It’s been more than a decade since the Decorah City Council approved a program aimed at improving the availability of local housing, and the topic remains a major discussion point today.
In 2013, city officials designed and approved a tax abatement allowing a five-year, 100 percent property tax abatement on new residential construction and remodeling projects, as well as commercial residential properties anywhere within the city limits. The program was revisited in 2022, when the city limited the tax abatements to the first $75,000 of a property’s valuation.
Decorah City Manager Travis Goedken said some people might not realize that limitation exists.
“If they build a home valued at $500,000 and still end up with a tax bill, they might get upset because they think they are supposed to get their property taxes abated,” he said.
Goedken explained the goal behind the city’s tax abatements was to promote commercial and industrial projects in Decorah by making them more affordable through the forgoing of property taxes for a set number of years.
“If I have a $2 million project, and my cash flow is in the red, I’m not moving forward with my project,” Goedken said, using a hypothetical situation. “But an abatement can be structured in a way it reduces the project’s expense for the first five to 10 years and might push the project into the black, so the project happens. The result is a business that adds tax dollars to the city, employees working and people purchasing items — all contributing to our tax base and lowering existing residents’ taxes.”
Property tax relief has been a major talking point among state legislators in recent years, but Goedken challenged area residents to compare their bills and personal incomes to what they were 10 to 20 years ago.
“On a statewide average, the percentage of property taxes in Iowa is the lowest in my lifetime,” Goedken said. “Property tax is the highest it has ever been, but so are the prices of everything else. Relative to personal income, property taxes are the lowest they have been in at least four decades.”
Assessed values rise and drop based on market trends and, in Decorah, assessed valuations have jumped considerably since the city’s tax abatements were approved in 2013, according to the city’s numbers.
“It’s because people want to live here and people are paying crazy prices for houses here,” Goedken said. “If you are in a community that didn’t see growth, or you’ve seen a decline in your valuation, you are hit twice as hard because your rollback reduces the amount of growth you can observe.”
Over the past decade, state-wide tax law changes have resulted in some changes to the city’s property tax incentives, and some have been altered to accommodate specific projects. In 2022, an apartment complex called Briar Grove began construction near Toppling Goliath Brewing Company in eastern Decorah, and the revitalization plan for Decorah was amended to change the abatement schedule for that project. The apartments received $1 million in state tax breaks from the Iowa Department of Economic Development, which was applied towards a second 48-unit complex developed in 2023. Goedken said the amended property tax schedule didn’t change anything for any other residential properties at the time, but the amendment did apply to the entire area where the apartments were being constructed.
Earlier this summer, the developers of the Briar Grove complex made a request to change plans for its pending third and fourth apartment buildings to allow for the creation of townhouses instead. The Iowa Department of Economic Development agreed to continue providing the tax credit, with the caveat a certain percentage of the development be set aside for low to moderate income families.
Iowa law dictates the limit which can be assessed on residential and commercial properties, which Goedken said is commonly called the rollback. And, in 2013, state legislation was adopted to remove a portion of Iowa’s commercial property classifications and create a new tax classification for multi-family residential properties. Under that bill, multi-residential property taxes were to step down year after year until they arrived at the same rollback amount as residential properties, at which point all the classifications would simply be considered residential — Goedken said there is no longer a multi-family classification at this point.
In 2023, legislation deemed the residential rollback also applies to the first $150,000 of commercial and industrial properties. Values exceeding $150,000 are then taxed at 90 percent.
Goedken and city staff will begin Decorah’s budget discussions in January, and he doesn’t anticipate legislation this session will impact the city’s financial planning.
Submit A Comment
Fill out the form to submit a comment. All comments require approval by our staff before it is displayed on the website.