HSB 165 (LSB 1563YC (9) 88)

HOUSE FILE _____ 

BY  (PROPOSED COMMITTEE ON WAYS AND MEANS BILL BY CHAIRPERSON HEIN)

A BILL FOR

An Act establishing budget limitations for counties and cities and including applicability provisions.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

    Section 1.  Section 23A.2, subsection 10, paragraph h, Code 2019, is amended to read as follows:
   h.  The performance of an activity listed in section 331.424, Code 2019, as a service for which a supplemental levy county may be certified include in its budget.
    Sec. 2.  Section 28M.5, subsection 2, Code 2019, is amended to read as follows:
   2.  If a regional transit district budget allocates revenue responsibilities to the board of supervisors of a participating county, the amount of the regional transit district levy that is the responsibility of the participating county shall be deducted from the maximum rates amount of taxes authorized to be levied by the county pursuant to section 331.423, subsections 1 and 2 subsection 3, paragraphs “b” and “c”, as applicable, unless the county meets its revenue responsibilities as allocated in the budget from other available revenue sources. However, for a regional transit district that includes a county with a population of less than three hundred thousand, the amount of the regional transit district levy that is the responsibility of such participating county shall be deducted from the maximum rate amount of taxes authorized to be levied by the county pursuant to section 331.423, subsection 1 3, paragraph “b”.
    Sec. 3.  Section 29C.17, subsection 2, paragraph a, Code 2019, is amended to read as follows:
   a.  A countywide special supplemental levy pursuant to section 331.424, subsection 1.
    Sec. 4.  Section 123.38, subsection 2, paragraph b, Code 2019, is amended to read as follows:
   b.  For purposes of this subsection, any portion of license or permit fees used for the purposes authorized in section 331.424, subsection 1, paragraph “a”, subparagraphs (1) and (2), Code 2019, and in section 331.424A, shall not be deemed received either by the division or by a local authority.
    Sec. 5.  Section 218.99, Code 2019, is amended to read as follows:
   218.99  Counties to be notified of patients’ personal accounts.
   The administrator in control of a state institution shall direct the business manager of each institution under the administrator’s jurisdiction which is mentioned in section 331.424, subsection 1, paragraph “a”, subparagraphs (1) and (2), and for which services are paid under section 331.424A, to quarterly inform the county of residence of any patient or resident who has an amount in excess of two hundred dollars on account in the patients’ personal deposit fund and the amount on deposit. The administrators shall direct the business manager to further notify the county of residence at least fifteen days before the release of funds in excess of two hundred dollars or upon the death of the patient or resident. If the patient or resident has no residency in this state or the person’s residency is unknown, notice shall be made to the director of human services and the administrator in control of the institution involved.
    Sec. 6.  Section 331.263, subsection 2, Code 2019, is amended to read as follows:
   2.  The governing body of the community commonwealth shall have the authority to levy county taxes and shall have the authority to levy city taxes to the extent the city tax levy authority is transferred by the charter to the community commonwealth. A city participating in the community commonwealth shall transfer a portion of the city’s tax levy authorized under section 384.1 or 384.12, whichever is applicable, to the governing body of the community commonwealth. The maximum rates amount of taxes authorized to be levied under sections section 384.1 and the maximum amount of taxes authorized to be levied under section 384.12 by a city participating in the community commonwealth shall be reduced by an amount equal to the rates of the same or similar taxes levied in the city by the governing body of the community commonwealth.
    Sec. 7.  Section 331.301, subsection 12, Code 2019, is amended to read as follows:
   12.  The board of supervisors may credit funds to a reserve for the purposes authorized by subsection 11 of this section; section 331.424, subsection 1, paragraph “a”, subparagraph (5); and section 331.441, subsection 2, paragraph “b”. Moneys credited to the reserve, and interest earned on such moneys, shall remain in the reserve until expended for purposes authorized by subsection 11 of this section; section 331.424, subsection 1, paragraph “a”, subparagraph (5); or section 331.441, subsection 2, paragraph “b”.
    Sec. 8.  Section 331.421, subsections 1 and 10, Code 2019, are amended by striking the subsections.
    Sec. 9.  Section 331.421, Code 2019, is amended by adding the following new subsection:
   NEW SUBSECTION.  7A.  “Item” means, in accordance with protests under chapter 24, a budgeted expenditure, appropriation, or cash reserve from a fund for a service area, program, program element, or purpose.
    Sec. 10.  Section 331.422, unnumbered paragraph 1, Code 2019, is amended to read as follows:
   Subject to this section and sections 331.423 through 331.426 331.424C or as otherwise provided by state law, the board of each county shall certify property taxes annually at its March session to be levied for county purposes as follows:
    Sec. 11.  Section 331.423, Code 2019, is amended by striking the section and inserting in lieu thereof the following:
   331.423  Property tax dollars —— maximums.
   1.  Annually, the board shall determine separate property tax levy limits to pay for general county services and rural county services in accordance with this section. The property tax levies separately certified for general county services and rural county services under section 331.434 shall not raise property tax dollars that exceed the amount determined under this section.
   2.  For purposes of this section, unless the context otherwise requires:
   a.  “Annual growth factor” means an index, expressed as a percentage, determined by the department of management by January 1 of the calendar year in which the budget year begins. In determining the annual growth factor, the department shall calculate the percentage change in the median family income in midwest census region between the two most recent calendar years for which information is available. The department shall then add that percentage change to one hundred percent. In no case, however, shall the annual growth factor be less than one hundred percent.
   b.  “Boundary adjustment” means annexation, severance, incorporation, or discontinuance as those terms are defined in section 368.1.
   c.  “Budget year” is the fiscal year beginning during the calendar year in which a budget is certified.
   d.  “Current fiscal year” is the fiscal year ending during the calendar year in which a budget is certified.
   e.  “Net new valuation taxes” means the amount of property tax dollars equal to the current fiscal year’s levy rate in the county for general county services or for rural county services, as applicable, multiplied by the increase from the current fiscal year to the budget year in taxable valuation due to the following:
   (1)  Net new construction, excluding all incremental valuation that is released in any one year from either a division of revenue under section 260E.4 or an urban renewal area for which taxes were being divided under section 403.19 if the property for the valuation being released remains subject to the division of revenue under section 260E.4 or remains part of the urban renewal area that is subject to a division of revenue under section 403.19.
   (2)  Additions or improvements to existing structures.
   (3)  Remodeling of existing structures for which a building permit is required.
   (4)  Net boundary adjustment.
   (5)  A municipality no longer dividing tax revenues in an urban renewal area as provided in section 403.19 or a community college no longer dividing revenues as provided in section 260E.4.
   (6)  That portion of taxable property located in an urban revitalization area on which an exemption was allowed and such exemption has expired.
   3.  a.  For the fiscal year beginning July 1, 2020, and subsequent fiscal years, the maximum amount of property tax dollars which may be certified for levy by a county for general county services and rural county services shall be the maximum property tax dollars calculated under paragraphs “b” and “c”, respectively.
   b.  The maximum property tax dollars that may be levied for general county services is an amount equal to the sum of the following:
   (1)  The annual growth factor times the current fiscal year’s maximum property tax dollars for general county services.
   (2)  The amount of net new valuation taxes in the county.
   c.  The maximum property tax dollars that may be levied for rural county services is an amount equal to the sum of the following:
   (1)  The annual growth factor times the current fiscal year’s maximum property tax dollars for rural county services. 
   (2)  The amount of net new valuation taxes in the unincorporated area of the county. 
   4.  a.  For purposes of calculating maximum property tax dollars for general county services for the fiscal year beginning July 1, 2020, only, the term “current fiscal year’s maximum property tax dollars” shall mean the total amount of property tax dollars certified by the county for general county services for the fiscal year beginning July 1, 2019.
   b.  For purposes of calculating maximum property tax dollars for rural county services for the fiscal year beginning July 1, 2020, only, the term “current fiscal year’s maximum property tax dollars” shall mean the total amount of property tax dollars certified by the county for rural county services for the fiscal year beginning July 1, 2019.
   5.  Property taxes certified for mental health and disabilities services in section 331.424A, the emergency services fund in section 331.424C, the debt service fund in section 331.430, any capital projects fund established by the county for deposit of bond, loan, or note proceeds, and any temporary increase approved pursuant to section 331.424, are not included in the maximum amount of property tax dollars that may be certified for a budget year under subsection 3. 
   6.  The department of management, in consultation with the county finance committee, shall adopt rules to administer this section. The department shall prescribe forms to be used by counties when making calculations required by this section. 
    Sec. 12.  NEW SECTION.  331.423A  Ending fund balance.
   1.  a.  Budgeted ending fund balances for a budget year in excess of twenty-five percent of budgeted expenditures in either the general fund or rural services fund for that budget year shall be explicitly reserved or designated for a specific purpose.
   b.  A county is encouraged, but not required, to reduce budgeted, unreserved, or undesignated ending fund balances for the budget year to an amount equal to approximately twenty-five percent of budgeted expenditures and transfers from the general fund and rural services fund for that budget year unless a decision is certified by the state appeal board ordering a reduction in the ending fund balance of any of those funds.
   c.  In a protest to the county budget under section 331.436, the county shall have the burden of proving that the budgeted balances in excess of twenty-five percent are reasonably likely to be appropriated for the explicitly reserved or designated specific purpose. The excess budgeted balance for the specific purpose shall be considered an increase in an item in the budget for purposes of section 24.28.
   2.  a.  For a county that has, as of June 30, 2019, reduced its actual ending fund balance to less than twenty-five percent of actual expenditures, additional property taxes may be computed and levied as provided in this subsection. The additional property tax levy amount is an amount not to exceed twenty-five percent of actual expenditures from the general fund and rural services fund for the fiscal year beginning July 1, 2018, minus the combined ending fund balances for those funds for that year.
   b.  The amount of the additional property taxes shall be apportioned between the general fund and the rural services fund. However, the amount apportioned for general county services and for rural county services shall not exceed for each fund twenty-five percent of actual expenditures for the fiscal year beginning July 1, 2018.
   c.  All or a portion of additional property tax dollars may be levied for the purpose of increasing cash reserves for general county services and rural county services in the budget year. The additional property tax dollars authorized under this subsection but not levied may be carried forward as unused ending fund balance taxing authority until and for the fiscal year beginning July 1, 2025. The amount carried forward shall not exceed twenty-five percent of the maximum amount of property tax dollars available in the current fiscal year. Additionally, property taxes that are levied as unused ending fund balance taxing authority under this subsection may be the subject of a protest under section 331.436, and the amount will be considered an increase in an item in the budget for purposes of section 24.28. The amount of additional property taxes levied under this subsection shall not be included in the computation of the maximum amount of property tax dollars which may be certified and levied under section 331.423.
    Sec. 13.  Section 331.424, Code 2019, is amended by striking the section and inserting in lieu thereof the following:
   331.424  Authority to levy beyond maximum property tax dollars.
   1.  a.  The board may annually certify additions to the maximum amount of property tax dollars to be levied if the board publishes the notice of the proposed action, including a statement of the amount and purpose of the proposed additions, and the time and place of a public meeting at which the board proposes to take action on the proposal. At the meeting, the board shall receive oral or written objections from any resident or property owner of the county. After all objections have been received and considered, the board may, following twenty days after the meeting and subject to paragraph “b”, take action on the proposal or abandon the proposal.
   b.  If at any time within twenty days after the meeting under paragraph “a”, a petition is filed with the county auditor signed by eligible electors of the county equal in number to the lesser of two thousand or twenty percent of the persons in the county who voted for the office of president of the United States at the last preceding general election that had such office on the ballot, asking that the question of levying an additional amount be submitted to the registered voters of the county, the board shall either by resolution declare the proposal to be abandoned or shall direct the county commissioner of elections to call a special election upon the question. 
   2.  The special election, if called, is subject to the following:
   a.  The board must give at least thirty-two days’ notice to the county commissioner of elections that the special election is to be held. In no case, however, shall a notice be given to the county commissioner of elections after December 31 for an election on a proposition to exceed the statutory limits during the fiscal year beginning in the next calendar year.
   b.  The proposition submitted to voters may propose authority for the board to certify additions to the maximum amount of property tax dollars for up to two fiscal years. The proposition is approved if it receives a favorable majority of the votes cast on the proposition. 
   c.  The proposition to be submitted shall be substantially in the following form:
  Vote “yes” or “no” on the following: 

  Shall the county of ........ levy for an additional $... each year for ... years beginning July 1, ...., in excess of the statutory limits otherwise applicable for the (general county services or rural services) fund? 

   d.  The canvass shall be held beginning at 1:00 p.m. on the second day which is not a holiday following the special election.
   e.  Notice of the special election shall be published at least once in a newspaper as specified in section 331.305 prior to the date of the special election. The notice shall appear as early as practicable after the board has voted to submit a proposition to the voters to levy additional property tax dollars.
   3.  Registered voters in the county may vote on the proposition to increase property taxes for the general fund in excess of the statutory limit. Registered voters residing outside the corporate limits of a city within the county may vote on the proposition to increase property taxes for the rural services fund in excess of the statutory limit.
   4.  The amount of additional property tax dollars certified under this section shall not be included in the computation of the maximum amount of property tax dollars which may be certified and levied under section 331.423.
    Sec. 14.  Section 331.424A, subsection 6, Code 2019, is amended to read as follows:
   6.  For each fiscal year, the county shall certify a levy for payment of services. For each fiscal year, county revenues from taxes imposed by the county credited to the county services fund shall not exceed an amount equal to the county budgeted amount for the fiscal year. A levy certified under this section is not subject to the appeal provisions of section 331.426 or to any other provision in law authorizing a county to exceed, increase, or appeal a property tax levy limit.
    Sec. 15.  Section 331.427, subsection 3, paragraph l, Code 2019, is amended to read as follows:
   l.  Services listed in section 331.424, subsection 1, Code 2019, and section 331.554.
    Sec. 16.  Section 331.428, subsection 2, paragraph d, Code 2019, is amended to read as follows:
   d.  Services listed under section 331.424, subsection 2, Code 2019.
    Sec. 17.  Section 331.429, subsection 1, paragraphs a and b, Code 2019, are amended to read as follows:
   a.  Transfers from the general fund not to exceed in any year the dollar equivalent of a tax of sixteen and seven-eighths cents per thousand dollars of assessed value on all taxable property in the county multiplied by the ratio of current taxes actually collected and apportioned for the general basic county services levy to the total general basic county services levy for the current year, and an amount equivalent to the moneys derived by the general fund from military service tax credits under chapter 426A, manufactured or mobile home taxes under section 435.22, and delinquent taxes for prior years collected and apportioned to the general basic county services fund in the current year, multiplied by the ratio of sixteen and seven-eighths cents to three dollars and fifty cents. The limit on transfers in this paragraph applies only to property tax revenue and is not a limit on transfers of revenue generated from sources other than property taxes.
   b.  Transfers from the rural services fund not to exceed in any year the dollar equivalent of a tax of three dollars and three-eighths cents per thousand dollars of assessed value on all taxable property not located within the corporate limits of a city in the county multiplied by the ratio of current taxes actually collected and apportioned for the rural county services basic levy to the total rural county services basic levy for the current year and an amount equivalent to the moneys derived by the rural services fund from military service tax credits under chapter 426A, manufactured or mobile home taxes under section 435.22, and delinquent taxes for prior years collected and apportioned to the rural county services basic fund in the current year, multiplied by the ratio of three dollars and three-eighths cents to three dollars and ninety-five cents. The limit on transfers in this paragraph applies only to property tax revenue and is not a limit on transfers of revenue generated from sources other than property taxes.
    Sec. 18.  Section 331.434, unnumbered paragraph 1, Code 2019, is amended to read as follows:
   Annually, the board of each county, subject to section 331.403, subsection 4, sections 331.423 through 331.426 331.424C, and other applicable state law, shall prepare and adopt a budget, certify taxes, and provide appropriations as follows:
    Sec. 19.  Section 331.435, unnumbered paragraph 1, Code 2019, is amended to read as follows:
   The board may amend the adopted county budget, subject to sections 331.423 through 331.426 331.424C and other applicable state law, to permit increases in any class of proposed expenditures contained in the budget summary published under section 331.434, subsection 3.
    Sec. 20.  Section 373.10, Code 2019, is amended to read as follows:
   373.10  Taxing authority.
   The metropolitan council shall have the authority to levy city taxes to the extent the city tax levy authority is transferred by the charter to the metropolitan council. A member city shall transfer a portion of the city’s tax levy authorized under section 384.1 or 384.12, whichever is applicable, to the metropolitan council. The maximum rates amount of taxes authorized to be levied under sections section 384.1 and the taxes authorized to be levied under section 384.12 by a member city shall be reduced by an amount equal to the rates of the same or similar taxes levied in the city by the metropolitan council.
    Sec. 21.  Section 384.1, Code 2019, is amended by striking the section and inserting in lieu thereof the following:
   384.1  Property tax dollars —— maximum.
   1.  A city shall certify taxes to be levied by the city on all taxable property within the city limits, for all city government purposes. Annually, the city council may certify a basic levy for city government purposes, subject to the limitation on property tax dollars provided in this section.
   2.  For purposes of this section, unless the context otherwise requires:
   a.  “Annual growth factor” means an index, expressed as a percentage, determined by the department of management by January 1 of the calendar year in which the budget year begins. In determining the annual growth factor, the department shall calculate the percentage change in the median family income in midwest census region between the two most recent calendar years for which information is available. The department shall then add that percentage change to one hundred percent. In no case, however, shall the annual growth factor be less than one hundred percent.
   b.  “Boundary adjustment” means annexation, severance, incorporation, or discontinuance as those terms are defined in section 368.1.
   c.  “Budget year” is the fiscal year beginning during the calendar year in which a budget is certified.
   d.  “Current fiscal year” is the fiscal year ending during the calendar year in which a budget is certified.
   e.  “Net new valuation taxes” means the amount of property tax dollars equal to the current fiscal year’s levy rate in the city for the general fund multiplied by the increase from the current fiscal year to the budget year in taxable valuation due to the following:
   (1)  Net new construction, excluding all incremental valuation that is released in any one year from either a division of revenue under section 260E.4 or an urban renewal area for which taxes were being divided under section 403.19 if the property for the valuation being released remains subject to the division of revenue under section 260E.4 or remains part of the urban renewal area that is subject to a division of revenue under section 403.19.
   (2)  Additions or improvements to existing structures.
   (3)  Remodeling of existing structures for which a building permit is required.
   (4)  Net boundary adjustment.
   (5)  A municipality no longer dividing tax revenues in an urban renewal area as provided in section 403.19 or a community college no longer dividing revenues as provided in section 260E.4.
   (6)  That portion of taxable property located in an urban revitalization area on which an exemption was allowed and such exemption has expired.
   3.  a.  For the fiscal year beginning July 1, 2020, and subsequent fiscal years, the maximum amount of property tax dollars which may be certified for levy by a city for the general fund shall be the maximum property tax dollars calculated under paragraph “b”.
   b.  The maximum property tax dollars that may be levied for deposit in the general fund is an amount equal to the sum of the following:
   (1)  The annual growth factor times the current fiscal year’s maximum property tax dollars for the general fund.
   (2)  The amount of net new valuation taxes in the city.
   4.  For purposes of calculating maximum property tax dollars for the city general fund for the fiscal year beginning July 1, 2020, only, the term “current fiscal year’s maximum property tax dollars” shall mean the total amount of property tax dollars certified by the city for the city’s general fund for the fiscal year beginning July 1, 2019.
   5.  Property taxes certified for deposit in the debt service fund in section 384.4, trust and agency funds in section 384.6, capital improvements reserve fund in section 384.7, the emergency fund in section 384.8, any capital projects fund established by the city for deposit of bond, loan, or note proceeds, any temporary increase approved pursuant to section 384.12A, property taxes collected from a voted levy in section 384.12, and property taxes levied under section 384.12, subsection 17, are not counted against the maximum amount of property tax dollars that may be certified for a fiscal year under subsection 3.
   6.  Notwithstanding the maximum amount of taxes a city may certify for levy, the tax levied by a city on tracts of land and improvements on the tracts of land used and assessed for agricultural or horticultural purposes shall not exceed three dollars and three-eighths cents per thousand dollars of assessed value in any year. Improvements located on such tracts of land and not used for agricultural or horticultural purposes and all residential dwellings are subject to the same rate of tax levied by the city on all other taxable property within the city. 
   7.  The department of management, in consultation with the city finance committee, shall adopt rules to administer this section. The department shall prescribe forms to be used by cities when making calculations required by this section. 
    Sec. 22.  NEW SECTION.  384.1A  Ending fund balance.
   1.  a.  Budgeted ending fund balances for a budget year in excess of twenty-five percent of budgeted expenditures from the general fund for that budget year shall be explicitly reserved or designated for a specific purpose.
   b.  A city is encouraged, but not required, to reduce budgeted, unreserved, or undesignated ending fund balances for the budget year to an amount equal to approximately twenty-five percent of budgeted expenditures and transfers from the general fund for that budget year unless a decision is certified by the state appeal board ordering a reduction in the ending fund balance of the fund.
   c.  In a protest to the city budget under section 384.19, the city shall have the burden of proving that the budgeted balances in excess of twenty-five percent are reasonably likely to be appropriated for the explicitly reserved or designated specific purpose. The excess budgeted balance for the specific purpose shall be considered an increase in an item in the budget for purposes of section 24.28.
   2.  a.  For a city that has, as of June 30, 2019, reduced its ending fund balance to less than twenty-five percent of actual expenditures, additional property taxes may be computed and levied as provided in this subsection. The additional property tax levy amount is an amount not to exceed the difference between twenty-five percent of actual expenditures for city government purposes for the fiscal year beginning July 1, 2018, minus the ending fund balance for that year.
   b.  All or a portion of additional property tax dollars may be levied for the purpose of increasing cash reserves for city government purposes in the budget year. The additional property tax dollars authorized under this subsection but not levied may be carried forward as unused ending fund balance taxing authority until and for the fiscal year beginning July 1, 2025. The amount carried forward shall not exceed twenty-five percent of the maximum amount of property tax dollars available in the current fiscal year. Additionally, property taxes that are levied as unused ending fund balance taxing authority under this subsection may be the subject of a protest under section 384.19, and the amount will be considered an increase in an item in the budget for purposes of section 24.28. The amount of additional property tax dollars levied under this subsection shall not be included in the computation of the maximum amount of property tax dollars which may be certified and levied under section 384.1.
    Sec. 23.  Section 384.12, subsection 19, Code 2019, is amended by striking the subsection.
    Sec. 24.  NEW SECTION.  384.12A  Authority to levy beyond maximum property tax dollars.
   1.  a.  The city council may annually certify additions to the maximum amount of property tax dollars to be levied if the city council publishes notice of the proposed action, including a statement of the amount and purpose of the proposed additions, and the time and place of a public meeting at which the city council proposes to take action on the proposal. At the meeting, the council shall receive oral or written objections from any resident or property owner of the city. After all objections have been received and considered, the council may, following twenty days after the meeting and subject to paragraph “b”, take action on the proposal or abandon the proposal.
   b.  If, at any time within twenty days after the meeting under paragraph “a”, a petition is filed with the city clerk signed by eligible electors of the city equal in number to the lesser of two thousand or twenty percent of the persons in the city who voted for the office of president of the United States at the last preceding general election that had such office on the ballot, asking that the question of levying an additional amount be submitted to the registered voters of the city, the city council shall either by resolution declare the proposal to be abandoned or shall direct the county commissioner of elections to call a special election upon the question. 
   2.  The special election, if called, is subject to the following:
   a.  The city council must give at least thirty-two days’ notice to the county commissioner of elections that the special election is to be held. In no case, however, shall a notice be given to the county commissioner of elections after December 31 for an election on a proposition to exceed the statutory limits during the fiscal year beginning in the next calendar year.
   b.  The proposition submitted to voters may propose authority for the city council to certify additions to the maximum amount of property tax dollars for up to two fiscal years. The proposition is approved if it receives a favorable majority of the votes cast on the proposition. 
   c.  The proposition to be submitted shall be substantially in the following form:
  Vote “yes” or “no” on the following: 

  Shall the city of ........ levy for an additional $... each year for ... years beginning next July 1, ...., in excess of the statutory limits otherwise applicable for the city general fund?

   d.  The canvass shall be held beginning at 1:00 p.m. on the second day which is not a holiday following the special election.
   e.  Notice of the special election shall be published at least once in a newspaper as specified in section 362.3 prior to the date of the special election. The notice shall appear as early as practicable after the city council has voted to submit a proposition to the voters to levy additional property tax dollars.
   3.  The amount of additional property tax dollars certified under this section shall not be included in the computation of the maximum amount of property tax dollars which may be certified and levied under section 384.1.
    Sec. 25.  Section 384.19, Code 2019, is amended by adding the following new subsection:
   NEW SUBSECTION.  5.  For purposes of a tax protest filed under this section and in accordance with the provisions of chapter 24, “item” means a budgeted expenditure, appropriation, or cash reserve from a fund for a service area, program, program element, or purpose.
    Sec. 26.  Section 386.8, Code 2019, is amended to read as follows:
   386.8  Operation tax.
   A city may establish a self-supported improvement district operation fund, and may certify taxes not to exceed the rate limitation as established in the ordinance creating the district, or any amendment thereto, each year to be levied for the fund against all of the property in the district, for the purpose of paying the administrative expenses of the district, which may include but are not limited to administrative personnel salaries, a separate administrative office, planning costs including consultation fees, engineering fees, architectural fees, and legal fees and all other expenses reasonably associated with the administration of the district and the fulfilling of the purposes of the district. The taxes levied for this fund may also be used for the purpose of paying maintenance expenses of improvements or self-liquidating improvements for a specified length of time with one or more options to renew if such is clearly stated in the petition which requests the council to authorize construction of the improvement or self-liquidating improvement, whether or not such petition is combined with the petition requesting creation of a district. Parcels of property which are assessed as residential property for property tax purposes are exempt from the tax levied under this section except residential properties within a duly designated historic district. A tax levied under this section is not subject to the levy limitation in section 384.1.
    Sec. 27.  Section 386.9, Code 2019, is amended to read as follows:
   386.9  Capital improvement tax.
   A city may establish a capital improvement fund for a district and may certify taxes, not to exceed the rate established by the ordinance creating the district, or any subsequent amendment thereto, each year to be levied for the fund against all of the property in the district, for the purpose of accumulating moneys for the financing or payment of a part or all of the costs of any improvement or self-liquidating improvement. However, parcels of property which are assessed as residential property for property tax purposes are exempt from the tax levied under this section except residential properties within a duly designated historic district. A tax levied under this section is not subject to the levy limitations in section 384.1 or 384.7.
    Sec. 28.  REPEAL.  Sections 331.425 and 331.426, Code 2019, are repealed.
    Sec. 29.  APPLICABILITY.  This Act applies to fiscal years beginning on or after July 1, 2020.
EXPLANATION
The inclusion of this explanation does not constitute agreement with
the explanation’s substance by the members of the general assembly.
   This bill removes the property tax levy rate limitations on the general and rural funds for counties and on the general fund for cities and substitutes a limitation on the maximum amount of property tax dollars that may be certified for expenditure by a county or city for those funds for fiscal years beginning on or after July 1, 2020. For the fiscal year beginning July 1, 2020, and subsequent fiscal years, the maximum amount of property tax dollars which may be certified for levy shall be an amount equal to the sum of the current fiscal year’s total property tax dollars certified by the county or city multiplied by the annual growth factor, as defined in the bill, and the amount of net new valuation taxes, as defined in the bill.
   The bill also allows counties and cities to annually certify additions to the maximum amount of property tax dollars to be levied following a public meeting, subject to a voter referendum, if requested by petition. The bill specifies the notice and election requirements for such a referendum election. The bill specifies that such additional amounts are not to be included in the computation of the maximum amount of property tax dollars for future budget years.
   The bill specifies certain requirements for ending fund balances for counties and cities. The bill provides that budgeted ending fund balances in certain specified funds for a budget year in excess of 25 percent of budgeted expenditures shall be explicitly reserved or designated for a specific purpose.
   Under the bill, counties and cities are encouraged, but not required, to reduce budgeted, unreserved, or undesignated ending fund balances for the budget year to an amount equal to approximately 25 percent of budgeted expenditures and certain transfers for that budget year unless a decision is certified by the state appeal board ordering a reduction in the ending fund balance of any of those funds. The county or city, as applicable, has the burden of proving that the budgeted balances in excess of 25 percent are reasonably likely to be appropriated for the explicitly reserved or designated specific purpose.
   The bill also allows for additional property taxes to be levied in certain fiscal years for those counties or cities that have, as of June 30, 2019, reduced their actual ending fund balance to less than 25 percent of actual expenditures. Such additional property tax dollars authorized but not levied may be carried forward as unused ending fund balance taxing authority until and for the fiscal year beginning July 1, 2025. However, the amount carried forward shall not exceed 25 percent of the maximum amount of property tax dollars available in the current fiscal year. The amount of such additional property taxes levied shall not, however, be included in the computation of the maximum amount of property tax dollars which may be certified and levied in future budget years.
   The bill also makes conforming amendments to other provisions of the Code.
   The bill applies to fiscal years beginning on or after July 1, 2020.