The House’s proposed legislation would require cities, counties, and school districts to set aside at least 10 percent of the total cost of any project for which bonds are to be issued and require notices be mailed to each property owner with personalized taxpayer information about the effects of potential spending increases on their property tax bills.
Just a few days into their current session, legislators in the Iowa House introduced HF1 to address property taxes. Division 3 of the bill, which would change the way local governments levy bonds or debt, should not be overlooked. Since a substantial portion of debt is paid with property tax dollars, well-crafted changes to the system can ultimately have a huge effect on local property tax burdens.
Under the proposed legislation, cities, counties, and school districts would be required to set aside at least 10 percent of the total cost of any project for which bonds are to be issued. These funds, which must be used toward the project, ensure governments have planned carefully and signify to lenders that the lower risk justifies lower interest costs. That’s fiscal responsibility.
On the good governance side, local governments are already required to post public notices of bond proposals, but this bill would also require notices be mailed to each property owner within the jurisdiction. The mailing must include all the information on the public notice (amount, estimated cost, etc.) plus examples of the property tax increase, for every property classification, needed to pay for the bond. All property owners should be aware of proposed bonds and their own costs for the debt. Currently, local governments can incur debt without connecting it to the associated tax increases.
Taxpayers in high-debt jurisdictions in particular will benefit from these reforms. Ida County, for example, is carrying $5,009 debt per person, while the City of Coralville’s debt is $16,485 per person, and the Clear Creek Amana Community School District has $35,134 in debt per student.
Unsurprisingly, some local school leaders have already voiced opposition to the changes, but House lawmakers are demonstrating a desire to put the taxpayer first. Rep. Bobby Kaufmann (R-Wilton), who leads the House’s committee on tax policy, emphasizes the goal of the legislation is to start conversations on property tax reduction. We agree; indeed, the reforms in Section 3 of HF1 echo proposals in ITR Foundation’s property tax toolkit.
The requirement to send bond proposals directly to taxpayers is an example of direct notification, which can be extended in other ways to provide taxpayers personalized information about the effects of potential spending increases on their property tax bills. Every reform along these lines is a step toward increased voter participation in bond elections.
Most Iowa citizens are aware that elections take place in November each year, but the many special elections held throughout the year can slip through the cracks of voters’ busy lives. An additional reform to remedy this situation would be a requirement that financial questions directly affecting property taxes be held during general November elections, when voter turnout is highest. While the politics of property tax reform will have to be sorted out in the legislature, it is always a win when lawmakers are thinking about the debt burden on taxpayers and seeking ways to increase transparency related to bonds.