Fiscal Conditions in Iowa: Property Tax and Your City Story

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Fiscal Conditions in Iowa: Property Tax and Your City Story

Iowa League of Cities 2012 Annual Conference & ExhibitFiscalConditions inIowa: PropertyTax and YourCity StoryHandouts and presentations are available online at www.iowaleague.orgErin Mullenix, Kate Carlucci and Jessica HarderIowa League of Cities


Property Tax UpdateJessica Harder, Legislative CounselKate Carlucci, Government Affairs Coordinator


Property Tax Status• Major property tax bills discussedpast two sessions• All agree something should be done• Differences in how Gov, D’s and R’sapproach reform• No bill has passed both chambers


Governor• Major campaign promise to roll backcommercial property tax by 40percent• Very focused on commercial propertytax relief and job creation• Says local governments willexperience a huge “windfall” ifnothing is done


Senate Democrats• Democrats want commercial property taxreform aimed at small businesses• Also added new apartment property taxclass which would roll back commercialrates to residential on multi-residentialhousing• Have said they prefer a tax creditapproach versus a rollback = less impacton local governments


Republicans• Want property tax reform andreduction across the board for allclasses• Want to reduce local governmentrevenue• Say local governments haveincreased property taxes too muchover time


Property Taxes• We know this will be a big issueagain this session• Third session in a row with majorbills• League preparing in interim


League Activities• Fiscal Conditions Survey• Fiscal Conditions Tool• Regional meetings around state infall to discuss tool and fiscalconditions survey results• Property Tax Workgroup


Regional Meetings• Five meetings inOctober• Atlantic (Oct 4)• Waverly (Oct 9)• Coralville (Oct 16)• Johnston (Oct 18)• LeMars (Oct 23)• Inviting:• Key legislators• Cities• Chambers


Regional Meetings• Opportunity to show information citieshave on property taxes and city finances• Demonstrate what cities will be talkingto legislators about during session• Give an early chance for dialogue


Property Tax Workgroup• Property Tax Workgroup• League members who have committed toexamine property tax concepts• Put together possible legislative proposal• Serve as key sounding board andresource during session on property taxes• Respond to media requests or writeletters to editor


Property Tax ResearchErin Mullenix, Research & Fiscal AnalystSeptember 27, 201212


Property Taxes: ImportanceWhy are property tax revenues important?• Property taxes are a reliable source of revenue that fund servicesprovided by local governments.• Tax revenues pay for such services as public safety, fire protection andemergency services, parks and recreation, roads, etc. that make ourcities more attractive places to live.13


Iowa DemographicsShift to Urban ResidencyOnly 14% of cities are urban, but 64% of the state populationresides in an urban city.(2,500 Population Threshold)Source: U.S. Census Bureau, Census 201014


Property Tax RevenuesWho pays property taxes?* Raw Data Source: Iowa Department ofManagement, FY1315


Property Tax DistributionWho receives property tax distributions?• Property tax supports many different"taxing authorities“ (more than 2,000).Most property is taxed by more thanone taxing authority.• Cities, counties, school districts, andtownships are the most common.• “Others” include: community collegedistricts, agricultural extension districts,assessor offices, hospital districts,sanitation districts, associations for fireprotection, drainage, and other publicneeds.* Raw Data Source: Iowa Department ofManagement, FY13 (Budgeted)16


Property Tax RevenuesOn a city level, what city functions do taxes fund?What makes up GeneralGovernment (Budget Line)?• Mayor, Council & City Manager• Clerk, Treasurer & FinanceAdm.• Elections• Legal Services & City Attorney• City Hall & General Buildings• Tort Liability• Other* Raw Data Source: Iowa Department ofManagement, (Budgeted) FY1317


League: What dothese numbersmean? Let’s lookat the full story.House R ChartCities74%State &Local Gov’tPrice Index48%18


This isn’t a complete picture!• Generalizations like the “74% chart” do NOT characterizeall cities!• Let’s revisit a more complete picture, and share cities’ storieswith legislators:• League Fiscal Conditions Survey• Economic trends• New League Research Tool19


2012 Iowa Fiscal Conditions Survey• Will help the League advocate for cities of all sizes!• The results are incorporated into the League’s new FiscalResearch Tool• Provides guidance on grassroots legislative efforts• A Cityscape article (October) will feature the surveyresults• Will help the Legislative Team provide information tolegislators20


2012 Iowa Fiscal Conditions SurveyTop City Cost Drivers & Anticipated-to-Increase Costs:• Police department• Fire department• Roads, bridges, and sidewalks• Healthcare premiums• Public pension systems*City concerns noted: local decision making, cities partnering ineconomic development, sustainable and dependable revenuesources21


2012 Iowa Fiscal Conditions SurveyGeneral increases in demands for city services• Very notable for public works, police departments, and firedepartmentsServiceUpSignificantlyUpSlightlyFlatDownSlightlyDownSignificantlyPolice Department 52 135 98 9 3Fire Department 22 111 163 6 2Public Works (incl. Roads) 116 158 38 4 0Parks & Recreation 55 159 96 2 1Library 29 101 126 15 722


2012 Iowa Fiscal Conditions Survey90%Cities' Largest Budgeted Costs80%78%70%60%50%48%40%34%30%20%27%23%21%18%10%9% 9%6%2% 1% 0%0%23


2012 Iowa Fiscal Conditions SurveyCities’ Largest Budgeted CostsBreakdown by Population GroupsCity Populations# of Cities inPopulation RangeTop Rank 2nd Rank 3rd RankLess than 500 144 Roads, Bridges, and Sidewalks Street Lighting Fire Department500-1,000 63 Roads, Bridges, and Sidewalks Police Department Fire Department1,000-5,000 84 Roads, Bridges, and Sidewalks Police Department Health Care PremiumsMore than 5,000 44 Police Department Roads, Bridges, and Sidewalks Fire Department24


2012 Iowa Fiscal Conditions Survey70%66%Cities' Fastest Increasing Costs Over the Past 5 Years60%50%40%30%20%33%31%28%24%20%15% 14%12% 11%10%0%2% 2% 1%25


2012 Iowa Fiscal Conditions SurveyCities’ Fastest Increasing Costs Over the Past 5 YearsBreakdown by Population GroupsCity Populations# of Cities inPopulation RangeTop Rank 2nd Rank 3rd RankLess than 500 144 Roads, Bridges, and Sidewalks Street Lighting Fire Department500-1,000 63 Roads, Bridges, and Sidewalks Health Care Premiums Police Department1,000-5,000 84 Health Care Premiums Roads, Bridges, and Sidewalks Police DepartmentTies: Health CareMore than 5,000 44 Police Department Roads, Bridges, and Sidewalks Premiums, MFPRSI,Fire Department26


2012 Iowa Fiscal Conditions Survey80%Cities' Anticipated Fastest Increasing Costs Over the Next 5 Years76%70%60%50%40%30%36%31%26%20%20% 20% 19% 18%10%0%9% 8%3% 2% 2%27


2012 Iowa Fiscal Conditions SurveyCities’ Anticipated Fastest Increasing Costs Over the Next 5 YearsBreakdown by Population GroupsCity Populations# of Cities inPopulation RangeTop Rank 2nd Rank 3rd RankLess than 500 144 Roads, Bridges, and Sidewalks Street Lighting Fire Department500-1,000 63 Roads, Bridges, and Sidewalks Health Care Premiums Police Department1,000-5,000 84 Health Care Premiums Roads, Bridges, and Sidewalks Police DepartmentMore than 5,000 44 Police Department Fire DepartmentTie: Health CarePremiums & MFPRSI28


Rollbacks Continued…RollbacksEach year, the Iowa Department of Revenue establishes an “AssessmentLimitation” schedule, commonly known as the rollback schedule, eachyear that applies to assessed property.In 2012, the rollback schedule was:Property ClassRollbackAgricultural Buildings 57.5411%Agricultural Land 57.5411%Residential 50.7518%Commercial 100.0000%Industrial 100.0000%Railroads* 100.0000%Utilities* 100.0000%* Railroad & Utilities assessed each year by state30


Property Tax RevenuesWho pays property taxes?* Raw Data Source: Iowa Department ofManagement, FY1331


What about my individual tax bill?What are the basic factors that cause increased or decreased taxes?According to the Iowa Department of Revenue:Your taxes increase if...• The budgets increase and the value of all properties remain the same.• The budgets and value of property in the entire government unit remain thesame but the value of the individual’s property increases.• The budgets and value of the individual’s property remain the same but the valueof the property in the entire government unit decreases.Your taxes decrease if...• The budgets decrease and the values of all properties remain the same.• The budgets and value of property in the entire government unit remain thesame but the value of the individual’s property decreases.• The budgets and value of the individual’s property remain the same but the valueof the property in the entire government unit increases.The changing urban/rural makeup may impact these basic factors, and impactcities differently depending on size, budget, citizen demands, etc.….32


Trend: State & Local Business TaxesWhat do businesses value (when looking at locations,relocations, expansions, redevelopment)?• Many factors! These include:• Educated, trained workforce• Quality of life “factors” and amenities• An attractive place to live• Incentives, business perks• Commercial property tax rates fall here, amongothers33


Trend: Current State Taxable Valuations34


Trends: Growing Costs / DemandsWhat are the fastest-growing expenditures,according to a FY01 & FY11 city budgets comparison?• Public Pensions (IPERS, MFPRSI, FICA)• Other Employee Benefits (includes health care costs)• 8.10 General Fund Levy Revenue (includes newconstruction)*• Debt ServicesDemands for City Services• Fiscal Conditions Survey Response35


New Fiscal Research Tool for 2012-13 SessionA new research tool has been developed to helpcities share their city story with legislators!• Charts and indicators generated easily, to help build a semicustomstory, with city-specific revenue trends for each individualcity• Guidance documents accompany the tool to help you craft a “citystory” that really highlights the key/valuable components for yourcity• Talking points included for specific city scenarios: highgrowth,average or flat growth, declining population cities36


New Fiscal Research Tool for 2012-13 SessionIn addition to the charts and information suggested in thetool, cities should add their own city-specific information!• Examples and ideas are included in the tool’s guidancedocument• Ames example…• Download the tool information• Add additional Ames-specific information (similar to nextslides, and likely much more to include)37


Example Ideas (Ames)• Property tax dollars collected are about average statewide (2001 –2011)• 16.2% increase in population (2000-2010, US Census) = increase incity tax base (8.10 levy)• Ames has experienced an average of over $88 million in newresidential, commercial, and industrial construction valuation over2002-2009 (Ames City Assessor, Aug 2010)• Budgeted property tax levy rates low, at $10.84 per $1,000 oftaxable valuation• Largest areas of increased expenditure over the past 6 yearswere in public safety and culture and recreation services• Police & Fire retirement system levy doubled in order to help meetmandated city contributions under the system that currently leavescity obligations limitless (comparing fiscal years 2002 and 2012)• Ames’ actual contributions to the police & fire retirement systemincreased 77% (comparing fiscal years 2001 and 2011)• Ames currently contributes over 26% of eligible earnedcompensation dollars to this pension system38


Example Ideas 2 (Ames)Example: Ames’ Finance Department broke down cityproperty tax distribution of services last year, on an individualcitizen level:Source: City of Ames Finance Department39


Thank you!Erin MullenixResearch & Fiscal Analyst, Iowa League of Citieserinmullenix@iowaleague.org515-244-7282Kate CarlucciGovernmental Affairs Coordinator, Iowa League of Citieskatecarlucci@iowaleague.org515-244-7282Jessica HarderLegislative Counsel, Harder Government Relationsjessicaharder@hardergov.comRemember you can sign up for the League Weekly electronic newsletter, or the League’sLegislative Link (weekly during legislative session) by emailing CV@iowaleague.org.40

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