Meeting in the newly christened New Vienna Community Center, over a dozen Dubuque County mayors and a pair of supervisors gathered to discuss a host of issues, ranging from nuisance abatement to the 2020 census to lead-based paint grants. But, one topic was more passionately discussed than others — new legislation regulating how cities can collect taxes.
Senate file 634, or what’s been dubbed the “truth in taxation” legislation, was recently passed despite heavy opposition from local governments, as was evident at Thursday’s meeting. In essence, the legislation limits a city from increasing its tax revenue by more than 2% without additional public hearings and a super-majority vote from the governing body.
Beth Bonz, the city administrator with the City of Asbury, spoke with the group about what the impact will mean as municipalities are gearing up for budgeting season.
“Effective for your fiscal 2021 budgets, you’re limited to 2% growth, and it only affects cities and counties, school districts are left out of this,” Bonz said. “If you go over the 2%, it takes a super-majority to pass, and then you have to go down the line on the budget form and say ‘we increased this by 2% because my culvert broke or we had a really bad snow year’ or whatever reason is you’re going over the 2%.”
State legislators have stated this will add a layer of transparency to the budget process, allowing citizens to see exactly where and why their taxes are going up as well as providing them an additional opportunity to speak their mind at public hearings. But opponents have argued the budgeting process at the local level is already far more transparent and accessible to the average citizen compared to the state level.
“There’s probably no one more transparent than small cities,” Bonz said of the budgeting process. “They made this transparency law thinking that (cities) are getting all of this additional assessed value, but they’re really not. And in a small community, it really hurts a lot.”
Depending on the size of the community and its tax base, that 2% figure could represent $2,000 or $10,000, which Bonz said could be absorbed to cover bills for street cleaning during a winter with heavier than expected snowfall.
For cities that want to update equipment or improve infrastructure, limiting the number of dollars they collect will slow growth, the mayors argued.
“Even if you’re a growing community, it’s going to stunt your growth,” Cascade Mayor Greg Staner said of the regulations. “Our operating costs go up every year, just like any other business. I said this from day one — they’re just going to slow everything down.”
Dyersville Mayor Jim Heavens said he was surprised local state representatives voted in favor of the bill even though local community elected officials and city staffs were strongly opposed.
“I thought this was one of the dumbest things I’ve ever seen come out of (the state legislature),” Heavens said. “It’s a complicated deal, but the thing that bugs me the most is the real estate tax is not a tax that the state levies — they’re trying to tell us what to do with the taxes we levy.”
Heavens said he believes state lawmakers have good intentions, but from an ideological and political standpoint, it’s difficult to argue to the public against a measure that appears to lower taxes.
“It doesn’t make our side popular; I mean, who isn’t for lower taxes?” Heavens said. “But they’re going to hurt the very people and towns they’re trying to help — the ones that aren’t growing real fast, the ones that are trying to make a comeback — they’re really kind of stifled by this.”
As Heavens has stated previously, cities like Dyersville are able to keep its general fund levy rate relatively low and stable because they are able to offset costs by capturing tax dollars that come from growth and increased valuations.
“If Dyersville is growing at 3.96% and we’re spending all this money to do that and we can only claim 2% growth, I think that would hurt us — there’s growth there in your taxable base that you can’t use,” Heavens said.
Heavens said they still haven’t fully realized all the nuisances of the legislation, but he theorized it likely wouldn’t have too much of an impact on Dyersville’s budget. He said if there is a proposal to go beyond the 2% growth and there isn’t full support from the council to do so, the budget proposal likely wasn’t good to begin with.
Bonz said some of the taxpayer ire is directed at the city when their bill is higher, but, some don’t realize that the cities on average are only capturing around 30% of that money.
“How many people have walked into city hall and thought their whole property tax bill is going to the city?” Bonz asked. “But in reality, it’s going to the city and the county and the school district, and most of that pie is the school district.”
Using Epworth as an example, 35% of tax revenue goes to the city, 39% to the school district and 20% to the county.
Dubuque County Supervisor Ann McDonough said this is a complex issue that can be difficult to comprehend, even for those who have the educational resources and time to devote to understanding it.
“You do have to look at the different levies and the property classifications and all the other little pieces and it’s difficult to understand, even for me, even though I hear this again and again from trusted professionals — it’s complicated,” McDonough said.
McDonough said it can be confusing when one governing body says they are lowering the levy rate but then a taxpayer finds they are getting hit for more property taxes because their valuations have increased.
“Again, you’re not attempting to spin it, you’re just trying to answer the question,” McDonough said, “but all they know is the check they write to the treasurer is bigger than it was last year.”
The new legislation also requires an additional public hearing if a city intends to go beyond that new 2% cap. But, the public hearing on going beyond that maximum growth has to be set before the public hearing for the actual budget, which presents a challenging timeline for councils who don’t have a very precise idea of how much money they need to operate early in the process.
“So you have to have the meeting before you’ve figured out what you need,” Epworth Mayor Sandra Gassman surmised.
For the smaller communities that may only meet monthly, making these predictions will be a challenge, especially given that most of them publish their notices in a weekly newspaper.
“And your county auditor might not have your property values to you much before that,” Bonz said of the timeline.