Cities collectively increased property taxes on their residents by nearly $115 million, even with the restrictions set forth in the property tax reform law.
Iowa is home to 940 incorporated cities, and their property taxes increased approximately 7% in total over last year’s collections. That percentage represents almost $115 million more taken from residents in just one year, even with restrictions set forth in 2023’s property tax reform law (HF718).
Similar to the restrictions placed on counties, the state’s recent property tax legislation groups cities into three tiers: Assessment Growth Below 3%, Assessment Growth Between 3-6%, and Assessment Growth Above 6%. Those cities with growth less than 3% were not subject to any restrictions.
Out of the 934 cities evaluated from fiscal year 2024 (FY24) to FY25, 320 were not impacted by statutory restrictions at all, including 206 cities that experienced negative valuation growth. 147 cities faced the 2% limitation, and 467 faced the 3% limitation, including more than 300 cities with valuations that grew by more than 10%.
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Even with restrictions in place on so many cities, how did property taxes grow so much? The general fund levy is only a part of the picture. Cities have access to various other property tax levies that are not subject to statutory limitations. Many of these levies, such as those designated for debt service, insurance, and employee benefits, fall outside the restrictions set by HF718.
The city of Des Moines serves as a good example of the broader statewide situation. After a 2% statutory limitation, the city’s maximum general fund levy on property was only permitted to increase 2%. This might suggest relief for taxpayers, but in reality, total property taxes in Des Moines rose from $148.5 million in FY24 to $155.3 million in FY25—a 4.6% overall increase. The increase was driven by other property tax levies that are not subject to growth restrictions, including a 40% increase for the insurance levy and an increase of more than 10% for the employee benefits levy.
From FY24 to FY25, 161 cities reduced property taxes year-over-year, while another 27 held property taxes at the same level. That means, of the 934 cities evaluated, 746 (80%) chose to increase property taxes on their residents. Recent property tax reform legislation was a valiant attempt to rein in local government spending, but clearly, local governments are still finding too many avenues to increase their spending and pile onto the property tax burden.
This situation serves as a reminder to Iowa lawmakers of the late economist Milton Friedman's cautionary words: “One of the great mistakes is to judge policies and programs by their intentions rather than their results.” State legislators should implement a policy that effectively limits total local government spending. After all, without excessive spending, there is no need for excessive taxation.
In 2024, the passage of SF2442 loosened statutory restrictions, giving local governments greater opportunities to raise property taxes—a step in the wrong direction. Collectively, cities have increased property tax revenue from $997.25 million in FY10 to $1.75 billion in FY25, a staggering 75% increase over 15 years. Policymakers should ask themselves: how many Iowans have seen a 75% increase in their paychecks for doing the same jobs during that time?
While cutting spending may seem challenging to local policymakers, making tough decisions is a core part of their responsibility. Reform efforts can no longer only target select revenue streams or allow exceptions. Iowans need a strict cap on how much property tax local governments can spend annually.
A 2% hard cap on the total property taxes a local government can collect is the most viable solution to curb tax growth. This straightforward limit would allow cities to adjust their budgets while staying within their means—just as Iowans do year after year. Such a policy aligns with sustainable growth and reflects taxpayers' ability to pay. Without a strict, comprehensive cap on property tax revenue, cities will continue unchecked taxation and spending.
Iowans cannot bear the burden of property tax increases that outpace inflation. Residents are already taxed by multiple local entities—schools, counties, and community colleges—which causes bills to grow faster than their incomes. Policymakers must ensure that any cap on taxes and spending remains firm, resisting carveouts that could dilute its effectiveness.
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