Email or print a PDF of this page. This might take 10-15 seconds.Counties are cashing in on hefty property taxes from high assessments, and reducing rates won’t halt financial gains.
You might hear your county officials complaining they are facing dire straits this year because of the new property tax law. The truth is that too many counties have been cashing in on hefty property taxes from rapidly increasing assessments, and redirecting some of these financial gains toward rate reductions shouldn’t affect the services they offer.
Every county is supposed to be allowed a maximum general services property tax levy of $3.50 per $1,000 in valuation, with another $3.95 for the rural area of the county.[1] Over time, special provisions in state law have given counties ways to exceed those rates. To make the property tax structure easier to understand and more predictable for taxpayers, the new law consolidates some levies and requires counties gradually to reduce their top rate to the $3.50 and $3.95 maximums.
Counties Raised Their Rates
While the legislation was working its way through the system before being enacted in May 2023, county officials knew it would eventually become law. In their final budgets before implementation, many counties made changes to hedge against future cuts.
They certainly had room to do so. Iowa property valuations increased as much as 22% above the prior year in some areas, so counties have no need for increased levy rates, given these extraordinary assessment bumps. Many of them were already enjoying the advantages of rates above the supposed maximums.
In fiscal year 2023 (FY23), 30 counties charged more than the maximum general services rate of $3.50, and three of them were above $3.95 for rural services.
For FY24, the number above the maximum for general services jumped to 40 counties, with rural rates above the maximum in five counties. The statewide average general county services rate rose over the same period from $3.55 to $3.78. Growth of the average rural addition was from $3.18 for FY23 to $3.27 for FY24.
To put that into perspective, Decatur County has the highest general services rate, and it jumped 12 cents to $6.71 for FY24. On the rural side, Audubon has the highest rate, which increased another 2 cents, to $5.38 on top of the general services rate in that county. Even so, Audubon comes nowhere near the highest total rate. The combined basic rate (general services and rural) in Clarke County is $9.64 for FY24.
Another key statistic is the county with the largest increase over the one-year timeframe; Lee County raised its general services rate from $3.50 to $5.85, a $2.35 jump in one year, which was the largest in the state.
Keep in mind that counties impose other levies on taxpayers, too, pushing total tax rates even higher. The highest-taxed residents in the state at the county level are currently the rural residents of Winnebago, who pay $15.52 per $1,000 of property, all in.
How the Legislation Works
The recent legislation reduces property tax levies by requiring counties to apply new growth toward lowering their levy rates. If a county experiences growth in property valuations, it can no longer keep the entire windfall but must adjust its rates.
Triggers vary this requirement based on the non-TIF taxable valuation growth.[2] If a county’s non-TIF taxable growth is 3% or less, it can maintain its current levy rate and collect the increase. If a county’s non-TIF taxable valuation growth is between 3% and 6%, it must reduce its total property tax collections by 2% by adjusting its rate downward. If a county’s tax base grows at 6% or more, the mandatory reduction is 3%.
For simplicity, the following examples consider only the general services levy:
- County A has a general services levy rate of $3.50, and its non-TIF taxable valuations increase from $1.00 billion to $1.02 billion, which is up 2% year-over-year.
a. The county can keep its tax rate and all property tax growth that year. - County B has a general services levy rate of $4.50, and its non-TIF taxable valuations increase from $1.00 billion to $1.04 billion, which is up 4% year-over-year.
a. The county is required to reduce its total tax dollars collected by 2% while keeping the rest of the increase. - County C has a general services levy rate of $4.50, and its non-TIF taxable valuations increase from $1.00 billion to $1.07 billion, which is up 7% year-over-year.
a. The county is required to reduce its total tax dollars collected by 3% while keeping the rest of the increase.
How Much in Savings?
From 2017 to 2023, county valuations went up an average of 4.3%. Every county saw its valuations grow by at least 3% during one of those years, and 70 saw valuations increase by more than 6%. In rural areas, the average growth across the state from 2017 to 2023 was 4.2%. Again, every county’s rural property values went up by at least 3% during one of those years, and 78 saw valuations increase by more than 6%.
The new county tax rate restrictions will lower property taxes statewide. Exactly how great an effect taxpayers see depends on how much the general and rural tax bases of each county grow from FY25 to FY28. The benefit will be most substantial in the 40 counties currently above $3.50 for general services and five counties currently above $3.95 for rural services, but any county with a big increase in property values will enjoy a tax reduction from what their taxes would otherwise have been.
[1] Certain county property tax levies apply to all taxed property within the county; these are called general levies, while other levies apply only to property that is outside of incorporated cities, which are called rural levies. Properties located in cities are only subject to the general levies, while rural properties are subject to both general and rural levies.
[2] This refers to the taxable valuation growth outside of specially designated districts with tax increment financing (TIF) programs.