the
tax burden on commercial and industrial payers. Iowa’s
commercial and industrial property owners are taxed on 100% of their
assessed value, while residential property owners pay taxes on
approximately 46% of their assessed value due to an assessment
limitation (rollback).
34
IOWA LEGISLATIVE SESSION: WEEK TWENTY-FIVE
 2011 Session�In the Nick of Time
The legislature adjourned Sine Die at 3:43 p.m. on Thursday, June 30, just in the nick of
time. The Iowa Legislature’s 110th session day was April 29, 2011, which is when
legislators� per diem expired. The Iowa Legislature has been at a stalemate over budget
and policy measures all session. Both chambers and the Governor’s office have been
working overtime this week to resolve those differences before the end of the fiscal
year.�
�
Property Tax Relief Fails to Advance
The most significant disappointment for the 2011 Legislative Session is the failure
by the Legislature to find agreement on property tax relief and reform for
business property. While all policymakers carried a theme of �job creation� into the
2011 session, failure to enact significant policy changes to Iowa’s property tax
environment will hamper the Governor, the new Iowa Partnership for Economic
Progress, as well as local developers in pursuing jobs and retaining jobs. Existing
businesses will continue to be taxed at the highest rates in the country, taking potential
wages and benefits for new hires off the table. At the same time, residential property
taxes will skyrocket due to their tie to accelerating agriculture land productivity
valuations. All classes of property taxpayers lose without action.
�
Cities, counties and school districts will continue to complain of their escalating labor,
benefits and pension costs, but were silent during the debate in March over reforming
collective bargaining for government employees. Taxpayers still don’t have a seat at the
collective bargaining table and the expenses for government continue to grow faster than
35
the rate of inflation. Again, all taxpayers lose without action
 ---Email sent to Mayor from her chamber of commerce

 Lay the Groundwork!
 Talk to your Chambers
 Talk to individual businesses
 Talk to your Legislators
 Continue PR work
36
 Mandate sheet—tailor it to your message
 Calculation tools—League website
 Talking points—review this presentation to prepare to
counter negative messages with facts and real-life
examples
 KEY: Tell YOUR UNIQUE STORY
 Show efficiencies you have implemented
 Show responsible taxation at local level
 Show cost-saving measures or cuts
 Show innovative service-sharing
 Show cost pressures your city faces
37
 League Website Legislative Section:
 Sign up for Legislative Link
 Use our bill tracking system
 Let us know what feedback you hear from legislators
jessicaharder@davisbrownlaw.com (lobbying)
jasmithlaw@mchsi.com (lobbying)
meganpeiffer@iowaleague.org (lobbying)
erinmullenix@iowaleague.org (research)
38
39