Iowa's great property tax freakout

Here's the rest of the story.

A neighborhood in west Davenport. (Photo: Ed Tibbetts)

Three months ago, a state agency significantly altered the property tax outlook for Iowa homeowners.

Did you notice?

That’s OK. Hardly anybody did. Which is quite a contrast from a year ago, when we experienced the Great Iowa Property Tax Freakout.

That’s when assessment notices went out, and Iowans were shocked to see their home values had skyrocketed.

Everybody knew about it. It was front-page news. Here’s a sampling of the headlines:

“Huge property tax assessments … are hitting Iowa homeowners”

“Most Iowa counties are seeing drastic rises in home assessments…”

“Iowa’s property tax shock.”

What often went unsaid, or not said loudly enough in my view, was that later in the year, the Iowa Department of Revenue would adjust values to take much of the bite out of those big increases.

Which is exactly what happened. And then some. In November, the department enacted the biggest adjustment to values since the late 1970s.

The rollback, as it’s known, appears to have had its intended effect. Consider just two examples:

• In Bettendorf, once the adjustment was made, 60% of residential parcels in the city actually saw a drop in taxable value from 2022 to 2023, according to my analysis of valuation data. Meanwhile, almost 73% of those parcels experienced either a reduction in taxable value, stayed the same or went up by less than 2%. Bettendorf officials say, when you set aside new growth, a sample of pre-existing residential properties showed an average decrease of 1.5%.

• As for Davenport, 61% of the residential parcels in the city also saw a decline in taxable value from the previous year, while 69% either fell in taxable value, stayed the same or went up by less than 2%. The median change for residential parcels, according to my analysis, was a decrease of 2%.

Not everybody fits into these categories, and local governments still haven’t finalized their tax rates, so we don’t know the impact on individual tax bills, which are payable this fall and next spring. But as you can see, the sticker shock homeowners experienced last spring was effectively neutered for most people last fall.

In fact, if a homeowner in Bettendorf didn’t experience a roughly 16% increase in assessed value last year, they’re taxable value shouldn’t have gone up, according to city officials.

County-wide, an increase of more than 17.9% was needed before taxable values went up, Scott County officials say.

I should note that the commercial and industrial property classes don’t have as generous a rollback.

I’ll bet a lot of Iowans don’t know that this mostly obscure action was this significant in countering the assessment shock we saw last spring.

Small wonder, either. There was hardly any news coverage at the time. As opposed to the prominent coverage given to the original notices. (I count myself among those who failed to follow up last fall.)

This has consequences.

The shock from the assessment notifications last spring definitely played a role in the Iowa Legislature’s decision to cut property taxes by $100 million last session.

This isn’t to say lawmakers wouldn’t have done it anyway, but the shock from the assessment notices helped set the stage.

Decker Ploehn, the longtime city administrator in Bettendorf, told me that he isn’t surprised the state’s action to roll back property values last November went largely unnoticed.

“The concept of the three levers is so foreign to people, why would you look for it?” he said.

Those three levers are essentially this: 1. Assessed values are set by county or city assessors; 2. The state then adjusts the value to determine taxable values. 3. Then, local governments set tax rates.

Those are just the basics, too. The credits, exemptions and other wrinkles that are built into the code make for a much more complex system.

The Legislature did take steps last year to consolidate local levies, but the major thrust of the legislation was to reduce taxes. I understand why that is. It’s more appealing to a politician to cut taxes than to take on the special interest provisions burrowed into the tax code.

I should note that even as the Legislature consolidated some local levies, lawmakers also added new complications by approving credits that, not coincidentally, also had political benefits.

Property taxes aren’t easy. In any state. I get that. But when folks can’t understand the system—or aren’t told prominently enough when significant changes are made—this leaves a lot of room for misunderstanding.

Republicans who control the Iowa Legislature have made clear they intend to reduce property and state income taxes even more than they already have—and in the case of the latter, potentially to eliminate them entirely. I worry—as do others—these changes will leave local and state governments without adequate resources to sustain the services Iowans want and need.

As the people of Iowa weigh in on these decisions, it’s important they get the most correct and up-to-date information about what’s happening with their taxes. Last spring, Iowans got the clear impression that property taxes were about to balloon because of sharply rising assessments. They should know that, months later, because of a little-noticed but foreseeable action by a state agency, much of the air was let out of that balloon.

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