House passes new restrictions on special city taxing districts

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April 12th, 2012 by Ric Hanson

Most of the Republicans in the Iowa House have voted to limit the authority cities and counties now have to set up special districts where tax growth is used to finance improvements like roads, sewers and, in some cases, swimming pools. Representative Chuck Soderberg, a Republican from Le Mars, says a few local governments have abused these “tax increment financing” districts. “Ladies and gentlemen, we have a responsibility to the taxpayers of Iowa to address the issues; to clarify, but to strengthen…and bring more accountability to the hard-earned dollars that our taxpayers provide in this program,” Soderberg says. Representative Dan Muhlbauer, a Democrat from Manilla, says his rural area has used this financing tool to pay for improvements to roads, to lure a wind turbine farm to the area. “You’re trying to micromanage what it is we want to do out in our small communities,” Muhlbauer said. “…We need just to leave it like it is. It’s a great tool.”

Representative Dave Jacoby, a Democrat from Coralville, railed against provisions in the bill which he argues would give school districts “veto power” to nix some of the special projects cities devise.
“Why is this the state’s business?” Jacoby asked. “Does this make us smaller and smarter? No, it’s big government and it’s slapping local governments in the face.” Representative Tom Sands, a Republican from Wapello, says school districts “should have a voice” to raise objections when property tax dollars are diverted forever, as is the case in tax increment financing districts in some Iowa cities. “This takes…what we have, it tries to build on what is working right and going forward with that,” Sands says. Senator Mary Gaskill, a Democrat from Ottumwa, says the bill’s new requirements would hamper the ability of city officials to quickly put together deals that lure businesses to town.

“Remember, these are businesses who are wanting to come to our districts and we’re putting all of these steps in place that’s doing to slow the process down, tremendously,” Gaskill says. “It’s going to slow it down.” After nearly two hours of debate, Representative Soderberg responded to the critics, arguing the bill would not “kill” cities’ ability to create these special taxing districts. “Puts some parameters around it, but does not restrict it as a tool,” Soderberg said. The bill passed on a 54 to 43 vote. It now goes to the Senate. The Iowa League of Cities, the Professional Developers of Iowa and the Iowa Chamber Alliance are all opposed to the bill, but groups like the Iowa Farm Bureau and the Iowa Association of School Boards support it.

(O. Kay Henderson/Radio Iowa)