House File 9 - Introduced HOUSE FILE 9 BY SANDS , HAGENOW , J. SMITH , KAUFMANN , SCHULTE , FRY , S. OLSON , JORGENSEN , WORTHAN , HELLAND , HANUSA , HUSEMAN , WAGNER , SODERBERG , PAUSTIAN , GRASSLEY , CHAMBERS , RAECKER , ALONS , DEYOE , DRAKE , BYRNES , PEARSON , HAGER , LOFGREN , and WINDSCHITL A BILL FOR An Act relating to property taxation and local government 1 and school financing by increasing the regular program 2 foundation base, establishing local government financing 3 requirements for essential services, establishing a method 4 for determining property assessment limitations, and 5 including retroactive and other applicability provisions. 6 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 7 TLSB 1484YH (6) 84 md/sc

H.F. 9 DIVISION I 1 EDUCATION FINANCE 2 Section 1. Section 257.1, subsection 2, paragraph b, Code 3 2011, is amended by striking the paragraph and inserting in 4 lieu thereof the following: 5 b. (1) The regular program foundation base per pupil is the 6 following: 7 (a) For the budget year commencing July 1, 2011, the 8 regular program foundation base per pupil is eighty-seven and 9 five-tenths percent of the regular program state cost per 10 pupil. 11 (b) For the budget year commencing July 1, 2012, the 12 regular program foundation base per pupil is eighty-nine and 13 twenty-eight hundredths percent of the regular program state 14 cost per pupil. 15 (c) For the budget year commencing July 1, 2013, the 16 regular program foundation base per pupil is ninety-one and six 17 hundredths percent of the regular program state cost per pupil. 18 (d) For the budget year commencing July 1, 2014, the regular 19 program foundation base per pupil is ninety-two and eighty-four 20 hundredths percent of the regular program state cost per pupil. 21 (e) For the budget year commencing July 1, 2015, the regular 22 program foundation base per pupil is ninety-four and sixty-two 23 hundredths percent of the regular program state cost per pupil. 24 (f) For the budget year commencing July 1, 2016, the regular 25 program foundation base per pupil is ninety-six and forty 26 hundredths percent of the regular program state cost per pupil. 27 (g) For the budget year commencing July 1, 2017, the regular 28 program foundation base per pupil is ninety-eight and eighteen 29 hundredths percent of the regular program state cost per pupil. 30 (h) For the budget year commencing July 1, 2018, and 31 succeeding budget years, the regular program foundation base 32 per pupil is one hundred percent of the regular program state 33 cost per pupil. 34 (2) For each budget year, the special education support 35 -1- LSB 1484YH (6) 84 md/sc 1/ 10

H.F. 9 services foundation base is seventy-nine percent of the special 1 education support services state cost per pupil. The combined 2 foundation base is the sum of the regular program foundation 3 base, the special education support services foundation base, 4 the total teacher salary supplement district cost, the total 5 professional development supplement district cost, the total 6 early intervention supplement district cost, the total area 7 education agency teacher salary supplement district cost, 8 and the total area education agency professional development 9 supplement district cost. 10 DIVISION II 11 LOCAL GOVERNMENT ESSENTIAL SERVICES 12 Sec. 2. NEW SECTION . 331.437A Essential services —— 13 funding. 14 1. If a county’s property tax capacity is reduced or the 15 amount of revenue to be received by a county from sources 16 other than property taxes is reduced, a county is prohibited 17 from reducing funding for essential services provided by the 18 county from the level such services were funded in the previous 19 year without first reducing funding for services that are not 20 essential services. 21 2. If funding for essential services is reduced under the 22 circumstances described in subsection 1, the budget summary 23 required to be published by the county pursuant to section 24 331.434 shall include a listing of the essential services, by 25 service area and item, for which funding was reduced from the 26 previous year, the previous year’s funding for such service 27 area and item, and the proposed funding for such service area 28 and item. The listing shall be prefaced by the following 29 statement: 30 State law requires that when the revenue capacity of a county 31 is reduced, funding for nonessential services shall be reduced 32 before reductions are made in funding of essential services. 33 Following is the list of essential services for which funding 34 is reduced in this proposed budget. 35 -2- LSB 1484YH (6) 84 md/sc 2/ 10

H.F. 9 3. For purposes of this section, “essential services” means 1 law enforcement, fire protection service, emergency medical 2 services, street lights, water, sewage and sewage disposal, 3 garbage pickup and garbage disposal, landfills, roads and road 4 maintenance, streets and street maintenance, bridges and bridge 5 maintenance, sidewalks and sidewalk maintenance, snow removal, 6 and local emergency management to the extent such essential 7 services are mandated by statute or have been provided at the 8 discretion of the county board of supervisors. 9 Sec. 3. NEW SECTION . 384.20A Essential services —— funding. 10 1. If a city’s property tax capacity is reduced or the 11 amount of revenue to be received by a city from sources other 12 than property taxes is reduced, a city is prohibited from 13 reducing funding for essential services provided by the city 14 from the level such services were funded in the previous year 15 without first reducing funding for services that are not 16 essential services. 17 2. If funding for essential services is reduced under the 18 circumstances described in subsection 1, the budget summary 19 required to be published by the city pursuant to section 384.16 20 shall include a listing of the essential services, by service 21 area and item, for which funding was reduced from the previous 22 year, the previous year’s funding for such service area and 23 item, and the proposed funding for such service area and item. 24 The listing shall be prefaced by the following statement: 25 State law requires that when the revenue capacity of a city 26 is reduced, funding for nonessential services shall be reduced 27 before reductions are made in funding of essential services. 28 Following is the list of essential services for which funding 29 is reduced in this proposed budget. 30 3. For purposes of this section, “essential services” means 31 law enforcement, fire protection service, emergency medical 32 services, street lights, water, sewage and sewage disposal, 33 garbage pickup and garbage disposal, landfills, roads and road 34 maintenance, streets and street maintenance, bridges and bridge 35 -3- LSB 1484YH (6) 84 md/sc 3/ 10

H.F. 9 maintenance, sidewalks and sidewalk maintenance, snow removal, 1 and local emergency management to the extent such essential 2 services are mandated by statute or have been provided at the 3 discretion of the city council. 4 Sec. 4. APPLICABILITY. This division of this Act applies to 5 fiscal years beginning on or after July 1, 2012. 6 DIVISION III 7 PROPERTY ASSESSMENT LIMITATION 8 Sec. 5. Section 441.21, subsections 4 and 5, Code 2011, are 9 amended to read as follows: 10 4. For valuations established as of January 1, 1979, 11 the percentage of actual value at which agricultural and 12 residential property shall be assessed shall be the quotient 13 of the dividend and divisor as defined in this section . The 14 dividend for each class of property shall be the dividend 15 as determined for each class of property for valuations 16 established as of January 1, 1978, adjusted by the product 17 obtained by multiplying the percentage determined for that 18 year by the amount of any additions or deletions to actual 19 value, excluding those resulting from the revaluation of 20 existing properties, as reported by the assessors on the 21 abstracts of assessment for 1978, plus six percent of the 22 amount so determined. However, if the difference between the 23 dividend so determined for either class of property and the 24 dividend for that class of property for valuations established 25 as of January 1, 1978, adjusted by the product obtained by 26 multiplying the percentage determined for that year by the 27 amount of any additions or deletions to actual value, excluding 28 those resulting from the revaluation of existing properties, 29 as reported by the assessors on the abstracts of assessment 30 for 1978, is less than six percent, the 1979 dividend for the 31 other class of property shall be the dividend as determined for 32 that class of property for valuations established as of January 33 1, 1978, adjusted by the product obtained by multiplying 34 the percentage determined for that year by the amount of 35 -4- LSB 1484YH (6) 84 md/sc 4/ 10

H.F. 9 any additions or deletions to actual value, excluding those 1 resulting from the revaluation of existing properties, as 2 reported by the assessors on the abstracts of assessment for 3 1978, plus a percentage of the amount so determined which is 4 equal to the percentage by which the dividend as determined 5 for the other class of property for valuations established 6 as of January 1, 1978, adjusted by the product obtained by 7 multiplying the percentage determined for that year by the 8 amount of any additions or deletions to actual value, excluding 9 those resulting from the revaluation of existing properties, 10 as reported by the assessors on the abstracts of assessment 11 for 1978, is increased in arriving at the 1979 dividend for 12 the other class of property. The divisor for each class of 13 property shall be the total actual value of all such property 14 in the state in the preceding year, as reported by the 15 assessors on the abstracts of assessment submitted for 1978, 16 plus the amount of value added to said total actual value by 17 the revaluation of existing properties in 1979 as equalized 18 by the director of revenue pursuant to section 441.49 . The 19 director shall utilize information reported on abstracts of 20 assessment submitted pursuant to section 441.45 in determining 21 such percentage. For valuations established as of January 22 1, 1980, and each year thereafter, the percentage of actual 23 value as equalized by the director of revenue as provided 24 in section 441.49 at which agricultural and residential 25 property shall be assessed shall be calculated in accordance 26 with the methods provided herein including the limitation of 27 increases in agricultural and residential assessed values to 28 the percentage increase of the other class of property if the 29 other class increases less than the allowable limit adjusted 30 to include the applicable and current values as equalized by 31 the director of revenue in this subsection , except that any 32 references to six percent in this subsection shall be four 33 percent. For valuations established for the assessment year 34 beginning January 1, 2011, and each assessment year thereafter, 35 -5- LSB 1484YH (6) 84 md/sc 5/ 10

H.F. 9 the percentage of actual value as equalized by the director of 1 revenue as provided in section 441.49 at which agricultural 2 and residential property shall be assessed shall be calculated 3 in accordance with the methods provided in this subsection and 4 subsection 5A, except that any references to six percent in 5 this subsection shall be four percent. 6 5. For valuations established as of January 1, 1979, 7 commercial property and industrial property, excluding 8 properties referred to in section 427A.1, subsection 8 , shall 9 be assessed as a percentage of the actual value of each class 10 of property. The percentage shall be determined for each 11 class of property by the director of revenue for the state in 12 accordance with the provisions of this section . For valuations 13 established as of January 1, 1979, the percentage shall be 14 the quotient of the dividend and divisor as defined in this 15 section . The dividend for each class of property shall be the 16 total actual valuation for each class of property established 17 for 1978, plus six percent of the amount so determined. The 18 divisor for each class of property shall be the valuation 19 for each class of property established for 1978, as reported 20 by the assessors on the abstracts of assessment for 1978, 21 plus the amount of value added to the total actual value by 22 the revaluation of existing properties in 1979 as equalized 23 by the director of revenue pursuant to section 441.49 . For 24 valuations established as of January 1, 1979, property valued 25 by the department of revenue pursuant to chapters 428 , 433 , 26 437 , and 438 shall be considered as one class of property and 27 shall be assessed as a percentage of its actual value. The 28 percentage shall be determined by the director of revenue in 29 accordance with the provisions of this section . For valuations 30 established as of January 1, 1979, the percentage shall be 31 the quotient of the dividend and divisor as defined in this 32 section . The dividend shall be the total actual valuation 33 established for 1978 by the department of revenue, plus ten 34 percent of the amount so determined. The divisor for property 35 -6- LSB 1484YH (6) 84 md/sc 6/ 10

H.F. 9 valued by the department of revenue pursuant to chapters 428 , 1 433 , 437 , and 438 shall be the valuation established for 1978, 2 plus the amount of value added to the total actual value by 3 the revaluation of the property by the department of revenue 4 as of January 1, 1979. For valuations established as of 5 January 1, 1980, commercial property and industrial property, 6 excluding properties referred to in section 427A.1, subsection 7 8 , shall be assessed at a percentage of the actual value of 8 each class of property. The percentage shall be determined 9 for each class of property by the director of revenue for the 10 state in accordance with the provisions of this section . For 11 valuations established as of January 1, 1980, the percentage 12 shall be the quotient of the dividend and divisor as defined in 13 this section . The dividend for each class of property shall 14 be the dividend as determined for each class of property for 15 valuations established as of January 1, 1979, adjusted by the 16 product obtained by multiplying the percentage determined 17 for that year by the amount of any additions or deletions to 18 actual value, excluding those resulting from the revaluation 19 of existing properties, as reported by the assessors on the 20 abstracts of assessment for 1979, plus four percent of the 21 amount so determined. The divisor for each class of property 22 shall be the total actual value of all such property in 1979, 23 as equalized by the director of revenue pursuant to section 24 441.49 , plus the amount of value added to the total actual 25 value by the revaluation of existing properties in 1980. The 26 director shall utilize information reported on the abstracts of 27 assessment submitted pursuant to section 441.45 in determining 28 such percentage. For valuations established as of January 1, 29 1980, property valued by the department of revenue pursuant 30 to chapters 428 , 433 , 437 , and 438 shall be assessed at a 31 percentage of its actual value. The percentage shall be 32 determined by the director of revenue in accordance with the 33 provisions of this section . For valuations established as of 34 January 1, 1980, the percentage shall be the quotient of the 35 -7- LSB 1484YH (6) 84 md/sc 7/ 10

H.F. 9 dividend and divisor as defined in this section . The dividend 1 shall be the total actual valuation established for 1979 by 2 the department of revenue, plus eight percent of the amount so 3 determined. The divisor for property valued by the department 4 of revenue pursuant to chapters 428 , 433 , 437 , and 438 shall 5 be the valuation established for 1979, plus the amount of 6 value added to the total actual value by the revaluation of 7 the property by the department of revenue as of January 1, 8 1980. For valuations established as of January 1, 1981, 9 and each year thereafter, the percentage of actual value as 10 equalized by the director of revenue as provided in section 11 441.49 at which commercial property and industrial property, 12 excluding properties referred to in section 427A.1, subsection 13 8 , shall be assessed shall be calculated in accordance with 14 the methods provided herein in this subsection , except that 15 any references to six percent in this subsection shall be four 16 percent. For valuations established as of January 1, 1981, 17 and each year thereafter, the percentage of actual value at 18 which property valued by the department of revenue pursuant 19 to chapters 428 , 433 , 437 , and 438 shall be assessed shall be 20 calculated in accordance with the methods provided herein, 21 except that any references to ten percent in this subsection 22 shall be eight percent. Beginning with valuations established 23 as of January 1, 1979, and each year thereafter, property 24 valued by the department of revenue pursuant to chapter 434 25 shall also be assessed at a percentage of its actual value 26 which percentage shall be equal to the percentage determined 27 by the director of revenue for commercial property, industrial 28 property, or property valued by the department of revenue 29 pursuant to chapters 428 , 433 , 437 , and 438 , whichever is 30 lowest. For valuations established for the assessment year 31 beginning January 1, 2011, and each assessment year thereafter, 32 the percentage of actual value as equalized by the director of 33 revenue as provided in section 441.49 at which commercial and 34 industrial property shall be assessed shall be calculated in 35 -8- LSB 1484YH (6) 84 md/sc 8/ 10

H.F. 9 accordance with the methods provided in this subsection and 1 subsection 5A, except that any references to six percent in 2 this subsection shall be four percent. 3 Sec. 6. Section 441.21, Code 2011, is amended by adding the 4 following new subsection: 5 NEW SUBSECTION . 5A. Notwithstanding the limitation 6 of increases for agricultural and residential property in 7 subsection 4 and the limitation of increases for commercial and 8 industrial property in subsection 5, for valuations established 9 for the assessment year beginning January 1, 2011, and each 10 assessment year thereafter, for residential, agricultural, and 11 commercial property, the assessed values of these three classes 12 of property shall be limited to the percentage increase of that 13 class of property that is the lowest percentage increase under 14 the allowable limit adjusted to include the applicable and 15 current values as equalized by the director of revenue. The 16 lowest percentage increase determined under this subsection 17 shall also be applied to industrial property in the same manner 18 it is applied to the other three classes of property. 19 Sec. 7. RETROACTIVE APPLICABILITY. This division of this 20 Act applies retroactively to January 1, 2011, for assessment 21 years beginning on or after that date. 22 EXPLANATION 23 This bill makes changes relating to property taxation and 24 local government and school financing. 25 Division I of the bill provides for an increase in the 26 regular program foundation base under the state school 27 foundation program. The foundation base is the specified 28 percentage of the state cost per pupil calculation which is 29 paid as state aid to school districts, above and beyond the 30 uniform property tax levy imposed in Code section 257.3. 31 Beginning with the budget year commencing July 1, 2012, the 32 increase is phased in over a seven-year period in equal annual 33 increments, from the current foundation base level of 87.5 34 percent to the level of 100 percent. 35 -9- LSB 1484YH (6) 84 md/sc 9/ 10

H.F. 9 Division II of the bill makes changes relating to funding of 1 city and county budgets and relating to assessment of property 2 for property tax purposes. The bill requires a county or 3 city whose property tax capacity or other revenue capacity 4 is reduced to first reduce funding for services that are not 5 essential services. If funding for essential services is also 6 reduced, the county or city shall include on the published 7 proposed budget summary the listing of essential services 8 for which funding has been reduced and a statement informing 9 persons that state law requires that when revenue capacity is 10 reduced, funding for nonessential services is to be reduced 11 before funding for essential services is reduced. The bill 12 defines “essential services”. 13 Division II of the bill applies to fiscal years beginning on 14 or after July 1, 2012. 15 Division III of the bill ties together the assessment 16 limitations of residential, agricultural, and commercial 17 property by limiting the percentage increase in all of those 18 classes of property to the percentage increase of that class 19 of property that is the lowest percentage increase under the 20 allowable (4 percent) limit. The division also provides that 21 the lowest percentage increase shall be applied to industrial 22 property in the same manner that it is applied to the other 23 three classes of property. 24 Division III of the bill applies retroactively to January 1, 25 2011, for assessment years beginning on or after that date. 26 -10- LSB 1484YH (6) 84 md/sc 10/ 10