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City Managers OfficeCity Hall50 West 13

thStreet

Dubuque, IA 52001-4864

563-589.4110www.cityofdubuque.org

March 5, 2012

Re: Property Tax Reform

The City of Dubuque supports the need for property tax reform. The City believes commercialproperty tax relief for business owners can be accomplished though a tax credit provided bythe State. This reform would hold cities harmless and provide the needed relief to our localbusiness owners. This proposal has bipartisan support having passed the Iowa Senate asSenate File Bill 522 with a 44-6 vote last legislative session.

However, the City opposes House File 2274 which is a bill being considered by the Ways andMeans Committee. The City of Dubuque opposes this bill because it is not a property taxcredit program that would hold cities harmless and the bill implements restrictions on cityrevenues. This bill would cause a shift in property taxes to residential property taxpayers or

result in significant reductions in city services.

The Senate Bill imitates the Homestead Property Tax Credit Program. The State of IowaHomestead Tax Credit is a state-financed property tax relief program which reducesresidents property tax bills directly. The State of Iowa Homestead Tax Credit is available toproperty owners in the State of Iowa who live in the property. This exemption is a reduction ofthe taxable value of their property amounting to a maximum $4,850. If the State of Iowaprovides reduced Homestead Tax Credit funding to residential taxpayers, the residentialtaxpayers end up paying more of the tax bill. Either way the City gets the money expectedbased on the adopted tax levy. The only thing in question is, will it come from the State orthe homeowner.

Senate File 522 would work much like the Homestead Tax Credit and would have a formulato apply the residential rollback to the first $32,000 in valuation for each qualified commercialproperty, usually amounting to a tax credit between $500 and $600 per property. Forexample, the owners of a local hardware store valued at $105,000 and a Wal-Mart buildingvalued at $1.5 million would both receive a $600 credit. As the size of the fund grows, thevalue of the credit would increase. When fully implemented, it's estimated that the propertytax credit would be worth approximately $4,029 for a property valued at $200,000 or greater.

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To pay for this permanent commercial property tax break, the State of Iowa would create aBusiness Property Tax Relief fund that would eventually reach a funding level of $200 millionin tax credits per year. Tax credits would be claimed for commercial, industrial, or railwayproperty improved with permanent construction. The county treasurer would show on eachproperty tax receipt the amount of the credit that was received from the Business Property tax

Credit Fund. Counties would be paid twice a year from the Fund to cover the lost revenuedue to the credit for local governments. If the State reduced funding, the local governmentswould still get the revenue, it would just come from the business.

In the case of the House Bill, the State would provide some replacement funding to cities, butif the State reduced the amount of funding, the cities would not get the revenues from thebusiness, so services would need to be reduced or residential property taxes increased.

Thank you for your continued efforts to hold the line on additional service reductions or feeincreases at the local level. Please support the Senate version of the commercial propertytax credit

Sincerely,

Roy D. BuolMayor

JMLcc: Michael Van Milligen, City Manager

Cindy Steinhauser, Assistant City ManagerTeri Goodmann, Assistant City Manager