The Iowa state legislature should be applauded for undertaking the ambitious task of overhauling Iowa's property-tax system. Few will disagree that the change is needed. Unfortunately the outcome of the proposed legislation needs considerably more discussion from all corners of the state. This is a wakeup call for the legislature and all Iowans. The pending property-tax policy will be a disincentive to invest in Iowa real estate. It raises serious questions regarding equity of taxation while impeding the ability of communities to retain and attract others to return or relocate to the state.

The desire of legislators to hold local taxing authorities solely accountable for increases in budget amounts rather than increases in market value of the property is understandable. The present property-tax system is confusing, and the ability to calculate what impact market appreciation has on tax revenues is difficult given the historic decline of the state-mandated rollback. The reality is, the State of Iowa has chosen real estate, a complex and dynamic financial asset, to be the primary funding mechanism for school and community needs. How that is achieved is the underlying question, which needs greater consideration and discussion from all levels of government, the private sector, and citizens at large.

On January 1, 2005, the assessed valuation will be the basis for the future taxation. That basis will not change, until a property is sold or enlarged by addition. The likelihood two similar properties in a neighborhood will be taxed at different amounts for similar services is great, as properties change hands, or don't, over time. This inequity cheats those that believe Iowa is a state of fairness, and a place that values generational success.

The tax policy will also create a disincentive for investment. Considering present interest rates, current homeowners will not have a financial desire to move up into a newer or larger home when faced with a tax penalty for doing so. As they have with pension taxes, developers in neighboring states will target potential buyers in Iowa, further highlighting the inequities of taxation between neighbors and friends. More important, Iowa's welcome mat will be a higher tax burden for those relocating or returning home. Is this the legislature's answer to the empty-nesters we seek to retain as their families downsize and change?

As important, the proposed "reforms" do not address current inequities. Multi-family properties of four units or more are still taxed as commercial. Renters who more than likely are at the lower end of the income bracket will continue to pay a proportionately higher amount of property taxes. And considering the nature of commercial real estate and the reality local officials will minimize any impact upon the voting residential homeowner, the present imbalance of commercial taxation will continue.

Overall, the proposed property-tax policy will continue to hurt urban Iowa. The larger urban communities will have higher tax rates per square foot than the suburban or bedroom communities with larger homes and higher valuations. Considering these built-in disincentives and inequities, the property-tax-reform bill should be placed on the back burner until it can be re-evaluated.

I strongly encourage the Iowa Senate and Governor Vilsack to hold back the property-tax reform for this session, to allow an open and inclusive process and discussion. Ideas and reforms hidden by study groups and caucuses of a select few are no way to reform Iowa into a proactive, competitive state. Replacing antiquated policy with flawed and inequitable "reform" is not in the best interest of Iowans. It is time for State and local leaders to seek workable solutions together to move Iowa forward.

Bob McGivern
6th Ward Alderman

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