Reprinted from the Quad-City Times April 10.
The attempt in the Iowa Legislature to limit property taxes has been a bit like a bouncing ball this year.
It’s hard to follow and keeps moving.
The latest twist came April 9 when we heard lawmakers were going to amend a House bill to shield local pension obligations from the property tax growth cap some Republicans want to impose on city councils and county boards.
We’ve already said we think Big Brother in Des Moines ought to leave local decisions on spending and revenues to mayors, council members and county supervisors. These elected leaders know best the needs of their communities — and they are keenly aware of the price they’ll pay if they get too far out of line with the public.
That line of reasoning, though, hasn’t been persuasive with some Republican state lawmakers. They still seem to be moving ahead with a bill that would limit property tax revenues to 2 percent per year. And the deliberations have included subjecting employee benefit expenses to that cap.
The problem is costs in this category have been growing at a far faster rate than 2 percent. Let’s face it, employee benefit expenses, in the public- as well as the private-sector, are rising far faster than general inflation.
Subjecting those to a 2 percent property tax cap would likely mean cuts in other city and county services just to make the budget work.
Where would those cuts come from? It’s hard to tell. But we’d rather not see street repair budgets or police staffing suffer as a result.
We would guess there is some sympathy for the idea of putting a lid on property tax increases at this time of year. New assessment notices just went out and, with the economy recovering, property values are naturally rising.
In Davenport, the residential property tax base is up 5 percent over last year, the city assessors office said. The Scott County assessor could not be reached this week, so we don’t know what the changes were in other jurisdictions. (We should note that property valuations vary and how much a person pays in property taxes based on these new values will depend on the rates approved by local jurisdictions. Those won’t be set for another year.)
There is a safety valve in the proposed legislation that would give local governments a way to raise revenues beyond the cap by holding a public referendum. However, we suspect, that would be little-used. Instead, we think aldermen and supervisors are likely to start looking for other ways to raise money — like raising fees.
They also would likely turn more frequently to borrowing. Which isn’t exactly a good financial option, in our view. Especially since the tax limitation proposal we’ve seen also requires local governments to trim their cash reserves. A healthy reserve is what bond rating agencies like to see when assigning a credit rating to local debt issues.
We understand the complaints about property taxes going up. But we also think they should be put in perspective.
The Iowa Fiscal Partnership published an analysis last month that said property taxes, as a share of total personal income in the state, have remained pretty steady over the past 20 years, at between 3 and 4 percent.
Also, the share of city and county property taxes, which are the main target of the limitation measures, made up less than 2 percent of personal income, according to figures compiled by Peter Fisher, research director at the Iowa Policy Project, and David Swenson, an associate scientist in the economics department at Iowa State University.
In our view, that doesn’t exactly paint a picture of a rapidly rising tax burden.
We also think that, in our border community, where Iowans have a distinct advantage over Illinois in the property tax department, investments to spur growth are better directed to items other than those areas where we already have an advantage.
So, we end where we began some weeks ago when we first took up this issue. We believe local spending and taxing decisions should be in the hands of city councils and county boards, not the state Legislature. The local officials know their priorities and budgets far better than lawmakers in Des Moines.
We hope our legislative delegation would respect the judgment of their local peers and not hamstring them.