DES MOINES — A proposal to require local governments take extra steps before they increase property tax revenues sparked a heated and prolonged debate that was not settled until nearly 3 a.m. Thursday at the Iowa Capitol.
The central accusation made by statehouse Democrats — that the proposal will hurt the state’s pension for public employees — was disputed Thursday officials with the pension program.
Under the proposal, city councils and county boards would be required to document and hold a public hearing for residents when they plan to increase property tax revenues through higher tax rates or reevaluated property value assessments.
If a city’s or county’s tax revenues will be increased more than 2 percent, the vote would require two-thirds of the board’s members instead of a simple majority.
During debate in the Iowa House, which started at 11 p.m. Wednesday and ended just before 3 a.m. Thursday, Democrats said the proposal would be detrimental to IPERS, the pension for Iowa public employees.
Some Democrats argued the proposal would force local governments to pit pension funding against other areas of their budgets. Others’ accusations were more direct, calling the legislation a threat to IPERS and Iowans’ retirement security.
An official statement from IPERS, issued Thursday afternoon, disputed those accusations.
“This bill does not alter the employers’ obligation to pay the employer portion of IPERS' contributions as established annually under (Iowa law). This bill does not affect a member’s or retiree’s pension,” the IPERS statement said.
Despite heavy opposition from Democrats and municipal governments, the proposal passed the House and Senate largely on party-line votes, with majority Republicans supporting.
The proposal, Senate File 634, heads to Gov. Kim Reynolds for her consideration. Earlier this week she declined to comment on the bill, but said more generally she thinks leaders should be looking for ways to lower Iowans’ property taxes.
Statehouse Republicans also pushed back at the suggestion that the proposal would hurt public pensions.
The legislation does not prescribe any changes to IPERS.
Currently, the trust and agency levy that covers local governments’ mandatory contribution to the retirement program can be raised as necessary to cover the employer’s share. Under the bill, House Democrats argued, any increase in that levy will count toward triggering the requirement for supermajority approval of revenue hikes higher than 2 percent. That would put the employer’s share of retirement program funding in competition with other local government expenses, they said, and government officials may choose to lay off staff members to free up money to make IPERS and police and fire retirement costs.
“Nothing could be farther from the truth,” said Dustin Hite, a House Republican who was mayor of his 1,300-person hometown of New Sharon for seven years. “This bill is not about IPERS. It’s a property tax bill.”
Supporters said the proposal is needed to require transparency in local property taxes, so taxpayers can understand why their bill is increasing. They say it would force municipalities to show when property tax revenues are increasing and why, and that some local governments have enjoyed property tax revenue boosts because of higher property values while passing the blame for increases to property owners’ tax bills.
They believe it will make local governments think twice about collecting more property tax revenue.
“I’ve had numerous constituents concerned with (property) valuations going through the roof,” said Sen. Jake Chapman, R-Adel. “For far too long local officials have been able to get by saying, ‘We didn’t raise your taxes.’”
Opponents said it would place an undue burden on and infringe upon the authority of local governments.
“This is a red tape machine for city clerks and county supervisors to do their jobs that they were elected to do,” said Sen. Joe Bolkcom, D-Iowa City.
Provisions that would have put a 3 percent hard cap on increases and allowed for a voter referendum to reverse the increase were removed from the bill.