County supervisors share concerns about recent state tax law changes

By Zach Jensen,

Fayette County Supervisor Janell Bradley proposed that, to address the impacts House File 718 is having on mostly-rural counties, county officials need to talk to Iowa’s urban legislators about a two-tiered approach to the issue — one formula for urban counties and another for rural. (Photo by Zach Jensen)

State legislation is causing rural counties to be more concerned over how they will fund future projects and maintenance costs.

House File 718 was the main topic of discussion during a six-county meeting held the morning of Dec. 11 at King Pin Entertainment Center in Decorah. County supervisors and engineers from Winneshiek, Howard, Chickasaw, Fayette, Allamakee and Clayton counties met to share notes on several issues — especially HF718, a topic proposed by the Fayette County Board of Supervisors.

House File 718 was signed into law by Iowa Gov. Kim Reynolds with bipartisan support in May of 2023. The bill relates to several aspects of government funding, but a number of elected officials in the region are most concerned about limits the bill places on a county’s ability to generate property taxes. 

“HF718 restricts how much we can increase property tax collections each year,” said Winneshiek County Auditor Ben Steines in an email to the supervisors last week. “Last year at this time, for the current budget, we had an increase in taxable valuation growth of less than 1 percent. So, for the current year, the General Fund rate was frozen at the same level as the year before. Our total collections for the current year are an increase of 0.93 percent over the previous year. This year, FY26, we have a taxable valuation growth of 3.33 percent, so with the restrictions, we must reduce our levy rate so that our property tax collections don’t exceed about 1.3 percent more than the current year.”

Fayette County Supervisors were reportedly curious as to how many counties had exceeded the cap imposed by HF718.

“Last year, we were fine. This year, we went a little over,” Fayette Supervisor Janell Bradley said. “It’s new for us, so we’re just curious how it’s impacted the rest of you, because … it’s going to have an impact if you get none back.”

Bradley said it was her understanding that Howard County went somewhat over the 3.5 percent property tax cap last year.

“I don’t know where this plane is going to land,” Howard County Supervisor Pat Murray said of the situation. “It’s still up in the air. They’re going to cut these taxes. I know they’re going to keep going, but for these small counties — Howard included — they just think we have unlimited money. If your valuation isn’t going up, if you’re not building commercial property and stuff like that, you’re flat-lined here. We haven’t done anything crazy for eight years, but we didn’t figure for inflation or just the cost of everything going up over eight years. We’re fine if they just leave us alone.”

Bradley said HF718 seems to have been proposed and approved primarily by urban Iowans, who failed to consider the impact the bill would have on mostly-rural counties, which she estimated is likely 80 percent of Iowa’s 99 counties. She went on to say handling the local tax base can’t be solved with a one-size-fits-all approach, and she noted public schools in many communities receive a large portion of county tax funds. 

“So, I really think we need to get this issue to our state legislators,” Bradley said. “Maybe our local people do understand, but apparently we need to lobby with those other people who are in those urban areas and make them understand that maybe they need two tiers — a separate tier for urban counties and an entirely different formula for the rural, because this isn’t going to work for us.”

Winneshiek County Supervisor Steve Kelsay said he foresees another potential issue arising due to HF718 — he said a county’s smaller towns, under the same financial pressure as the county, may choose to become unincorporated, which Kelsay said would shift a towns’ financial obligations onto the county government.

“They want to cut us deeper and deeper,” Kelsay said. “This really means we need to reach out to the legislators, because this is foolish.”

Winneshiek County Supervisor Shirley Vermace claimed HF718 was passed without most Iowa legislators even reading it. 

“They didn’t know what they were passing,” she said. “And, if you guys were at the (Iowa State Association of Counties) conference in Des Moines, where we had this discussion, we were told basically ‘If you bring that up, and if you keep hounding them about this, they’ll hurt it more.’ That’s what we heard at the Des Moines conference. And, you can’t get answers from the legislators on this. They’re not listening.”

No official action was taken during last week’s six-county meeting, but Winneshiek County Engineer Michael Kueny, who hosted the six-county meeting, asked the group if they would generally support contacting Iowa’s District 32 State Sen. Mike Klimesh regarding the state legislation. However, Bradley indicated she would prefer to begin the discussion with lawmakers from Iowa’s more populace counties.

“I think we need to talk to some of those that represent the urban areas — make them understand a two-tiered system is needed,” Bradley said. 

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