The Iowa House on Tuesday night voted 58-40 along party lines for a sweeping property-tax-relief plan that could cost as much as $1 billion, despite repeated warnings from Democrats that the bill would give tax breaks to businesses while increasing taxes for Iowa homeowners and farmers.
"Do you really believe we should raise taxes on our parents, our children, our farmers in order to give a 40-percent tax cut to Wal-Mart?" asked state Representative Jerry Kearns, D-Keokuk, who also is a staff representative for the United Steelworkers Union. "I don't believe so."
Senate File 522, as approved by the House, includes a rollback on commercial and industrial property taxes from 100 percent to 60 percent of valuation over five years. To make up the lost revenue, the state eventually would provide $250 million a year to local governments. The bill limits residential and agricultural property-tax increases to 2 percent, rather than the current 4 percent. It also increases state aid to schools at a cost of up to $555 million by Fiscal Year 2019.
Representative Brian Quirk (D-New Hampton) joined Republicans in voting for the bill. Representative Kim Pearson (R-Pleasant Hill) joined Democrats in voting against it. Two Republican lawmakers - Dan Huseman of Aurelia and Ralph Watts of Adel - were absent.
"Property taxes have been studied to death, and it's now time for action," said state House Ways & Means Chair Thomas Sands (R-Wapello), the bill's floor manager. "If we do absolutely nothing, we will see the biggest property-tax increase the state has ever seen. Doing nothing is not an option."
State Representative Greg Forristall (R-Macedonia), a farmer, said this legislation will be "the biggest job-creating bill of this session."
The estimated cost of the House property-tax plan ranges from about $800 million to nearly $1 billion, depending on how much school districts are allowed to increase their budgets each year, according to the nonpartisan Legislative Services Agency. It gives extra relief to businesses that currently pay taxes on 100 percent of the assessed value of their commercial and industrial properties, as opposed to the 50 percent paid by homeowners and farmers.
"Tax increases are inevitable to homeowners and to farmers," said state Representative Dave Jacoby (D-Coralville). "The bill is not ready. This bill will cost $1 billion. Smaller government? I think not. Less expenditures? I think not."
State Representative Roger Thomas (D-Elkader), executive director of the Elkader Development Corporation, said the plan is too bold.
"I have several concerns about the aggressiveness of the proposed bill," Thomas said. "This bill will definitely shift the burden of property taxes to residential."
State House Minority Leader Kevin McCarthy (D-Des Moines) angrily shouted on the House floor that the House Republican plan for property-tax relief would lead to a large increase in state spending.
"Almost a billion dollars annually is going to have to come out of the state general fund," McCarthy said.
Attempts by House Democrats to approve a more modest plan for property-tax relief and ensure local governments are protected from losses in tax revenue failed Tuesday on party-line votes.
Jacoby proposed that cities be prohibited from reducing funding for law enforcement, fire protection, emergency medical services, and local emergency management, despite the loss of tax revenue. His amendment failed on a 43-53 vote.
Another amendment proposed by Thomas would have taken the bill back to the more modest, $200-million plan for a commercial-property-tax credit approved by the Democrat-led Senate. His amendment failed on a 40-58 vote.
Under the Senate plan, the state would create a property-tax credit for businesses at a cost to the state of $50 million in Fiscal Year 2013. The cost would grow incrementally to $200 million over four years, if state revenue increased by at least 4 percent in each of those years. Businesses would see about $600 in property-tax relief by taking the first $30,000 in assessed value and taxing it at residential rates.
"It will begin the process of relieving the commercial property tax, but it won't impact cities and counties and schools," Thomas said.
Sands praised the Senate bill as showing that state senators are serious about doing some kind of commercial-property-tax relief, and are attempting to address some of the inequity that businesses face. But Sands noted that money for the state Senate plan depends on state revenue growing by 4 percent each year.
"It actually adds another layer of complexity to the already complex property-tax system," Sands said. "The fact is it's so modest; does it really do anything to spark jobs across this state? That is something we all campaigned on vigorously in the last election."
Sands acknowledged that the $250 million a year that the state intends to give to local governments to make up for some of the $600 million a year of losses in tax revenue isn't certain.
"There is no such thing as a total padlock to tie up dollars or intent," he said.
But Sands said lawmakers do not intend to harm local governments.
After passage of the property-tax bill and a mental-health reform bill, members of the Iowa House went home for the week. Key players were told to be on-call in case leaders reach an agreement on the state budget and tax policy as they continue to work towards adjournment of the 2011 legislative session.
Some See Support Eroding for Nuclear-Power-Plant Bill
Opponents of a bill that would pave the way for MidAmerican Energy Company\ to construct an additional nuclear power plant in Iowa say support for the controversial bill has eroded and are hopeful it will fall by the wayside this legislative session.
"We know that just a few weeks ago, this bill had tremendous support," said Steve Falck, a senior policy advocate with the Environmental Law & Policy Center. "But since some in the lobby like AARP and Wal-Mart now have gotten involved, senators are now stepping back."
State Senator Bill Dotzler (D-Waterloo), a former supporter of the legislation, said he's now a "no" vote. He said Tuesday that support for the proposal has eroded, and that he believes a majority of the 50-member Iowa Senate is now opposed to the bill.
"We got the details and realized that the rate-payers really have to have all the risk in this thing," Dotzler said. "There's where the real concern comes from. I'm hearing it from my seniors back home and other people that are very concerned about this bill and its repercussions."
MidAmerican Energy is proposing a nuclear power plant that would sit on about 700 acres - on land about the same size as Iowa's only nuclear power plant, the Duane Arnold Energy Center near Palo. MidAmerican hasn't increased its rates since 1995. Company President William Fehrman has said customers would see a rate increase of up to 10 percent during the next decade should the company proceed with construction of a new $1-billion to $2-billion nuclear power plant. Such a plant wouldn't come online until 2020.
The bill paving the way for the nuclear power plant, House File 561, is one of the more controversial proposals of the 2011 legislative session. The legislation cleared the Iowa House with a 68-30 vote on April 26, the 25th anniversary of the Chernobyl disaster in Ukraine. However, the companion bill, Senate File 390, has yet to be debated in the Senate.
State Senator Swati Dandekar (D-Marion), the bill's floor manager, denied Tuesday that the bill is officially dead this year. She said she's just waiting for word from Senate Majority Leader Mike Gronstal (D-Council Bluffs) that the bill will be debated in the Senate.
Dandekar said she has not taken a vote count on the bill, so she doesn't know how many Senate Democrats would support it.
"We do need base load" energy, Dandekar said. "We are an industrial nation, and we are used to having electricity all the time. We are not used to blackouts and brownouts. To me, it is important that we consider nuclear energy as one of the options. I think this bill, in my view, really gives an option for nuclear energy as a base load. That's what this bill does."
Senate Minority Leader Paul McKinley (R-Chariton) said he believes the votes are there to approve the bill. He estimated that 19 or 20 Republicans support the bill, along with about 13 Democrats in the Democrat-led Senate. Yet McKinley acknowledged that the bill likely will not come up for a vote this year.
"If Mike Gronstal wanted that bill to pass and be debated, he would have brought it up two weeks ago," McKinley said.
The issue is one that crosses party lines. In the House, 12 Democrats joined Republicans in voting for the bill, while two Republicans joined Democrats in voting against it.
"We still need to have base load electric generation in this state," McKinley said. "To me, that means either coal or nuclear. It's not wind; it's not solar. I think natural gas can be used to supplement, but that's such a volatile price and commodity item that I'm not sure that's reasonable. Iowans are going to need to really decide if they want to have economic development. We've got to have sustainable, reliable, affordable electricity, and we've got to do something."
AARP and environmental groups are key opponents to the bill, largely because it would authorize MidAmerican Energy, with permission from the Iowa Utilities Board, to increase customers' rates upfront to pay for construction and preparation costs for a potential nuclear plant, even if that plant may never be built and even if costs increase.
The Iowa Utilities Board estimates that rates would increase about $7 a month, or about 10 percent on an average bill of about $70.
Dandekar said changes made to the bill would provide for more public input and allow MidAmerican Energy to recover its costs over 40 years, rather than just five to 10 years as originally drafted.
"This is a new approach to take away the sticker shock," Dandekar said.
McKinley maintained that electric rates would go up regardless of whether this legislation is approved.
"The cost of doing it, at least entering into an examination of nuclear, is far less than the cost of doing nothing," McKinley said. "Rate-payers will see their rates increase more if we do nothing, in my opinion, because of the lack of electric generation."
The Iowa Association of Business & Industry and some labor unions support the legislation. Businesses are large consumers of energy, and many see nuclear as helping to provide that energy.
Labor unions, meanwhile, see the legislation as creating jobs. Supporters say the proposed nuclear power plant would create more than 500 new construction jobs and another 300 to 800 jobs that pay an average of $75,000 a year.
The Iowa Federation of Labor AFL-CIO recently added its support to the bill, while Wal-Mart switched its lobbyist registration from "undecided" to "against."
"Wal-Mart is very good [at] watching the bottom line," Falck said. "They have stores in all 50 states, and the states that have passed similar legislation saw their electric rates jump, really spike. So they saw this legislation here and said, 'Hey wait a second. This isn't something that we want to be for, because we know what's going to happen to the consumers.'"
This article was produced by IowaPolitics.com. For more stories on Iowa politics, visit RCReader.com/y/iapolitics.
