HOUSE FILE _____

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

A BILL FOR

An Act relating to state and local government finances by increasing the regular program foundation base percentage, establishing a property tax exemption for commercial and industrial property, establishing property tax levy limits for cities and counties, eliminating certain reporting requirements, and including applicability provisions.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

DIVISION I

EDUCATION FINANCE
    Section 1.  Section 257.1, subsection 2, paragraph b, Code 2011, is amended by striking the paragraph and inserting in lieu thereof the following:
   b.
  (1)  The regular program foundation base per pupil is the following:
   (a)  For the budget year commencing July 1, 2012, the regular program foundation base per pupil is eighty-seven and five-tenths percent of the regular program state cost per pupil.
   (b)  For the budget year commencing July 1, 2013, the regular program foundation base per pupil is eighty-nine and twenty-eight hundredths percent of the regular program state cost per pupil.
   (c)  For the budget year commencing July 1, 2014, the regular program foundation base per pupil is ninety-one and six hundredths percent of the regular program state cost per pupil.
   (d)  For the budget year commencing July 1, 2015, the regular program foundation base per pupil is ninety-two and eighty-four hundredths percent of the regular program state cost per pupil.
   (e)  For the budget year commencing July 1, 2016, the regular program foundation base per pupil is ninety-four and sixty-two hundredths percent of the regular program state cost per pupil.
   (f)  For the budget year commencing July 1, 2017, the regular program foundation base per pupil is ninety-six and forty hundredths percent of the regular program state cost per pupil.
   (g)  For the budget year commencing July 1, 2018, the regular program foundation base per pupil is ninety-eight and eighteen hundredths percent of the regular program state cost per pupil.
   (h)  For the budget year commencing July 1, 2019, and succeeding budget years, the regular program foundation base per pupil is one hundred percent of the regular program state cost per pupil.
   (2)  For each budget year, the special education support services foundation base is seventy-nine percent of the special education support services state cost per pupil. The combined foundation base is the sum of the regular program foundation base, the special education support services foundation base, the total teacher salary supplement district cost, the total professional development supplement district cost, the total early intervention supplement district cost, the total area education agency teacher salary supplement district cost, and the total area education agency professional development supplement district cost.
    Sec. 2.  Section 257.4, subsection 1, paragraph b, Code 2011, is amended to read as follows:
   b.  For the budget year beginning July 1, 2008, and succeeding budget years
 
beginning before July 1, 2019, the department of management shall annually determine an adjusted additional property tax levy and a statewide maximum adjusted additional property tax levy rate, not to exceed the statewide average additional property tax levy rate, calculated by dividing the total adjusted additional property tax levy dollars statewide by the statewide total net taxable valuation. For purposes of this paragraph, the adjusted additional property tax levy shall be that portion of the additional property tax levy corresponding to the state cost per pupil multiplied by a school district’s weighted enrollment, and then multiplied by one hundred percent less the regular program foundation base per pupil percentage pursuant to section 257.1. The
 
For budget years beginning before July 1, 2019, the district shall receive adjusted additional property tax levy aid in an amount equal to the difference between the adjusted additional property tax levy rate and the statewide maximum adjusted additional property tax levy rate, as applied per thousand dollars of assessed valuation on all taxable property in the district. The statewide maximum adjusted additional property tax levy rate shall be annually determined by the department taking into account amounts allocated pursuant to section 257.15, subsection 4. The
 
For budget years beginning before July 1, 2019, the statewide maximum adjusted additional property tax levy rate shall be annually determined by the department taking into account amounts allocated pursuant to section 257.15, subsection 4, and the balance of the property tax equity and relief fund created in section 257.16A at the end of the calendar year.
    Sec. 3.  Section 257.15, subsection 4, Code 2011, is amended to read as follows:
   4.
  a.  Allocations for maximum adjusted additional property tax levy rate calculation and adjusted additional property tax levy aid.  The
 
For fiscal years beginning before July 1, 2019, the department of management shall allocate from amounts appropriated pursuant to section 257.16, subsection 1, and from funds appropriated from the property tax equity and relief fund created in section 257.16A for the purpose of calculating the statewide maximum adjusted additional property tax levy rate and providing adjusted additional property tax levy aid as provided in section 257.4, subsection 1, paragraph “b”, an amount equal to the sum of subparagraphs (1) and (2) as follows:
   (1)  From the amount appropriated from the general fund of the state pursuant to section 257.16, subsection 1, equal to the following:
   (a)  For the budget year beginning July 1, 2006, six million dollars.
   (b)  For the budget year beginning July 1, 2007, twelve million dollars.
   (c)  For the budget year beginning July 1, 2008, eighteen million dollars.
   (d)  For the budget year beginning July 1, 2009, and succeeding budget years
 
beginning before July 1, 2019, twenty-four million dollars.
   (2)  From the amount appropriated from the property tax equity and relief fund created in section 257.16A.

   b.  After lowering all school district additional property tax levy rates to the statewide maximum adjusted additional property tax levy rate under paragraph “a”, the department of management shall use any remaining funds at the end of the calendar year to further lower additional property taxes by increasing for the budget year beginning the following July 1, the state foundation base percentage. 
 
If, however, the state foundation base percentage is one hundred percent, the department of management shall deposit those remaining funds in the taxpayers trust fund created in section 8.57E. Moneys used pursuant to this paragraph shall supplant an equal amount of the appropriation made from the general fund of the state pursuant to section 257.16 that represents the increase in state foundation aid.
    Sec. 4.  Section 257.16A, subsections 2 and 3, Code 2011, are amended to read as follows:
   2.  There
 
For fiscal years beginning before July 1, 2019, there is appropriated annually all moneys in the fund to the department of management for purposes of section 257.15, subsection 4.
   3.  Notwithstanding
 
Except as provided in subsection 4, and notwithstanding section 8.33, any moneys remaining in the property tax equity and relief fund at the end of a fiscal year shall not revert to any other fund but shall remain in the property tax equity and relief fund for use as provided in this section for the following fiscal year.
    Sec. 5.  Section 257.16A, Code 2011, is amended by adding the following new subsection:
   NEW SUBSECTION.  4.  Any moneys in the property tax equity and relief fund on June 30, 2019, shall be deposited by the department of management in the taxpayers trust fund created in section 8.57E.
    Sec. 6.  Section 423F.2, subsection 3, Code 2011, is amended to read as follows:
   3.  The moneys available in a fiscal year in the secure an advanced vision for education fund shall be distributed by the department of revenue to each school district in an amount equal to the amount the school district would have received pursuant to the formula in section 423E.4 as if the local sales and services tax for school infrastructure purposes was imposed. Moneys
 
collected in a fiscal year
 
beginning before July 1, 2017, that are in excess of that needed to provide each school district with its formula amount shall be distributed and credited to the property tax equity and relief fund created in section 257.16A. 
 
Moneys collected in a fiscal year beginning on or after July 1, 2017, that are in excess of that amount needed to provide each school district with its formula amount shall be deposited in the taxpayers trust fund created in section 8.57E.

DIVISION II

COMMERCIAL AND INDUSTRIAL

PROPERTY TAX EXEMPTION
    Sec. 7.  Section 331.512, Code 2011, is amended by adding the following new subsection:
   NEW SUBSECTION.  13A.  Carry out duties relating to the commercial and industrial property tax exemption as provided in section 427.1, subsection 38.
    Sec. 8.  Section 427.1, Code Supplement 2011, is amended by adding the following new subsection:
   NEW SUBSECTION.  38.  Commercial and industrial property.
   a.  Property that is improved with permanent construction and classified for property tax purposes as commercial property or industrial property. For assessment years beginning on or after January 1, 2013, but before January 1, 2020, the exemption provided under this subsection is limited to an amount of actual value of the permanent improvements to the property equal to twenty percent of the exemption base applicable under paragraph “b”. For assessment years beginning on or after January 1, 2020, the exemption provided under this subsection is limited to an amount of actual value of the permanent improvements to the property equal to forty percent of the exemption base applicable under paragraph “b”.
   b.
  (1)  For the assessment year beginning January 1, 2013, the exemption base is one hundred thousand dollars or the actual value of the permanent improvements to the property, whichever is less.
   (2)  For the assessment year beginning January 1, 2014, the exemption base is one hundred fifty thousand dollars or the actual value of the permanent improvements to the property, whichever is less.
   (3)  For the assessment year beginning January 1, 2015, the exemption base is two hundred thousand dollars or the actual value of the permanent improvements to the property, whichever is less.
   (4)  For the assessment year beginning January 1, 2016, the exemption base is three hundred thousand dollars or the actual value of the permanent improvements to the property, whichever is less.
   (5)  For the assessment year beginning January 1, 2017, the exemption base is four hundred thousand dollars or the actual value of the permanent improvements to the property, whichever is less.
   (6)  For the assessment year beginning January 1, 2018, the exemption base is seven hundred thousand dollars or the actual value of the permanent improvements to the property, whichever is less.
   (7)  For the assessment year beginning January 1, 2019, the exemption base is one million dollars or the actual value of the permanent improvements to the property, whichever is less.
   (8)  For the assessment year beginning January 1, 2020, the exemption base is five hundred thousand dollars or the actual value of the permanent improvements to the property, whichever is less.
   (9)  For the assessment year beginning January 1, 2021, the exemption base is eight hundred thousand dollars or the actual value of the permanent improvements to the property, whichever is less.
   (10)  For the assessment year beginning January 1, 2022, the exemption base is one million dollars or the actual value of the permanent improvements to the property, whichever is less.
   (11)  For the assessment year beginning January 1, 2023, the exemption base is two million dollars or the actual value of the permanent improvements to the property, whichever is less.
   (12)  For the assessment year beginning January 1, 2024, the exemption base is four million dollars or the actual value of the permanent improvements to the property, whichever is less.
   (13)  For the assessment year beginning January 1, 2025, the exemption base is seven million five hundred thousand dollars or the actual value of the permanent improvements to the property, whichever is less.
   (14)  For assessment years beginning on or after January 1, 2026, the exemption base is the actual value of the permanent improvements to the property.
   c.  If property that is eligible for the exemption under this subsection also receives a property tax exemption under another provision of law for the same assessment year, the amount of the exemption determined under this subsection shall be reduced by all or a portion of the amount of the other exemption. The amount of the reduction shall be determined by prorating the other exemption amount in the proportion that the actual value of the permanent improvements to the property bears to the total actual value of the property, and such prorated amount attributable to the permanent improvements shall be the amount of the reduction. If, however, such exemption under another provision of law applies only to the actual value of the permanent improvements to the property, the amount of the exemption determined under this subsection shall instead be reduced by the amount of the exemption under the other provision of law for the same assessment year.
   d.  Wind energy conversion property as defined in section 427B.26 is not eligible for the exemption provided under this subsection. 
   e.  Upon receiving the appropriate valuation information and data from the assessor, the county auditor shall calculate the amount of each exemption under this subsection and shall enter such exemption amounts in the county system.
    Sec. 9.  IMPLEMENTATION.  Section 25B.7 shall not apply to this division of this Act.
    Sec. 10.  APPLICABILITY.  This division of this Act applies to assessment years beginning on or after January 1, 2013.

DIVISION III

COUNTY AND CITY BUDGET LIMITATION
    Sec. 11.  Section 23A.2, subsection 10, paragraph h, Code 2011, is amended to read as follows:
   h.  The performance of an activity listed in section 331.424,
 
Code 2011, as a service for which a supplemental levy
 
county may be certified
 
include in its budget.
    Sec. 12.  Section 28M.5, subsection 2, Code 2011, 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. 13.  Section 123.38, subsection 2, Code 2011, is amended to read as follows:
   2.  Any licensee or permittee, or the licensee’s or permittee’s executor or administrator, or any person duly appointed by the court to take charge of and administer the property or assets of the licensee or permittee for the benefit of the licensee’s or permittee’s creditors, may voluntarily surrender a license or permit to the division. When a license or permit is surrendered the division shall notify the local authority, and the division or the local authority shall refund to the person surrendering the license or permit, a proportionate amount of the fee received by the division or the local authority for the license or permit as follows:  if a license or permit is surrendered during the first three months of the period for which it was issued, the refund shall be three-fourths of the amount of the fee; if surrendered more than three months but not more than six months after issuance, the refund shall be one-half of the amount of the fee; if surrendered more than six months but not more than nine months after issuance, the refund shall be one-fourth of the amount of the fee. No refund shall be made, however, for any special liquor permit, nor for a liquor control license, wine permit, or beer permit surrendered more than nine months after issuance. 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 2011, and in section 331.424A, shall not be deemed received either by the division or by a local authority. No refund shall be made to any licensee or permittee, upon the surrender of the license or permit, if there is at the time of surrender, a complaint filed with the division or local authority, charging the licensee or permittee with a violation of this chapter. If upon a hearing on a complaint the license or permit is not revoked or suspended, then the licensee or permittee is eligible, upon surrender of the license or permit, to receive a refund as provided in this section; but if the license or permit is revoked or suspended upon hearing the licensee or permittee is not eligible for the refund of any portion of the license or permit fee.
    Sec. 14.  Section 218.99, Code 2011, 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 legal settlement’s entity designated to perform the county’s central point of coordination process 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 entity designated to perform the county’s central point of coordination process 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 county of legal settlement, notice shall be made to the director of human services and the administrator in control of the institution involved.
    Sec. 15.  Section 331.263, subsection 2, Code 2011, 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. 16.  Section 331.301, subsection 12, Code Supplement 2011, 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 (6); 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 (6); or section 331.441, subsection 2, paragraph “b”.
    Sec. 17.  Section 331.421, subsections 1 and 10, Code 2011, are amended by striking the subsections.
    Sec. 18.  Section 331.421, Code 2011, is amended by adding the following new subsection:
   NEW SUBSECTION.  7A.  “Item” means a budgeted expenditure, appropriation, or cash reserve from a fund for a service area, program, program element, or purpose.
    Sec. 19.  Section 331.423, Code 2011, 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 and section 331.423B, 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 average of the preceding twelve-month percentage change, which shall be computed on a monthly basis, in the midwest consumer price index, ending with the percentage change for the month of November. The department shall then add that average percentage change to one hundred percent. In no case, however, shall the annual growth factor exceed one hundred four 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, 2013, 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, 2013, 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, 2012.
   b.  For purposes of calculating maximum property tax dollars for rural county services for the fiscal year beginning July 1, 2013, 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, 2012.
   5.  Property taxes certified for mental health, mental retardation, and developmental disabilities services, 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. 20.  NEW SECTION.  331.423B  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, 2012, 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, 2011, 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, 2011.
   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, 2018. 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. 21.  Section 331.424, Code 2011, is amended by striking the section and inserting in lieu thereof the following:
   331.424  Authority to levy beyond maximum property tax dollars.
   1.  The board may certify additions to the maximum amount of property tax dollars to be levied for a period of time not to exceed two years if the proposition has been submitted at a special election and received a favorable majority of the votes cast on the proposition.
   2.  The special election 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 special election shall be conducted by the county commissioner of elections in accordance with law.
   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. 22.  Section 331.424A, subsection 4, Code Supplement 2011, is amended to read as follows:
   4.  For the fiscal year beginning July 1, 1996, and for each subsequent 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 services fund shall not exceed an amount equal to the amount of base year expenditures for services as defined in section 331.438, less the amount of property tax relief to be received pursuant to section 426B.2, in the fiscal year for which the budget is certified. The county auditor and the board of supervisors shall reduce the amount of the levy certified for the services fund by the amount of property tax relief to be received. 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. 23.  Section 331.427, subsection 3, paragraph l, Code 2011, is amended to read as follows:
   l.  Services listed in section 331.424, subsection 1,
 
Code 2011, and section 331.554.
    Sec. 24.  Section 331.428, subsection 2, paragraph d, Code 2011, is amended to read as follows:
   d.  Services listed under section 331.424, subsection 2, Code 2011.
    Sec. 25.  Section 331.434, subsection 1, Code 2011, is amended to read as follows:
   1.  The budget shall show the amount required for each class of proposed expenditures, a comparison of the amounts proposed to be expended with the amounts expended for like purposes for the two preceding years, the revenues from sources other than property taxation, and the amount to be raised by property taxation, in the detail and form prescribed by the director of the department of management. For each county that has established an urban renewal area, the budget shall include estimated and actual tax increment financing revenues and all estimated and actual expenditures of the revenues, proceeds from debt and all estimated and actual expenditures of the debt proceeds, and identification of any entity receiving a direct payment of taxes funded by tax increment financing revenues and shall include the total amount of loans, advances, indebtedness, or bonds outstanding at the close of the most recently ended fiscal year, which qualify for payment from the special fund created in section 403.19, including interest negotiated on such loans, advances, indebtedness, or bonds. For purposes of this subsection, “indebtedness” includes written agreements whereby the county agrees to suspend, abate, exempt, rebate, refund, or reimburse property taxes, provide a grant for property taxes paid, or make a direct payment of taxes, with moneys in the special fund. The amount of loans, advances, indebtedness, or bonds shall be listed in the aggregate for each county reporting. The county finance committee, in consultation with the department of management and the legislative services agency, shall determine reporting criteria and shall prepare a form for reports filed with the department pursuant to this section. The department shall make the information available by electronic means.
    Sec. 26.  Section 373.10, Code 2011, 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. 27.  Section 384.1, Code 2011, is amended by striking the section and inserting in lieu thereof the following:
   384.1  Property tax dollars —— maximums.
   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 basic levies for city government purposes, subject to the limitation on property tax dollars provided in this section.
   2.  For purposes of this section and section 384.1B, 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 average of the preceding twelve-month percentage change, which shall be computed on a monthly basis, in the midwest consumer price index, ending with the percentage change for the month of November. The department shall then add that average percentage change to one hundred percent. In no case, however, shall the annual growth factor exceed one hundred four 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, 2013, 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, 2013, 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, 2012.
   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 18, 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. 28.  NEW SECTION.  384.1B  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, 2012, 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, 2011, 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, 2018. 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. 29.  Section 384.12, subsection 20, Code 2011, is amended by striking the subsection.
    Sec. 30.  NEW SECTION.  384.12A  Authority to levy beyond maximum property tax dollars.
   1.  The city council may certify additions to the maximum amount of property tax dollars to be levied for a period of time not to exceed two years if the proposition has been submitted at a special election and received a favorable majority of the votes cast on the proposition.
   2.  The special election 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 special election shall be conducted by the county commissioner of elections in accordance with law.
   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. 31.  Section 384.16, subsection 1, paragraph b, Code 2011, is amended to read as follows:
   b.  A budget must show comparisons between the estimated expenditures in each program in the following year, the latest estimated expenditures in each program in the current year, and the actual expenditures in each program from the annual report as provided in section 384.22, or as corrected by a subsequent audit report. Wherever practicable, as provided in rules of the committee, a budget must show comparisons between the levels of service provided by each program as estimated for the following year, and actual levels of service provided by each program during the two preceding years. For each city that has established an urban renewal area, the budget shall include estimated and actual tax increment financing revenues and all estimated and actual expenditures of the revenues, proceeds from debt and all estimated and actual expenditures of the debt proceeds, and identification of any entity receiving a direct payment of taxes funded by tax increment financing revenues and shall include the total amount of loans, advances, indebtedness, or bonds outstanding at the close of the most recently ended fiscal year, which qualify for payment from the special fund created in section 403.19, including interest negotiated on such loans, advances, indebtedness, or bonds. The amount of loans, advances, indebtedness, or bonds shall be listed in the aggregate for each city reporting. The city finance committee, in consultation with the department of management and the legislative services agency, shall determine reporting criteria and shall prepare a form for reports filed with the department pursuant to this section. The department shall make the information available by electronic means.
    Sec. 32.  Section 384.19, Code 2011, is amended by adding the following new unnumbered paragraph:
   NEW UNNUMBERED PARAGRAPH.  For purposes of a tax protest filed under this section, “item” means a budgeted expenditure, appropriation, or cash reserve from a fund for a service area, program, program element, or purpose.
    Sec. 33.  Section 386.8, Code 2011, 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. 34.  Section 386.9, Code 2011, 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. 35.  REPEAL.  Sections 331.425 and 331.426, Code 2011, are repealed.
    Sec. 36.  APPLICABILITY.  This division of this Act applies to fiscal years beginning on or after July 1, 2013.
EXPLANATION
   This bill relates to state and local government finances by increasing the regular program foundation base percentage, establishing a property tax exemption for commercial and industrial property, and establishing property tax levy limits for cities and counties.
   Division I of the bill provides for an increase in the regular program foundation base under the state school foundation program. The foundation base is the specified percentage of the state cost per pupil calculation which is paid as state aid to school districts, above and beyond the uniform property tax levy imposed in Code section 257.3. Beginning with the budget year commencing July 1, 2013, the increase is phased in over a seven-year period in annual increments, from the current foundation base level of 87.5 percent to the level of 100 percent in the seventh year.
   Division I of the bill provides that the department of management’s determination of an adjusted additional property tax levy and a statewide maximum adjusted additional property tax levy rate only applies to budget years beginning before July 1, 2019. The bill also provides that adjusted additional property tax levy aid to school districts is only provided for budget years beginning before July 1, 2019. The elimination of adjusted additional property tax levy aid is the result of the regular program foundation base percentage reaching 100 percent.
   Division I of the bill sunsets the annual appropriation of $24 million for adjusted additional property tax levy aid under Code section 257.15(4) for the fiscal year beginning July 1, 2019, and thereafter, and provides that if the state foundation base percentage is 100 percent, the department of management shall deposit those remaining funds allocated for adjusted additional property tax levy aid in the taxpayers trust fund.
   Division I of the bill specifies that any moneys in the property tax equity and relief fund established under Code section 257.16A on June 30, 2019, shall be deposited by the department of management in the taxpayers trust fund.
   Division I of the bill provides that moneys collected in a fiscal year beginning before July 1, 2017, in the secure an advanced vision for education fund (SAVE) that are in excess of that needed to provide each school district with its formula amount continue, as under current law, to be distributed and credited to the property tax equity and relief fund created in Code section 257.16A. The bill provides that such excess moneys collected in a fiscal year beginning on or after July 1, 2017, shall be deposited in the taxpayers trust fund.
   Division II of the bill establishes a property tax exemption for property that is improved with permanent construction and classified for property tax purposes as commercial property or industrial property. For assessment years beginning on or after January 1, 2013, but before January 1, 2020, the exemption is limited to an amount of actual value of the permanent improvements to the property equal to 20 percent of the exemption base as defined in the bill. For assessment years beginning on or after January 1, 2020, the exemption is limited to an amount of actual value of the permanent improvements to the property equal to 40 percent of the exemption base as defined in the bill. The exemption base used to determine the amount of the exemption is an amount specified in the bill for the applicable assessment year or the actual value of the permanent improvements to the property, whichever is less. The amount specified for determining the exemption base for the assessment year beginning January 1, 2013, is $100,000, and the amount specified for determining the exemption base is increased each assessment year thereafter by varying amounts until the amount specified for determining the exemption base is equal to $1 million for the assessment year beginning January 1, 2019. The amount specified for determining the exemption base for the assessment year beginning January 1, 2020, is $500,000, and the amount specified for determining the exemption base is increased each assessment year thereafter by varying amounts until the amount specified for determining the exemption base is equal to $7,500,000 for the assessment year beginning January 1, 2025. For assessment years beginning on or after January 1, 2026, the exemption base is equal to the actual value of the permanent improvements to the property.
   Division II provides for certain reductions in the amount of the exemption if the eligible property also receives a property tax exemption under another provision of law for the same assessment year. The exemption provided under division II of the bill does not apply to wind energy conversion property as defined in Code section 427B.26.
   Division II of the bill directs the county auditor to calculate the amount of the exemption for each eligible property.
   Division II of the bill provides that the provisions in Code section 25B.7, relating to the obligation of the state to reimburse local jurisdictions for property tax credits and exemptions, does not apply to the exemption in division II of the bill.
   Division II of the bill applies to assessment years beginning on or after January 1, 2013.
   Division III of the 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 fiscal years beginning on or after July 1, 2013. For the fiscal year beginning July 1, 2013, 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 multiplied by the annual growth factor, as defined in the bill, and the amount of net new valuation taxes, as defined in the bill.
   Division III also allows counties and cities to certify additions to the maximum amount of property tax dollars to be levied for a period of time not to exceed two years if the proposition has been approved at a special election. The bill specifies the notice and election requirements for such a proposition. The bill specifies that such amounts approved at special election are not to be included in the computation of the maximum amount of property tax dollars for future budget years.
   Division III of 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.
   Division III of 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, 2012, 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, 2018. 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.
   Division III also makes conforming amendments to other provisions of the Code.
   Division III strikes language relating to the duties of the county finance committee and the city finance committee to determine criteria for reporting of certain indebtedness and strikes language requiring the department of management to make such information available by electronic means.
   Division III applies to fiscal years beginning on or after July 1, 2013.