📉 A levy rate for harder times...
Iowa City will be lowering its levy rate this year, maybe for the last time.
January 20, 2021 | Letter No. 25
It’s inauguration day. And in Johnson County, I feel like y’all are in too good a mood. So let’s talk about taxes.
Iowa City Council met last night and agreed to keep the staff’s proposed property tax levy rate: a decrease from a $15.673 millage in fiscal year 2021 to $15.663 for fiscal year 2022.
This does not mean property taxes have gone down. On the contrary. Since 2012, Iowa City has lowered the rate it taxes property at. Meanwhile, valuation has increased drastically. This growth has mostly been a factor of assessed value increasing.
Two weeks ago, Mayor Pro Tem Mazahir Salih was arguing that given the pandemic era needs, Iowa City should end its near-decade of tax levy decreases and keep the levy at the same rate.
Dennis Bockenstedt, the city’s finance administrator, said this could generate as much as $500,000. But by not reducing the levy rate, he warned the council would limit the city’s ability to raise those rates in the future. A problem since the city is still dealing with rollbacks from the state’s 2013 tax cuts.
While the city receives some compensation for the money lost from commercial valuation rollbacks, it hasn’t received that for lost revenue from multi-residential properties.
In Iowa, cities cannot tax the entire value of residential property; only a percentage. Historically, commercial and multi-residential property has been taxable at 100%. However, following the 2013 tax cuts, the taxable valuation for multi-residential property has plunged.
The city has referred to a point in fiscal year 2024 as the “multi-residential cliff;” a point at which taxable valuation of residential and multi-residential properties become the same. That multi-residential property makes up nine percent of Iowa City’s taxable valuation.
Staffers like Bockenstedt have been concerned that the city — which has maxed out many of its levy rates — won’t have as many options in FY 2024 when they might need it. In other words, the city’s small reduction of the city’s tax levy rate for FY 2022 was a move to add some flexibility in later years when they might need the additional revenue-generating capacity to keep city services where they are.
While it’s not important that you understand the taxable valuation of different categories of property, it is important to think about how reductions in some pressure the need for increases in other categories and how those reductions limit revenue potential.
Anyway. Happy Inauguration Day, Iowa City.
Your friendly neighborhood reporter,
Zachary Oren Smith
P.S., Email me pics of your celebration and tell me if I can put them in my next newsletter.
Take Five
🔵 Profile: Susan Mims – With Susan Mims announcing 2021 will be her final year on Iowa City Council, I think it’s time to consider why the Bernie caucus-er is oft made out to be the “right-wing” councilor too.
🌑 Closed in Iowa City – Around town, you’ve surely noticed the closed shops and empty windows. While nothing compared to the loss of life, COVID-19 has taken some iconic pieces of Iowa City.
💅 Fact-checker – Speaker of the House Pat Grassley, R-New Hartford, is wrong that he can’t require people to wear masks at the Statehouse. As the Gazette’s fact-checker team shows, he’s the only one that can.
🏛️ Iowa Constitutional Amendments – Republican-controlled Iowa Legislature subcommittees advance two Iowa Constitution amendments. The first would add “strict scrutiny” requirement for any future gun safety laws. The second would legislate away the 2018 Iowa Supreme Court ruling that struck down the 2018 72-hour abortion waiting period requirement.
💰 High-earner Tax Cuts Now – Gov. Kim Reynolds aims to nix the Legislature’s 2018 general fund revenue and revenue growth percentage requirements in hopes of triggering tax cuts on Iowans who make the most.
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Zachary Oren Smith writes about government, growth and development for the Iowa City Press-Citizen. Reach him at zsmith@press-citizen.com, at 319 -339-7354 or on Twitter via @Zacharyos.