Transparency requires accurate data and enforcement mechanisms when local governments don’t follow the rules.
Taxpayers across the state of Iowa received notices this spring that outlined proposals their local elected officials put forth for property taxes for the upcoming fiscal year. Many citizens expressed concern about the notices because they saw significant increases from the year before.
Some city leaders downplayed those fears and went so far as to say, “Everybody publishes their maximum levy even though it’s not going to be that high; no one takes into account the rollback, and I don’t blame them it’s difficult to understand.” While others said, “We don’t plan to raise the levy at that level at all. Honestly, it’s just a way of scaring them into concern and fright that we’re going to raise taxes at this level when that’s never been our intention.”
Given these statements from city leaders, Iowans for Tax Relief Foundation (ITRF) decided to determine if they were accurate. We surveyed all 99 counties and 45 different cities across Iowa to better understand if property tax rates ended up being “that high” or if they were reduced from their proposed levels.
The Iowa Legislature enacted a property tax relief package (HF 718) last year that implemented multiple reforms for the benefit of taxpayers. A key principle behind the package was increasing awareness of and transparency into the process when local property taxes are set. A direct-notification and hearing provision requires county auditors to mail statements to taxpayers in late-March with detailed information about local governments’ proposed budgets and property tax rates.
The mailer must include data for proposed city, school district, and county budgets so taxpayers can specifically address the proposals at public hearings held before budgets are approved. The date, time, and location of the hearings must be included in the statements, and according to state law, after the hearings the budgets and property tax rates may only be lowered, not raised. This new system helps Iowans understand the process and spurs engagement with local elected officials. However, the policy’s initial run exposed some areas in which improvements should be made
Countywide Rate
A survey of Iowa’s 99 counties found that 14 counties chose to lower their property tax rates (per thousand dollars of taxable valuation) from the amount proposed in the mailers and hearings, as shown in the table below. The reductions ranged from 0.1%, amounting to less than a penny, to 33%, saving taxpayers more than $1.85 per thousand dollars of taxable value. Eighty-two counties certified the rates as they initially proposed.
Surprisingly, three counties certified rates higher than those they proposed, which is not permitted under state law. The county auditors indicated errors in their original data entry — the unintentional omission of the debt service levy. Debt obviously must be paid, so they added this amount to the approved property tax rates. Although these were likely honest mistakes, taxpayers in these three counties were not sent updated notices before the budget hearings and were therefore deprived of their ability to be heard on the true levy.
These instances expose a concerning fact about the reform: There does not appear to be an enforcement mechanism when local governments don’t follow the rules. We believe these three cases were merely accidental oversights that stemmed from this being the first year of a new system. However, what is to stop a local government from intentionally subverting the law and passing higher packages of property tax rates than those they disclosed? What if they would simply choose to ignore the law outright if they think the local political environment will let them get away with it?
Rural Rate
Iowans who do not live within city limits additionally pay a rural property tax rate. This rate must be included in the direct notification mailer and is also subject to taxpayer input during the public hearings. A survey of the 99 counties found only five counties lowered their rural rates from the proposed amounts. The following table shows that the smallest reduction was 3%, or 13 cents, while the largest was 10.5%, amounting to 46 cents per thousand.
A survey of 45 cities across the state found that only 6 chose to lower their property tax rates (per thousand dollars of taxable valuation) from the amount proposed in the mailers and hearings, as shown in the table below. Cities were chosen from three different population groups: the largest 15, the middle 15, and the least populated 15 cities ITR Local has in its database (roughly 1,000 in population). The reductions ranged from 0.1%, amounting to a penny, to 9.8%, saving taxpayers more than $1.60 per thousand dollars of taxable value. Thirty-nine of the cities surveyed certified the rates they initially proposed.
While the property tax legislation did increase Iowans’ involvement in their local government budgeting processes, the goal of lower property taxes was not realized for many across the state. Some aspects of the process should change before budget decisions are put in front of taxpayers again next year. Iowans for Tax Relief Foundation (ITRF) recommends making the direct-notification process better for taxpayers in the following ways:
1. Proposed Rates Cannot Be Increased
Local governments should not be permitted to certify rates higher than the stated proposals they provided taxpayers. If a government makes a mistake, such as excluding the debt service levy, a new notification must be sent to taxpayers, and a new hearing must be held. Any budget that is passed with a rate higher than what was disclosed to taxpayers must not be certified and that local government must start their notification and hearing process over.
2. Rate Impact for Each Homeowner
Auditors should send every taxpayer a statement disclosing the direct consequence of a proposed property tax rate on his or her specific property, whether it is sent by postal mail or electronically.
This year, taxpayers received mailers that only provided the impact of the proposed property tax rates on a hypothetical $100,000 residential property. The actual effect of new tax rates on each taxpayer’s property could be quite different when factoring in changes in the taxable value. While tax legislation enacted in 2024 (SF 2442) did make some technical changes in this area, it did not fix the problem.
3. After-Work Hours for Hearings
Most counties held their hearings between the hours of 8:00 a.m. and 10:00 a.m. and many cities held their hearings during the day— a very difficult time for taxpayers to attend. Some cities and a few counties held hearings after normal work hours, such as the city of Dubuque at 6:30 p.m. and Muscatine County at 7:00 p.m. Holding public meetings after 5:00 p.m. should be a requirement.
4. Notices on County Websites
While state law currently requires notice to be “posted and clearly identified” on local government websites, along with continued availability of all notices from prior years, many are not in compliance. ITRF visited the website for each of the 99 counties and 45 cities in this survey to review their proposed property tax notices, and in many cases, personnel had to email copies of the documentation to us because it was not available online. Taxpayers require an enforcement mechanism to ensure county auditors comply with this provision of the law.
5. Accurate Data in the State Database
The Iowa Department of Management keeps records and documentation for all local governments. The budget database includes a copy of each local government’s proposed property tax notice and the associated rate.
ITRF discovered that, when local governments uploaded their certified rates into the Department of Management’s system, those governments proposed property tax rates were replaced with the certified rates, resulting in inaccurate data. If taxpayers or researchers wish to investigate previous years’ proposed rates (because it is not available on the government’s website), the data is wrong. This is a simple database fix that deserves the appropriate attention to make the state’s data accurate.
Print a PDF