Rod Sullivan, Supervisor, Johnson County, Iowa

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June 25, 2011

Sullivan’s Salvos 5/17/11

In this edition:

*Hills School
*Update on Property Tax Bill

*Hills School
The ICCSD Board is concerned because Hills Elementary School is very low in enrollment.

Let’s cut the crap. The ICCSD created this problem. To pretend they are shocked! shocked! that enrollment is down there is absurd. This is a self-fulfilling prophecy, perpetuated at the expense of a mostly voiceless group of families.

The whole thing makes me so angry that I need to move on to other, less ire-inducing topics. Such as the State budget!!!

*Update on Property Tax Bill
The Legislature is considering property tax changes that may significantly affect residential taxpayers and local governments. This is important stuff – more important than anything I can write!

The following piece is the best analysis I have seen. It is borrowed in whole from my friends at the Iowa Policy project. I made a few edits for length; you can find this and much more at their website:

House File 691 would reduce commercial property tax assessments by 40 percent over five years — an unnecessary cut in our already low-tax state. Reducing commercial property taxes would further shift local funding of cities, schools and counties to residential property taxpayers. In addition to reducing commercial property taxes, the bill severely limits the ability of local governments to meet the needs of their citizens.

Iowa’s Business Taxes Already Low

When one considers the whole range of state and local taxes that fall on businesses, Iowa is a low-tax state. In a report on overall taxes, including property taxes, paid by businesses, the nationally recognized accounting firm of Ernst and Young recently showed that only 15 states taxed businesses at a lower rate than Iowa as a percent of private-sector GDP.

Commercial Property Tax Break Will Spur Little or No Growth

A state or local government’s tax rate — be it corporate income or commercial property or the combination of all taxes on business — is a tiny portion of a business’ overall costs. Taken together, state and local taxes on business are, on average, only about 1.8 percent of total business costs. The commercial property tax by itself would be an even tinier fraction of a business’ overall costs. Furthermore, cities already routinely use Iowa’s TIF law to provide generous rebates of property taxes on new commercial and industrial buildings. The notion that cutting commercial property taxes further by reducing assessments will bring in new economic activity and new revenue is a pipe dream.

Bill Would Shift Taxes from Business to Residential

The bill mandates a 40 percent reduction in commercial and industrial property assessments, phased in over five years. At the same time, the annual growth in taxable residential and agricultural property value allowable under the rollback formula would be reduced from four percent to two percent. The net effect is still a sizeable shift in taxes from commercial and industrial to residential property. HF691 would substantially magnify the shift from commercial to residential: The commercial share would drop all the way to 20 percent while the residential share rises to 54 percent. The bill does express a “legislative intent” to partially reimburse localities for the loss in revenue due to the new assessment limitations on commercial property. But there is no guarantee that even the partial reimbursement will continue. If past practice is a guide, it will not.

Limitations on Local Governments

In addition to slashing business property taxes, HF691 limits the amount of property tax revenue city and county governments may raise to support public services, in exchange for eliminating the cap on property tax rates. Revenue growth would be limited to inflation plus new property valuation.

This limitation is problematic for a number of reasons. First, inflation will be measured by the consumer price index (CPI). The CPI tends to underestimate inflation for costs affecting government. State and local government budgets are largely driven by personnel costs, and the cost to of hiring workers has steadily increased as insurance costs have increased at a pace faster than inflation. Between 2000 and 2010, the consumer price index increased by over 26 percent; the state and local governments price index increased by more than 44 percent over the same period. Over time the revenue limitation would force substantial cuts in local government services because revenues would not be allowed to increase as fast as costs, a problem aggravated by the bill’s limitation on the inflation factor to four percent regardless of actual inflation. Since 2000, the state and local government price index increased by more than 4 percent from year to year six times.

The formula may force further service cutbacks and employee layoffs through another provision. Most local services are services to people, and it is population growth that necessitates expansion of services and increases in local budgets. The formula does not allow for revenue to grow along with population, but instead allows it to grow only with construction of new taxable property. This provision puts additional pressure on local governments to engage in unfair “fiscal zoning” practices to exclude properties that tend to bring in families with children and with below-average valuation, and encourage only high value property that brings with it few people and few additional demands on services. The alternative is to cut services because revenues can’t keep up with the needs of a growing population.

A bill as complex and far-reaching as HF691 demands further analysis and discussion than the General Assembly has given it. Changes of this magnitude deserve — and Iowans should demand — far more study than they have received.

*DID YOU KNOW? 84% of all American adults own a cell phone, and only 33% use it strictly for making phone calls. (Source:

Anyone interested in learning more about County government should take a look at the County website-

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