Category: Schools

The True Cost of Property Taxes

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Many city, county, and school governments seem to disregard Iowans’ struggle to achieve when their only focus is more taxpayer money to spend on their special projects.

According to a recent WalletHub article, Iowa has one of the highest property tax burdens in the country. The 1.49 percent of their home’s value Iowans pay in property taxes yearly ranks as the 10th highest in the country.

Real-Life Impact

ITR recently heard about a woman’s journey trying to improve her life. She escaped her abusive husband, and after living in her car, under bridges with her three children, she ended up in a homeless shelter. With the shelter’s support, she got back on her feet and went back to school. She now has a degree in counseling and works full-time at the homeless shelter. Her kids are all good students, and her sons are now volunteer firefighters in the community. One of the things she is most proud of now is that she is a homeowner.

She worked hard to own a house but now is coming to grips with the property tax burden that comes with it. Her city, school, and county governments seem to disregard her struggle to achieve when their only focus is more taxpayer money to spend on their special projects.

The government needs to quit taking so much.

Property taxes were an unnecessary hurdle for her. Rent increases because landlords have no choice but to pass on that expense. Businesses struggle to afford leases because of tight profit margins. For homeowners, do they even own their own homes?

Think about your grocery bill, your gas bill, everything else. Expenses increase, and affordability decreases.

Paying 1.49 percent of your home value yearly for property taxes is simply too much. It needs to come down. Reducing our collective tax burden is better for us economically, but these things impact every Iowan at a fundamental level and change how people live their lives.

Property tax bills are determined right now.

Next year’s local government’s proposed budgets will soon be finalized. Many county supervisors have been lashing out at legislators and policies as simple as the assessment rollback. They point the finger at everyone but themselves because they have a tight budget and lose sight of the fact that Iowans don’t want to pay this much.

Local officials cannot see Iowans are overtaxed on their property taxes. Their entire paradigm is based on their local budget and what it means for them.

We’ve heard from many state legislators who are sick and tired of being lectured by city and county officials. The legislature gets it and knows how upset Iowans are because they go door to door and hear it from voters. Remember, last year’s property tax relief bill passed with only one dissenting vote.

Upset city councilmen and county supervisors try to blame and lecture those dastardly legislators of both parties who simply stood up for their citizens when their local government wouldn’t do it anymore.

The vast majority of these local governments are just flat wrong when complaining about cuts. Revenue was not cut; the legislature just limited their growth. Simply put:  Property tax revenue collected by cities and counties will continue to increase.

Only in government is slowing the growth of spending seen as a cut. Cal Thomas once said:

“It’s funny that government can never afford to cut taxes or spending, but taxpayers are never asked whether they can afford higher taxes.

When your city council, county board of supervisors, or school board chooses to increase spending and raise property taxes, they need to clearly explain why the government needs the money more than you do.

Take Action!

Use the menu at the top of this page to see how your community’s property taxes have grown compared to inflation, population, and school enrollment. Use this information to learn more about your local government budgets, share it with your neighbors, and start a conversation with your elected officials.

Keep an eye on your mailbox. Property tax public hearing notices will be mailed in March. ITR will keep you updated and provide information for you to share when you attend.

Property Tax Increases Take Center Stage on March 5th Special Election Ballots

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Some local governments say if you vote to renew a levy, taxes won’t go up.

But it’s like finishing paying for a car and then buying another with the same monthly payment. This hides the option of saving money instead!

The March 5, 2024, special election in 13 school districts and one county will put property tax increase questions before voters. The school districts are looking for increases in their physical plant and equipment levies (PPELs), which generate local property tax dollars for infrastructure and equipment repairs, and one district is also asking for an increase of its debt service levy (i.e., for bonds). Louisa County is asking voters for a 15-year tax increase to fund emergency medical services (EMS).

How Much Will Property Taxes Increase?

If these public measures were to pass, the total would increase next year’s property tax collections by $12.1 million. Even worse, these property tax increases are scheduled to last for 10 years or more. The total taxpayer commitment would be more than $137.4 million — and that is a conservative estimate because nobody can predict property valuation increases a decade from now.

The following table provides the details for each public measure.

What Is PPEL?

PPEL stands for “physical plant and equipment levy.” The Iowa Legislature created the tax in the early 1990s as a local funding stream to support school district facilities and equipment. One type of PPEL allows annual school board approval, while the other, including those listed above, requires public votes. Voted PPELs can be authorized for a maximum of 10 years and $1.34 per $1,000 of taxable value and are distinctive because school boards may issue bonds against them and repay the debt with interest from the revenue.

PPEL funds may only be used for maintenance projects and equipment. For the current fiscal year, 49 districts do not use this property tax levy, while 100 districts are at the maximum rate of $1.34. The statewide average tax rate is 81 cents, and it generates $206.7 million per year.

Not Telling the Whole Truth

Anytime government agencies hold a vote to increase spending or keep it the same, the burden on taxpayers increases because home values continue to go up year after year. Some districts are forthcoming about the effect on taxpayers and admit they are asking for more money; others use careful wording to convince voters the tax increase doesn’t exist.

One of the most common statements school districts will use is, “This will not cause an increase in the school district property tax rate.”

The claim is that the current tax rate includes a PPEL, and if voters agree to keep it the same, then taxes do not go up. The principle is similar to paying off a car only to run out to buy a new one at the same monthly payment. The continuing payments disguise the alternative: saving the money.

Another way to say the same thing points to a second misleading aspect, “The district believes this will not cause an increase in the school district property tax rate. This will extend the voter PPEL the district currently has for an additional 10 years. The district has had a voter PPEL since 1992.” Over time, keeping the rate the same produces inevitable increases as property values rise. Since 1992, Iowa residential property valuations have increased 274%, meaning the district has been effectively raising taxes for 30+ years.

Some districts go so far as to deploy scare tactics against voters like, “If the PPEL is not renewed, the district would need to use general fund or SAVE money to support building upkeep, transportation, and technology, delaying potential projects planned from SAVE funding.” Translation: the school would have to budget and spend money on its planned projects. State Secure an Advanced Vision for Education (SAVE) money is already earmarked for infrastructure purposes, so using it is not unreasonable.

Another common tactic is to claim, “The current PPEL rate is $0.67 per $1,000 of taxable property value. We are asking voters to consider raising that to $1.34. Despite the increase, the district is positioned financially to make changes that allow the district’s overall tax levy rate to remain flat, meaning an increase of the voted PPEL will not raise taxes.” Notice the details. The district is positioned to make changes, which doesn’t mean it will. Total spending will likely increase, meaning the burden on property owners will also increase.

Voter Resources

Click on your school or county in the table above or use the menu at the top of this page to visit your community's page to learn more about its property taxes and spending.

What Is a Revenue Purpose Statement?

What Is a Revenue Purpose Statement?

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Simply put, if the voters of your district do not approve of a Revenue Purpose Statement (RPS), your property taxes will be lower. If they approve an RPS, your school district can spend more money and keep taxes higher. All school districts receive the corresponding funds from the state regardless of RPS status; the question is where the money goes.

Details

Revenue Purpose Statement (RPS) is a ballot measure describing how a school district will spend sales tax funds the State of Iowa has dedicated to public schools through a program called Secure an Advanced Vision for Education (SAVE). State law mandates that all SAVE money must be used to pay for local property tax relief or school infrastructure needs. If a district wants to utilize its SAVE funds on infrastructure projects by spending that money or bonding against it, officials must ask voters to approve an RPS allowing them to forgo property tax relief.

Importance

Simply put, if the voters of your district do not approve of a Revenue Purpose Statement (RPS), your property taxes will be lower. If they approve an RPS, your school district can spend more money and keep taxes higher. All school districts receive the corresponding funds from the state regardless of RPS status; the question is where the money goes.

How Property Taxes Are Lowered

If a school district does not have an RPS, the SAVE revenue generated from the sales tax must be used to reduce specific local property tax levies. The only exception is if voters previously approved an RPS and the district used it for revenue bonding, then that debt must be paid off before SAVE revenue can be directed towards tax relief. The district must apply the money in the following order:

  1. To any debt service levy for general obligation bonds until it is reduced to zero. The maximum rate is $4.05 per $1,000 of taxable valuation.
  2. To any board-imposed physical plant and equipment levy (PPEL) until it is reduced to zero.
    The maximum rate is $0.33.
  3. To any voter-approved physical plant and equipment levy (PPEL) and income surtax until it is reduced to zero. The maximum rate is $1.34 and income surtax is 20%.
  4. To any public educational and recreational levy (PERL) until it is reduced to zero. The maximum rate is $0.135.
  5. To any authorized school infrastructure purpose.

Use the menu at the top of this page to see how much your district is spending.

RPS on the Ballot

Every March and September a handful of districts submit RPSs to voters. Voters should pay attention to why a district wants an RPS and what it intends to do with the proceeds.

Glenwood CSD, for example, failed to win approval of a general obligation bond in November, and officials have been very open about their plan to leverage SAVE money to build some of the facilities voters turned down last fall.  By using SAVE dollars this time around, they can bypass voter approval. Woodward-Granger CSD simply wants to extend its RPS because the current one is expiring. Meanwhile, Williamsburg CSD has listed examples of its past SAVE spending to imply how it will use funds moving forward.

The following table puts the seven pending RPS questions in context of whether the district placed a bond initiative on the November 2023 ballot as well as the growth (or decline) of local property taxes and student enrollment.

Misleading Comments by School Districts

Leading up to an election, school district officials attempt to make the case for their intentions, but their statements can sometimes be misleading.

The most common example is that “renewal of the district’s RPS will not lead to a property tax increase and will not extend an existing tax.” This is disingenuous because absent an RPS, the district’s property taxes would be decreased if all revenue bonds have been paid off. By enacting an RPS, the district extends its current property tax burden into the future. Variations on this misleading statement are that the RPS is “not endorsing a new tax burden” or that “the revenue generated has been used to meet our evolving needs while minimizing the burden on local taxpayers.”

Another misconception is that failure to approve an RPS means the district cannot access the SAVE funds. One example: “[we] ask voters to approve our Revenue Purpose Statement, a resolution necessary for districts to access sales tax revenue for a variety of purposes.” Districts receive SAVE funds with and without RPSs, it is only the use of those SAVE dollars that might be limited.

Revenue Purpose Statement Expiration

Legislation in 2019 set all RPSs voted on before July 1, 2019, to expire on January 1, 2031. For districts to continue spending SAVE funds as they wish, each must secure new RPSs approved by voters. Any new RPS will stay in effect through December 31, 2050, unless amended or repealed. For more information on the use of SAVE funds and Revenue Purpose Statements, click here.

School Districts Seek $1.2 Billion Amid Declining Enrollment

School Districts Seek $1.2 Billion Amid Declining Enrollment

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At a time when the economic environment is forcing families to budget for gasoline and groceries while property taxes keep climbing, school districts would do well to focus on projects directly related to the education of children.

On November 7, 2023, 34 school districts will ask voters to approve bond questions totaling more than $1.2 billion across 50 counties in Iowa. Many districts claim the new debt will be revenue neutral from a taxpayer perspective, or only increase the property tax a little, but most Iowans want their taxes to go down, not stay the same or increase.

Half of these districts, 17, have overseen property tax increases of more than 40% in the last decade. At the same time, 15 of the 34 districts have experienced declines in enrollment over the same period. Only 10 have seen enrollment increase by double digits, mostly in the Des Moines metro area in Dallas and Polk Counties.

While some of the proposed projects are likely necessary in districts with increasing enrollment and/or aging facilities, many are not so obviously a wise decision for taxpayers given the current economic environment. For example, it is understandable that Adel-Desoto-Minburn Community School District (CSD) is proposing a bond to build a new high school and renovate its middle school, given an enrollment increase of nearly 44%. The same goes for Van Meter CSD, where enrollment has increased nearly 55%, potentially justifying $18 million to build new classroom additions and expanded parking.

In contrast, the Beaman-Conrad-Liscomb-Union-Whitten (BCLUW) School District has seen an enrollment decline exceeding 20% over the last decade, yet is asking voters to fund additions to the elementary and high school buildings. Easton Valley CSD wants to build a new athletic fieldhouse despite a 10-year decline of over 16%.

Some districts are returning to voters asking for more money mere months after a March 7 election that included bond questions. The Irwin-Kirkman-Manilla-Manning (IKM-Manning) CSD won a bond approval in March but now is back for more despite a 5.8% enrollment decrease over the last decade. Others, including Durant CSD, North Tama CSD, West Sioux CSD, and Clarinda CSD, lost their bond requests but are trying the same questions again, as detailed in the following table.

The nature of each project is also important to consider. Especially in an economic environment forcing families to budget for gasoline and groceries while property taxes keep climbing, school districts would do well to focus on projects directly related to the education of children. While sports are a valuable component of children’s educational experience, their value is worth examining when measured against adequate classroom space or essentials like functioning HVAC, electrical, and plumbing systems.

Nonetheless, 14 of the bond questions entail building or enhancing athletic facilities. These projects range from new baseball and softball complexes to tennis and pickleball courts to expansion of wrestling practice rooms. New facilities are on the ballot for an indoor batting/hitting area, a swimming pool, and a new concession/ticket booth, among others. These may be nice amenities to have, but at a time of high interest rates and declining enrollment are they reasonable to put on the back of the taxpayers?

For worthwhile projects, communities can always look to other sources of funding than bonds. Not only do they have property taxes to pay for infrastructure, but they also receive a penny of every dollar subject to the sales tax through the Secure and Advanced Vision for Education (SAVE) fund. In fiscal year 2022, total SAVE expenditures across the state amounted to more than $880 million. These sources are in addition to Physical Plant and Equipment Levies (PPELs) school boards impose.

As the facts highlighted above illustrate, voters in these districts must educate themselves. School finance is difficult even for those who work in the public policy world, which is why the Iowans for Tax Relief Local webpage has been enhanced with new information to help voters make informed decisions when it comes to local government spending.

Visit itrlocal.org to explore your community’s spending, debt, and property tax collections.

November 7 Election Bond Questions Exceed $1.7 Billion

November 7 Election Bond Questions Exceed $1.7 Billion

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75 percent of Iowans will see a bond question on their November 7th ballot.

The November 7, 2023, election ballots in 50 Iowa counties will have bond questions that total $1.72 billion in potential new spending statewide. A majority of the state’s people, 75%, live in counties with bond referenda next month, and these residents face their local governments saddling them with new debt. In fact, some November 7 ballots will include additional questions related to property tax increases specifically tied to the proposed debt.

The bond questions cover all variety of local governments: Six are for counties; four are for cities; and the remaining 35 are for public school districts. The largest request is Polk County’s proposal to build a new terminal at the Des Moines International Airport for $350 million. The smallest is the City of State Center’s proposal to build a municipal fire station and emergency medical service (EMS) building for $1,500,000.

School Districts Asking for Bonds… Again

For some school districts, next month’s bond questions are their second this year. A March 7 election also included bond questions, and voters in the Durant Community School District (CSD), North Tama CSD, West Sioux CSD, and Clarinda CSD all said “no.” Nonetheless, these school districts have decided to bring the same questions up for a second-chance vote, some with more money added. In the case of the Irwin-Kirkman-Manilla-Manning (IKM-Manning) CSD, voters approved a bond in March, but the district is back asking for more money anyway, despite its declining enrollment.

Effect of a New Property Tax Law

Earlier this year, a wide-ranging package of property tax reforms passed through the Iowa State Capitol (HF 718) with overwhelming bipartisan support in both legislative chambers. One of the major provisions of the legislation is the restriction of bond elections to November each year. The intent was to increase voter turnout for issues that have a direct effect on property taxes.

Another new requirement in the legislation is direct notification about bond elections. The commissioner of elections or auditor for each county conducting a bond election must mail every registered voter a notice that includes the full text of the public measure to be voted on not less than 10 days or more than 20 days prior to election day.

Voter Education

To ensure efficient, accountable government, voters in these districts must educate themselves about public projects and spending in their communities. Public finance is difficult even for those who work in the public policy world, which is why Iowans for Tax Relief has revamped and expanded its ITR Local webpage with information to help you make an informed decision this November.

Visit itrlocal.org and explore your community’s spending, debt, and property tax collections.

Iowa Government Debt Increase Largest in Nearly a Decade

Iowa Government Debt Increase Largest in Nearly a Decade

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At a time when property valuations are increasing and Iowans are struggling financially from inflation, local communities must focus on paying their debt off, not finding new spending projects.

Iowa governments took on nearly 7% more debt — almost $1.3 billion — in fiscal year 2022 (FY22). The current Outstanding Obligations Report from the state treasurer shows this to be the largest increase since FY14. Iowa’s state and local governments now collectively owe $20.2 billion, which is roughly $6,320 per resident.

Especially with interest rates rising, property taxpayers should be asking their local officials — from cities, counties, and school districts — whether this is the right time to increase debt spending. Local leaders often tout spending projects as paths to prosperity for their cities and school districts, but this is simply a political assertion. Debt costs money. As interest payments, bond ratings, attorney fees, and more pile up, a pay-as-you-go approach is preferable over taking on debt whenever possible.

Among all levels of Iowa government with outstanding debt, cities currently hold the most. In FY22, cities had $7.5 billion in outstanding debt obligations, requiring $663 million in annual debt-service payments, or 7.7% of total budgeted city expenses.

Breaking down the total outstanding debt statewide by purpose, more than half of FY22 debt went toward public buildings/schools (36%) and utilities/sewer systems (24%). Smaller amounts funded transportation, housing and urban development, health care, and public safety.

Another important way to assess government debt is by the types of debt that have been issued. General obligation (GO) bonds, which voters are accustomed to seeing on the ballot, are the most familiar. This type of debt is backed by the full faith and credit of the government responsible for the bond, which typically translates into the lowest interest rates because governments can always raise taxes to pay bondholders. By voting on and approving such debt, residents have agreed to take the risk upon themselves.

Another common type of government debt is the revenue bond. This type of debt is supported by a specific revenue source, such as income from a utility (water/sewer), enterprise revenue (landfills/ garbage facilities), or a local option sales tax. In theory, the issuing government body may not be responsible for the debt if the revenue doesn’t appear, so the interest is typically higher than for GO bonds. However, defaulting on such bonds can affect the government’s bond rating and make borrowing without voter approval more expensive in the future, so officials have incentive to make bondholders whole no matter what happens.

Overall, Iowa’s debt is 46% general obligation bonds, 50% revenue bonds, 3% loans, and 1% lease-purchase agreements.

Iowa’s state constitution limits the debt of each political subdivision to 5% of the value of the taxable property within it, but this limit only applies to debt payable from property taxes, typically GO bonds. Revenue bonds or other types of debt paid from sources other than property taxes have no legal limit.

To some extent, the higher-than-normal debt in FY22 can be attributed to a carryover from the pandemic and the federal stimulus money sent to local governments, which flooded cities, counties, and school districts with cash. The combination of surging cash and record low interest rates encouraged cities to pursue infrastructure projects and refinance previously held debt.

In the new high-interest-rate environment, these activities need to change. Debt places a burden on taxpayers and can crowd other priorities out of local budgets. At a time when property valuations are increasing and Iowans are struggling financially from inflation, local communities must focus on paying their debt off, not finding new spending projects. A temporary increase for a good reason is understandable, but constant high levels of debt put the taxpayer on the hook for growing interest payments in the future.

The following table shows the top cities, counties, and school districts across the state of Iowa when it comes to debt levels. If you are interested in digging into the debt held by your local governments, visit ITR Local and review the countycity, and school district debt pages.

© 2023 Iowans for Tax Relief and ITR Foundation