Fairfield Ledger
https://fairfield-ia.villagesoup.com/p/1720945

Mt. Pleasant News   Wash Journal
Neighbors Growing Together | Aug 20, 2018

Party leaders agree on ending backfill

Fairfield has not been counting on funds from state
By Andy Hallman, Ledger news editor and James Q. Lynch, The Gazette | Jan 29, 2018

Leaders in both Democratic and Republican parties have expressed a desire to end the property tax backfill local governments have received from the state since 2013.

That year, the Iowa Legislature cut the amount local governments could levy on commercial and industrial properties, and it cut taxes on multifamily housing. Since this generated less revenue for local governments, the Legislature compensated them with backfill, money that made up for the lost property tax revenue.

 

What does this mean for Fairfield?

In fiscal year 2017, Fairfield received $193,669 in backfill. Fairfield City Administrator Aaron Kooiker said the city, aware the state might soon cut or even eliminate backfill, has not budgeted for it the last few years. Instead of relying on backfill for essential services, the city has put that money in the bank to improve its cash reserves and, the council hopes, its credit rating.

“If we lost backfill, we’d have to tighten our belts a little bit, and be more cautious with our spending,” Kooiker said. “But it won’t be a huge impact on city programs whatsoever. We’ve been fiscally conservative in our spending so we can manage something like this.”

Kooiker remarked that the state’s efforts to cut property taxes always seem to fall on the back of local government, and never on the state.

 

Negotiations

Iowa Senate President Jack Whitver said the bipartisan deal lawmakers made in 2013 on backfill will be honored this year, but did not promise anything after that. With leaders in both parties voicing support for ending backfill, it appears its days are numbered.

Even as his Senate Republican caucus is proposing $52 million in cuts to the current $7 billion-plus state budget, Whitver said lawmakers are unlikely to cut the payments to cities, counties and school districts.

“I believe there is general agreement in the Legislature that we don’t want to touch that for the current fiscal year,” Whitver said during Friday’s taping of Iowa Public Television’s “Iowa Press.”

Local governments have certified their budgets for the current fiscal year so “it would be very difficult for them to go back and change that.”

However, Whitver predicted the backfill payments — about $150 million this year — “should be on the table for the next few years.”

 

History

In 2013, a split-control Legislature and Gov. Terry Branstad reduced the portion of commercial property assessed value that local governments could tax from 100 percent to 90 percent and lowered taxes on multifamily residential housing.

The idea was that the tax cut would spur development that would then result in greater property tax revenue.

“Many places around the state have seen tremendous growth since then,” the Ankeny Republican said. “So I believe we should look at phasing that out over time.”

 

Bi-partisan support

Whitver seemed to favor phasing out the backfill payments, which have amounted to more than $390 million, over stopping them cold turkey.

He’s not the first to broach the subject.

In the run-up to the 2018 session, both Democratic and Republican lawmakers suggested it’s time to end the backfill. Before the Legislature convened earlier this month, state Sen. Chaz Allen, D-Newton, and Rep. Jake Highfill, R-Johnston, called the backfill a bad idea that should be ended.

“It made no sense in the first place,” Highfill told the Iowa Chamber Alliance in December.

Allen, a former mayor who was part of the same legislative preview panel, agreed, adding, “It is not like you are going to get it forever.”

Republican Gov. Kim Reynolds is not calling for cuts to the backfill this year but has not committed to maintaining the payments beyond the current budget.

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