SF 652 (LSB 2933SV (2) 91)

SENATE FILE 652

BY  COMMITTEE ON WAYS AND MEANS

(SUCCESSOR TO SSB 1214)

A BILL FOR

An Act relating to economic development and housing by modifying provisions concerning economic development programs and modifying provisions concerning Iowa’s urban renewal law, and including applicability provisions.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

DIVISION I
HOUSING
    Section 1.  Section 15A.1, subsection 1, paragraph b, Code 2025, is amended to read as follows:
   b.  For purposes of this chapter, “economic development” means private or joint public and private investment involving the creation of new jobs and income or the retention of existing jobs and income that would otherwise be lost or the provision of workforce housing.
    Sec. 2.  Section 15A.1, subsection 2, Code 2025, is amended by adding the following new paragraph:
   NEW PARAGRAPH.  e.  Development policies that advance the development of workforce housing.
    Sec. 3.  Section 403.17, subsection 14, Code 2025, is amended to read as follows:
   14.  “Low or and moderate income families” means those families, including single person households, earning no more than eighty percent of the higher of the median family income of the county or the statewide nonmetropolitan area as determined by the latest United States department of housing and urban development, section 8 income guidelines.
    Sec. 4.  Section 403.17, Code 2025, is amended by adding the following new subsection:
   NEW SUBSECTION.  14A.  “Low and moderate income family housing” means housing for low and moderate income families and includes housing that meets the requirements of section 15.353.
DIVISION II
DIVISION OF REVENUE —— SCHOOL FOUNDATION LEVY
    Sec. 5.  Section 403.19, subsection 2, paragraph a, Code 2025, is amended to read as follows:
   a.  That portion of the taxes each year in excess of such amount shall be allocated to and when collected be paid into a special fund of the municipality to pay the principal of and interest on loans, moneys advanced to, or indebtedness, whether funded, refunded, assumed, or otherwise, including bonds issued under the authority of section 403.9, subsection 1, incurred by the municipality to finance or refinance, in whole or in part, an urban renewal project within the area, and to provide assistance for low and moderate income family housing as provided in section 403.22. However, except as provided in paragraph “b”, taxes for the regular and voter-approved physical plant and equipment levy of a school district imposed pursuant to section 298.2, foundation property taxes of a school district imposed under section 257.3, and taxes for the instructional support program of a school district imposed pursuant to section 257.19, taxes for the payment of bonds and interest of each taxing district, and taxes imposed under section 346.27, subsection 22, related to joint county-city buildings shall be collected against all taxable property within the taxing district without limitation by the provisions of this subsection.
    Sec. 6.  APPLICABILITY.  This division of this Act applies to property taxes due and payable in fiscal years beginning on or after July 1, 2027, that are levied against any of the following:
   1.  Property located in an urban renewal area for which the ordinance providing for a division of revenue takes effect on or after January 1, 2026.
   2.  Property annexed or otherwise included in an urban renewal area after the effective date of the ordinance providing for a division of revenue if the annexation or inclusion occurs on or after January 1, 2026.
DIVISION III
DIVISION OF REVENUE —— CHAPTER 422D PROPERTY TAX LEVY

    Sec. 7.  Section 403.19, subsection 2, paragraph a, Code 2025, is amended to read as follows:
   a.  That portion of the taxes each year in excess of such amount shall be allocated to and when collected be paid into a special fund of the municipality to pay the principal of and interest on loans, moneys advanced to, or indebtedness, whether funded, refunded, assumed, or otherwise, including bonds issued under the authority of section 403.9, subsection 1, incurred by the municipality to finance or refinance, in whole or in part, an urban renewal project within the area, and to provide assistance for low and moderate income family housing as provided in section 403.22. However, except as provided in paragraph “b”, taxes for the regular and voter-approved physical plant and equipment levy of a school district imposed pursuant to section 298.2 and taxes for the instructional support program of a school district imposed pursuant to section 257.19, taxes for the payment of bonds and interest of each taxing district, taxes for emergency medical services imposed pursuant to chapter 422D, and taxes imposed under section 346.27, subsection 22, related to joint county-city buildings shall be collected against all taxable property within the taxing district without limitation by the provisions of this subsection.
    Sec. 8.  APPLICABILITY.  This division of this Act applies to property taxes due and payable in fiscal years beginning on or after July 1, 2026.
DIVISION IV
LIMITATIONS ON DIVISION OF REVENUE

    Sec. 9.  Section 403.19, subsection 2, Code 2025, is amended by adding the following new paragraph:
   NEW PARAGRAPH.  e.  For urban renewal areas for which an ordinance providing for a division of revenue is not limited in duration under section 403.17, subsection 10, or section 403.22, subsection 5, after fifteen years following the effective date of this division of this Act or after fifteen years from the calendar year following the calendar year in which the municipality first certifies to the county auditor the amount of any loans, advances, indebtedness, or bonds which qualify for payment from the division of revenue, whichever is later, the amount determined under paragraph “a” that may be paid into the municipality’s special fund shall not exceed seventy-five percent of the amount otherwise determined under paragraph “a” but for this paragraph and such excess amounts shall be allocated and paid to the respective taxing districts in the same manner as amounts under subsection 1. However, beginning with the sixth year that such an urban renewal area is subject to this paragraph, the amount determined under paragraph “a” that may be paid into the municipality’s special fund shall not exceed sixty percent of the amount otherwise determined under paragraph “a” but for this paragraph and such excess amounts shall be allocated and paid to the respective taxing districts in the same manner as amounts under subsection 1.
DIVISION V
URBAN RENEWAL AREA HOUSING AND RESIDENTIAL DEVELOPMENT REQUIREMENTS

    Sec. 10.  Section 403.22, subsection 1, Code 2025, is amended by adding the following new paragraph:
   NEW PARAGRAPH.  d.  (1)  For municipalities of any population size, and notwithstanding any minimum low and moderate income family housing requirement, if the public improvement project is approved on or after July 1, 2025, but before July 1, 2026, and is related to housing and residential development in an economic development area containing property that has been located entirely within the corporate limits of a city for twenty years or more, the amount to be provided for low and moderate income family housing for such projects shall not be required to be greater than an amount equal to twenty percent of the original project cost.
   (2)  In addition, and notwithstanding subsection 5, the division of the revenue under section 403.19 for each project under this paragraph shall be limited to tax collections for twenty fiscal years beginning with the second fiscal year after the year in which the municipality first certifies to the county auditor the amount of any loans, advances, indebtedness, or bonds which qualify for payment from the division of the revenue in connection with the project.
DIVISION VI
URBAN RENEWAL AREA LIMITATIONS

    Sec. 11.  Section 331.403, subsection 3, paragraph b, Code 2025, is amended by adding the following new subparagraph:
   NEW SUBPARAGRAPH.  (22)  For purposes of determining compliance with section 403.5A, the percentage of actual value of all property within the county’s area of operation, as defined in section 403.17, that is located in an urban renewal area established by the municipality and in effect for the applicable fiscal year.
    Sec. 12.  Section 384.22, subsection 2, paragraph b, Code 2025, is amended by adding the following new subparagraph:
   NEW SUBPARAGRAPH.  (22)  For purposes of determining compliance with section 403.5A, the percentage, of actual value of all property within the city’s area of operation, as defined in section 403.17, that is located in an urban renewal area established by the municipality and in effect for the applicable fiscal year.
    Sec. 13.  NEW SECTION.  403.5A  Percentage of municipal value within urban renewal areas —— limitations.
   For fiscal years beginning on or after July 1, 2026, and notwithstanding any provision of this chapter to the contrary, each municipality shall be subject to the following limitations:
   1.  For the fiscal year beginning July 1, 2026, the actual value in the aggregate of all property located in urban renewal areas established and in effect for the fiscal year by a municipality shall not exceed ninety-six and one-fourth percent of the total actual value of all property within the municipality’s area of operation.
   2.  For each fiscal year beginning on or after July 1, 2027, but before July 1, 2047, the actual value in the aggregate of all property located in urban renewal areas established and in effect for the fiscal year by a municipality shall not exceed the limitation percentage of the total actual value of all property within the municipality’s area of operation. For purposes of this subsection, the “limitation percentage” for each fiscal year shall be a percentage equal to the limitation percentage applicable under this subsection for the immediately preceding fiscal year, or for the fiscal year beginning July 1, 2027, the percentage applicable under subsection 1, minus three and three-fourths percent.
   3.  For each fiscal year beginning on or after July 1, 2047, the actual value in the aggregate of all property located in urban renewal areas established and in effect for the fiscal year by a municipality shall not exceed twenty percent of the total actual value of all property within the municipality’s area of operation.
EXPLANATION
The inclusion of this explanation does not constitute agreement with
the explanation’s substance by the members of the general assembly.
   This bill relates to economic development and housing by modifying provisions concerning economic development programs and modifying provisions concerning Iowa’s urban renewal law.
   DIVISION I —— HOUSING. The bill amends the definition of “economic development” for purposes of Code chapter 15 to also include the provision of workforce housing.
   The bill adds development policies that advance the development of workforce housing to the list of factors required to be considered by the public body before public funds are used for grants, loans, tax incentives, or other financial assistance to private persons or on behalf of private persons for economic development under Code chapter 15.
   The bill also defines “low and moderate income family housing” for Code chapter 403 to mean housing for low and moderate income families and housing that meets the requirements of Code section 15.353 (workforce housing).
   The bill also modifies the defined term “low or moderate income families” in Code chapter 403 to “low and moderate income families” to align with the terminology usage within the Code chapter.
   DIVISION II —— DIVISION OF REVENUE —— SCHOOL FOUNDATION LEVY. The bill excludes the school district foundation property tax imposed under Code section 257.3 from the division of revenue under Code section 403.19 (tax increment financing). The bill prohibits the foundation property tax from being divided and paid into the municipality’s special fund for the payment of urban renewal indebtedness but instead requires the tax to be levied, collected, and paid to the school district in the same manner as all other property taxes. The exclusion in the bill applies to property taxes due and payable in fiscal years beginning on or after July 1, 2027, that are levied against either of the following: (1) property located in an urban renewal area for which the ordinance providing for a division of revenue takes effect on or after January 1, 2026; or (2) property annexed or otherwise included in an urban renewal area after the effective date of the ordinance providing for a division of revenue if the annexation or inclusion occurs on or after January 1, 2026.
   DIVISION III —— DIVISION OF REVENUE —— CHAPTER 422D PROPERTY TAX LEVY. The bill excludes property taxes for emergency medical services imposed pursuant to Code chapter 422D from a division of revenue (tax increment financing) under Code section 403.19.
   The division applies to property taxes due and payable in fiscal years beginning on or after July 1, 2026.
   DIVISION IV —— LIMITATIONS ON DIVISION OF REVENUE. Under the bill, for urban renewal areas for which an ordinance providing for a division of revenue is not limited in duration under Code section 403.17(10) (20 years) or Code section 403.22(5) (10 years), after 15 years following the effective date of this division of the bill or after 15 years from the calendar year following the calendar year in which the municipality first certifies to the county auditor the amount of any loans, advances, indebtedness, or bonds which qualify for payment from the division of revenue, whichever is later, the amount of taxes that is authorized to be paid into the municipality’s urban renewal special fund shall not exceed 75 percent of the amount otherwise authorized, but for the bill, and such excess amounts shall be allocated and paid to the respective taxing districts in the same manner as other taxes. Beginning with the sixth year that such an urban renewal area is subject to this new provision, the amount of taxes that is authorized to be paid into the municipality’s urban renewal special fund shall not exceed 60 percent of the amount otherwise authorized. 
   DIVISION V —— URBAN RENEWAL AREA HOUSING AND RESIDENTIAL DEVELOPMENT REQUIREMENTS. Under current law, any urban renewal area established upon the determination that the area is an economic development area, a division of revenue (tax increment financing) shall not be allowed for the purpose of providing or aiding in the provision of public improvements related to housing and residential development, unless the municipality assures that the project will include assistance for low and moderate income family housing, subject to certain municipality population thresholds.
   Under the bill, for municipalities of any population size, and notwithstanding any minimum low and moderate income family housing requirement, if the public improvement project is approved on or after July 1, 2025, but before July 1, 2026, and is related to housing and residential development in an economic development area containing property that has been located entirely within the corporate limits of a city for 20 years or more, the amount to be provided for low and moderate income family housing for such projects shall not be required to be greater than an amount equal to 20 percent of the original project cost. The bill also extends the division of the revenue for such projects to tax collections for 20 fiscal years instead of the current law maximum of 10 years.
   DIVISION VI —— URBAN RENEWAL AREA LIMITATIONS. The bill amends Code chapter 403 to provide that for the fiscal year beginning July 1, 2026, the actual value in the aggregate of all property located in urban renewal areas established and in effect for the fiscal year by a municipality shall not exceed 96.25 percent of the total actual value of all property within the municipality’s area of operation, as defined in Code section 403.17. For each fiscal year beginning on or after July 1, 2027, but before July 1, 2047, the percentage limitation on the amount of actual value of the municipality that may be within urban renewal areas is reduced by 3.75 percent each fiscal year until, starting with the fiscal year beginning July 1, 2047, the percentage limitation is 20 percent. 
   The bill also requires cities and counties to include, as part of their urban renewal reporting to the department of management, the percentage of actual value of all property within the city’s or county’s area of operation that is located in an urban renewal area established by the municipality and in effect for the applicable fiscal year.