The Ottumwa Courier

Ottumwa

January 25, 2013

Reynolds: commercial property tax reduction must be permanent

Lt. gov. says Iowans must grow skill sets to fill jobs

OTTUMWA — With a tight, focused agenda, Gov. Terry Branstad and Lt. Gov. Kim Reynolds are powering through the state, delving into their goals for this legislative session.

In an interview with the Courier Thursday, Reynolds emphasized her and the governor’s 2013 priorities as part of their statewide tour “taking the Condition of the State to all areas of the state.”

“Iowa is poised for significant growth,” she said. “With this year’s agenda, we’ll be able to accomplish what we set out to do because we have the funding to support it.”

The No. 1 priority, creating jobs, means Iowa needs to ramp up its competitiveness, she said.

“We’re the third highest in the nation in commercial property tax,” she said. “We also need to work on our regulatory climate and investing in businesses, communities and in people in the state of Iowa.”

When the state promised last year they would backfill local governments from any potential reduction in commercial property tax, many asked, “Will you really?”

“People were skeptical of that,” she said. “But with our five-year projected budget, you could say that’s why we can’t spend every dollar of the surplus. We have to have money in there in order to backfill, so we know we can’t spend every single dime because it’s all accounted for.”

Branstad said in his Condition of the State address that the state would reduce commercial and industrial property tax 20 percent over four years and that any loss in revenue would be backfilled 100 percent by state aid.

“That equates to about $400 million in actual property tax relief,” Reynolds said. “If we provide permanent and reduced commercial property tax, that puts money back in the pocket of the business owner so they expand or start a new business. It lowers the cost of doing business, and it impacts every single town in the state of Iowa.”

In order for this reduction to come to fruition, she said three things need to happen: the reduction needs to be permanent, it cannot shift to other classes of property, and all classes must see property tax reduction.

The state’s “rainy day funds” — the Cash Revenue Fund and the Economic Emergency Fund — are full, she said. They then overflow into the surplus.

One example of how the rainy day funds could be used is for those suffering from last summer’s drought, she said.

“When I was in the State Senate during the Cedar Rapids flood in 2008, we called a special session to use some of those funds for that,” she said.

“In two years we were able to eliminate the deficit, we refilled the cash reserves and we have a surplus,” she said. “When you look at other states in the nation ... very few are sitting in the position Iowa is. Granted, our agricultural economy is phenomenal. But we’ve also seen advanced manufacturing coming back, as well as our ability to export and trade with various countries.”

The “sticking point” with commercial property tax reduction, she said, is that it must be permanent.

“From a business standpoint, they want predictability,” she said. “It’s really important to be able to say, ‘This is what it’s going to be. You can count on it.’”

Reynolds also raised concerns about Iowa’s education system, noting that whereas Iowa was No. 1 in the nation in 1992 and education comprised 37 percent of the entire budget, today Iowa is 25th in the nation and education is 43 percent of the budget.

“We need to move out of this 20th century education system we’re in and move into a 21st century education system,” she said. “We made modest steps forward last year in reforming education, but not bold enough to get the results we think we need to get.”

One effort to improve Iowans’ skill sets is the Skilled Iowa initiative, which works with unemployed or under-employed persons to highlight their strengths and weaknesses, help them obtain the National Career Readiness Certificate and prepare them for internships and jobs.

“And they don’t have to give up unemployment [benefits],” Reynolds said. “They still have the security of that, and the opportunity to find where their strengths and weaknesses are.”

Reynolds, originally from Osceola, and Branstad, originally of northern Iowa, said rural Iowa will not be left behind.

Last year, Valent BioSciences opened a $146 million facility in Osage, and CF Industries chose Woodbury County for its $1.7 billion expansion.

“Those are good-paying jobs in corners of the state that really needed it,” she said. “Their investment will stay in the state. We don’t offer tax incentives,  and they’re gone. We offer them in areas of the state that have the highest unemployment.

“We need to create a level playing field. Incentives will never go away. They’re part of the package. But even with disadvantages we have with our tax system, through incentives we were able to secure them.”

Reynolds said Honey Creek Resort in Moravia is a prime example of “how hard it is to try to encourage development in all areas of the state.”

“It was well intended,” she said. “But it couldn’t have opened at a worse time, in the middle of floods and in the heart of a recession.”

She said the goal is to find ways to pay off the bonds sooner and wean it off of the Resource Enhancement and Protection (REAP) fund, since “that’s not what the REAP fund was designed to do.”

In Des Moines, Reynolds said friction lies more so now in rural vs. urban politicians rather than Democrat vs. Republican.

“But we’re not Washington, D.C.,” she said. “We have an opportunity to demonstrate to Iowans that we can work together. We have an opportunity to come together in a focused manner to poise Iowa for significant growth moving forward. We don’t want to slip back into a recession,  and we don’t want to see growth stop.”

Reynolds would not comment on any possibility of running for governor in 2014.

“We’re both really focused on working with the Legislature right now and getting our initiatives passed so we can continue to move Iowa forward,” she said. “Then in 2014, we’ll make a decision. We’re just not going to do it until then. We need to stay focused.”

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