City Manager’s Office City Hall th 50 West 13 Street Dubuque, IA 52001-4864 563-589.4110 www.cityofdubuque.org
March 5, 2012
Property Tax Reform
The City of Dubuque supports the need for property tax reform. The City believes commercial property tax relief for business owners can be accomplished though a tax credit provided by the State. This reform would hold cities harmless and provide the needed relief to our local business owners. This proposal has bipartisan support having passed the Iowa Senate as Senate File Bill 522 with a 44-6 vote last legislative session. However, the City opposes House File 2274 which is a bill being considered by the Ways and Means Committee. The City of Dubuque opposes this bill because it is not a property tax credit program that would hold cities harmless and the bill implements restrictions on city revenues. This bill would cause a shift in property taxes to residential property taxpayers or result in significant reductions in city services. The Senate Bill imitates the Homestead Property Tax Credit Program. The State of Iowa Homestead Tax Credit is a state-financed property tax relief program which reduces residents’ property tax bills directly. The State of Iowa Homestead Tax Credit is available to property owners in the State of Iowa who live in the property. This exemption is a reduction of the taxable value of their property amounting to a maximum $4,850. If the State of Iowa provides reduced Homestead Tax Credit funding to residential taxpayers, the residential taxpayers end up paying more of the tax bill. Either way the City gets the money expected based on the adopted tax levy. The only thing in question is, will it come from the State or the homeowner. Senate File 522 would work much like the Homestead Tax Credit and would have a formula to apply the residential rollback to the first $32,000 in valuation for each qualified commercial property, usually amounting to a tax credit between $500 and $600 per property. For example, the owners of a local hardware store valued at $105,000 and a Wal-Mart building valued at $1.5 million would both receive a $600 credit. As the size of the fund grows, the value of the credit would increase. When fully implemented, it's estimated that the property tax credit would be worth approximately $4,029 for a property valued at $200,000 or greater.
March 5, 2012 Page 2 To pay for this permanent commercial property tax break, the State of Iowa would create a Business Property Tax Relief fund that would eventually reach a funding level of $200 million in tax credits per year. Tax credits would be claimed for commercial, industrial, or railway property improved with permanent construction. The county treasurer would show on each property tax receipt the amount of the credit that was received from the Business Property tax Credit Fund. Counties would be paid twice a year from the Fund to cover the lost revenue due to the credit for local governments. If the State reduced funding, the local governments would still get the revenue, it would just come from the business. In the case of the House Bill, the State would provide some replacement funding to cities, but if the State reduced the amount of funding, the cities would not get the revenues from the business, so services would need to be reduced or residential property taxes increased. Thank you for your continued efforts to hold the line on additional service reductions or fee increases at the local level. Please support the Senate version of the commercial property tax credit Sincerely,
Roy D. Buol Mayor JML cc:
Michael Van Milligen, City Manager Cindy Steinhauser, Assistant City Manager Teri Goodmann, Assistant City Manager