Jun 26, 2023 - News

Iowa's tax breaks lead to a city, county cash crunch

Illustration of a despondent George Washington on the dollar bill

Illustration: Sarah Grillo/Axios

A new property tax break for people 65 and older will cost Iowa's city and county governments an estimated combined $57 million a year in lost revenue, according to estimates from the state's Legislative Services Agency.

Why it matters: The shortfall could force cuts to essential local government services like fire protection, trash pickup and street maintenance.

State of play: The tax break is part of a bill passed at the end of this year's legislative session that includes about a dozen tax or fee changes that will shrink local budgets. Altogether the changes amount to an estimated annual loss in revenue of $100 million statewide over the next four years.

Driving the news: Some of the changes begin in the fiscal year that starts Saturday.

  • Tough conversations are ahead about possible cuts to services, Lucas Beenken, a public policy specialist for the Iowa State Association of Counties, tells Axios.

Catch up fast: Both parties voted nearly unanimously for the bill, partly in reaction to record increases in some counties' property assessments that many lawmakers feared would result in massive tax increases, the Des Moines Register reports.

  • The bill creates new limits on city and county property tax rates, repeals some taxes and creates new property tax breaks for seniors and veterans.

Zoom in: The 65+ tax break will cost Des Moines and Polk County — the state's largest city and county governments — between $500K-$600K in estimated lost revenue in the 2024 fiscal year and $1 million or more the following year, according to projections from their fiscal staffs obtained by Axios.

  • Both governments continue to evaluate other changes in the bill and will discuss how to cover drops in revenue in upcoming work sessions, finance department staffers told Axios or said in a public meeting.

The big picture: Des Moines was already bracing for spending cutbacks in upcoming years as the city reaches its self-imposed debt ceiling.

  • Revenue losses linked with some of the tax changes won't be known until property owners apply for the tax break, Nickolas Schaul, DSM's finance director, tells Axios.
  • Polk County's applications for the 65+ break are due by Saturday.

Of note: Registered voters automatically qualify and don't need to apply.

  • Those who aren't registered or aren't sure should apply or inquire with the county assessor.
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