The Ottumwa Courier

March 18, 2014

Property tax legislation could hurt Ottumwa

By JOSH VARDAMAN
Courier staff writer

---- — OTTUMWA — The most recent property tax legislation passed by the Iowa General Assembly was said to be a part of the biggest tax cut in Iowa’s history, according to Gov. Terry Branstad. But, while the bill will keep property tax rates down, it could severely weaken the city services offered in Ottumwa.

The bill, named Senate File 295, has many facets to it. Some of the highlights from it include forcing local jurisdictions to reduce the amount of total taxable commercial properties by 5 percent and reclassifying multi-family properties —like apartment complexes — from commercial to residential, which will take effect in 2017 and lead to more property tax revenue reductions.

Since the bill will decrease the amount of revenue cities will get from the commercial property tax, the state has promised to backfill, or reimburse, municipalities to make up for the loss of income.

However, the state has not yet promised a backfill for the multi-family property tax losses, which could lead to more losses and drastic changes in Ottumwa, according to City Administrator Joe Helfenberger and Finance Director Bob Jay.

The reason some of Ottumwa’s services will be hurt is because the city receives 46 percent of property tax dollars, and those help fund 26 percent of the total yearly city budget. So, if there is less taxable commercial property and if the state does not promise to backfill when the multi-family property tax changes are made, then the city will not be able to pay for some of its services offered to citizens.

According to Jay, because of the loss of revenue the City Council will have to make decisions about what projects and services will have to be cut. The projections for the next 10 years, assuming the city’s tax base doesn’t change and the state doesn’t backfill the multi-family property tax, there will be a total tax revenue loss of over $1.5 million.

Helfenberger said one way to help the situation would be to increase the tax base in Ottumwa, and they are aggressively looking for ways to do that by bringing in businesses and providing affordable housing.

“We are working harder than ever on trying to create more tax base,” he said. “That would be a huge help in this situation. It may not be the whole answer, but it certainly is a step in the right direction.”

If the tax base does not grow, then the city will have to make drastic cuts by reducing staff and services. Then, if the city has to get rid of some staff, the departments will have to try and maintain services with less people, and certain projects will have to get prioritized or deferred until later.

Even though the loss in revenue from the property tax legislation will hurt Ottumwa and some of the services the city offers might have to be cut, Jay is optimistic that the future will be fine.

“What we’re doing is in the right direction,” he said. “We just can’t move too fast.”

— To see reporter Josh Vardaman's Twitter feed, go to @CourierJosh