Fix to Iowa property tax errors could leave cities losing millions

Published: Feb. 13, 2023 at 11:51 PM CST
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BETTENDORF, Iowa (KWQC) - A mistake at the state level overcalculated how much local governments in Iowa will earn from property taxes next year.

A bill to correct the problem in the Iowa General Assembly could leave cities across the state responsible for making up millions of dollars in lost revenue.

The state calculates property taxes based on a percentage of the total value of a home, which is called the rollback rate.

The Iowa Department of Revenue incorrectly assigned the correct rollback to certain property types.

Initially, the state reported to cities the rollback was 56.49%. However, it found out it should actually be 54.65%.

As it stands right now, without the bill, Iowa property owners will pay anywhere from $126 million to $133 million more than they should.

The bill passed in the Iowa Senate on Feb. 1. On Monday, it was placed on House Ways and Means Committee calendar.

If the bill passes, cities will have to scramble to adjust their budgets to the revenue they now wouldn’t earn.

Bettendorf usually starts the budgeting process sometime in October, as they’re due to the state at the end of March. The city’s Director of Finance, Jason Schadt, said they were informed of the error in January.

“We roll with the punches pretty well,” Schadt said. “It’s frustrating when changes are made that affect the budget that, we’ve put so much work into already.”

With the new calculations, Bettendorf will collect about $912,000 less in revenue than they originally planned. Schadt said they’re in a better place than most cities.

“We may have to raise revenue in other areas of the budget, separate from property taxes,” Schadt said. “We may fund some one-time purchases a little bit differently going forward, but we’re pretty fortunate to have the flexibility to respond.”

According to Schadt, Bettendorf residents probably won’t notice a difference. They’ll actually be charged an average of about $63 less in property taxes than what was originally calculated.

“It probably won’t impact residents in Bettendorf too terribly,” Schadt said. “Not on their tax bill, and probably not in the services that the city provides. We’re finding ways to continue that with the status quo services.”

However, the city is considering raising its property tax levy to correct the deficit. It is also looking at cutting some staff openings.

“We may not need to increase [the levy] to make up the full gap,” Schadt said. “There may be a decision made where we take a little bit of an increase to get some of that back, but it’s just one of the options we’re considering.”

The Senate’s version of the bill extends the 2023 deadline for budgets to be into the state to April 30.

Representations with the City of Davenport have not yet responded to TV6 News’ request for comment.