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Local leaders warn Iowa GOP property tax plans could squeeze services as cost rise
Republican proposals advance as cities, counties and Democrats urge changes to a 2 percent revenue cap they say could strain local budgets
Jan. 29, 2026 6:06 pm, Updated: Jan. 30, 2026 8:22 am
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DES MOINES — A pair of Republican-backed property tax proposals advanced Thursday at the Iowa Capitol — but not before local government leaders, business advocates and Democrats warned that a proposed 2 percent cap on annual local revenue growth could squeeze city and county budgets as costs rise faster.
In back-to-back legislative hearings, critics repeatedly returned to the same theme: inflation, insurance and wage pressures have outpaced 2 percent for years, and a hard cap could force communities to cut services, defer maintenance or shift costs into debt. Supporters countered that a strict cap is the clearest way to slow property tax growth and “put the needs of Iowa taxpayers ahead of the needs of government.”
Both the House Republican proposal and Gov. Kim Reynolds’ plan advanced Thursday on party lines — with Republican members in favor and Democrats opposed — to the full tax policy House Ways & Means Committee for further discussion. Republican lawmakers said the hearings marked an early “starting point,” and stressed they will keep working with the governor and Senate Republicans as negotiations continue.
“We will continue to work with the governor. We’ll continue to work with the Senate, continue to have these conversations,” said Rep. Carter Nordman, R-Dallas Center, chair of the House Ways and Means Committee.
A crowded field of plans — and a looming negotiation
Republican leaders in the Iowa Legislature and Reynolds have unveiled competing proposals to overhaul the state’s property tax system, setting up challenging negotiations over how aggressively to limit local government revenues and how quickly taxpayers would see relief.
House Republicans released their plan last week, joining earlier proposals from Senate Republicans and the governor.
House Democrats have also offered an alternative, though Republicans hold agenda-setting majorities in both chambers and control the governor’s office.
The push comes as Iowa continues to rank near the top nationally in property taxes. Local government leaders have raised concerns that a hard revenue cap could limit their ability to keep up with inflation or respond to rising costs. Property taxes are levied by cities, counties and school districts and are a primary source of funding for services such as police and fire protection, emergency medical response and schools.
House Democrats argue that Republican plans risk hollowing out local services.
Their plan would cap property tax growth at 4 percent, triple the homestead tax credit, freeze property taxes for Iowans 65 and older, and provide temporary rebates — $1,000 for homeowners and $500 for renters — before the cap takes effect.
Cities, counties warn revenue cap and exemption could squeeze services
In testimony on the House Republican bill, local government advocates said they appreciated proposed changes to make property tax statements easier to understand — but warned the package’s fiscal limits could collide with rising costs.
Chelsea Hoye, representing the Iowa League of Cities, said cities were “genuinely excited” to see language aimed at improving taxpayer notices, but said the combination of the 2 percent revenue restriction and a proposed $25,000 residential exemption “significantly reduce local revenue capacity” at the same time cities face higher costs “for construction materials, equipment, insurance, utilities, employee benefits.”
“Layering a 2 percent cap on top of a broad new residential exemption creates a real risk that cities will be forced to reduce services, defer maintenance or delay critical investments,” Hoye said.
Local officials and others also focused on proposed bonding changes that would require 60 percent voter approval for property-tax-backed bonds.
“In practice, this would increase cost, slow projects and make it harder to respond to urgent infrastructure needs or compete for economic development opportunities where timing matters,” Hoye said.
Des Moines City Manager Scott Sanders said he wanted more time to model the proposals’ “layered effects” and urged lawmakers to leave room for fiscal analysis — especially for larger cities.
“One of the biggest concerns is the bonding requirements,” Sanders said, noting Des Moines has “10 to 12 bond notices every year,” providing repeated opportunities for residents to ask questions and engage with the process.
County leaders echoed concerns that a one-size-fits-all cap could hit communities differently. Lucas Beenken, representing the Iowa State Association of Counties and the Iowa State Association of County Supervisors, also flagged how county responsibilities required by the state — including certain court and human services-related costs — could wind up competing under the same cap with other county services residents expect.
Business and taxpayer advocates, meanwhile, split — some praising the cap as necessary, others warning about tax shifts.
Nate Ristow, representing the Iowa Taxpayers Association, said the group supported the 2 percent growth limitation as “the cleanest and easiest way” to provide “uniform relief for all classes of property taxpayers.” But he said the House plan’s residential exemption could shift the tax burden “further on to businesses and agricultural property,” warning it could worsen Iowa’s competitiveness.
Chris Hagenow, president of Iowans for Tax Relief, backed both the House GOP and Reynolds proposals, calling a strong revenue limitation the central goal.
“Iowans for Tax Relief has been in favor of a 2 percent revenue limitation for many years,” Hagenow said. He urged lawmakers to avoid “carve outs,” warning that if reforms include “escape hatches,” “they will be found and used.”
Democratic State Rep. Aime Wichtendahl, a former Hiawatha City Council member, said she agreed with supporters on the taxpayer notice changes, but argued a 2 percent cap “well below inflation” would push cities toward debt and higher interest costs.
“If you want to back the blue, you can’t cut the green,” Wichtendahl said, arguing public safety spending dominates many city budgets.
Rep. Larry McBurney, D-Urbandale, called the bill “short, sweet and to the point” and also praised transparency provisions. But he said a 2 percent cap would not accomplish what lawmakers promised.
“House File 718 was passed three years ago, had a 3 percent hard cap in it,” McBurney said. “Property taxes didn't go down. Instead, we saw city government shift where the money is being pulled from. … Nothing in this bill will actually lower property taxes.”
What the bills do — and how they differ
House Republicans: House Study Bill 596
- Caps local property tax revenue growth at 2 percent plus new construction, with exceptions for schools and the debt levy, aiming to preserve incentives for growth.
- Creates a new $25,000 exemption on every residential property, applied after existing rollback calculations, reducing taxable value for every home.
- Tightens rules on debt by making it harder for local governments to take on property tax-backed debt, including a 60 percent voter approval requirement for certain bonds.
- Expands the role of regional councils of government to identify efficiencies and collaboration opportunities.
- Revamps property tax statements to be more transparent and easier to understand.
Gov. Kim Reynolds: House Study Bill 563
- Also imposes a 2 percent cap on total revenue growth for taxing authorities, with exceptions for debt service and school funding.
- Moves property tax assessments from every two years to every three years.
- Limits the use and duration of tax increment financing (TIF) districts, arguing some cities use TIF too broadly; local officials say TIF is a key development tool to finance infrastructure like roads and sewers.
- Freezes property tax bills for homeowners 65 and older with homes valued at $350,000 or less.
- Creates a $10 million state fund to encourage shared services and consolidation among cities and counties.
- Eliminates election mandates for county treasurers, auditors and recorders, allowing those offices to be appointed instead.
Reynolds’ office estimates her package would save taxpayers more than $3 billion over six years.
During Thursday’s hearing on Reynolds’ plan, Hoye again registered concerns on city finances — including a proposed 10 percent cap on general fund reserves that she said could weaken bond ratings and increase borrowing costs. She said cities would prefer a reserve limitation aligned with credit standards, suggesting 35 percent.
The hearing also drew opposition from county officials and elections administrators over the proposal to convert certain county offices from elected to appointed positions.
Jordyn Hill, the Warren County recorder, warned it would “eliminate the voters’ voice and choice,” “erode the separation of power,” and weaken checks and balances, arguing elections would still be held and cost savings wouldn’t materialize.
Doug Struyk, speaking for the Iowa State Association of County Auditors, said having supervisors appoint the officials who oversee elections “seems to create an inherent conflict.”
Reynolds urges compromise as Democrats press for rebates
At Great Oaks High School and Career Center in Des Moines, Reynolds told reporters Thursday she was open to ideas across the competing plans — and said Iowans expect action this year.
“It's going to take everybody pulling together to get something across the finish line,” Reynolds said, adding that the Senate, House and governor’s office each putting forward bills showed “the commitment is really there to get something done.”
“We've heard it from our constituents for years. It is the expectation of Iowans that we get something done this year,” she said. “So, you know, nobody should be drawing lines in the sand right now. Everybody should be looking for common areas that we have … and then let’s talk and figure out what makes sense.”
House Democratic Leader Brian Meyer, D-Des Moines, said Democrats want a “seat at the table,” and emphasized immediate relief through rebates.
“Our refunds are immediate relief, and we need to have immediate relief now,” Meyer said, pointing to the proposed $1,000 homeowner rebate. He said Democrats support reductions that “protect first responders, schools and essential services,” and argued there is “room” to talk about caps — but only in the context of the full package, including mandates and rising costs.
Senate Democratic Leader Janice Weiner, of Iowa City, said Democrats were reviewing each proposal and “soliciting input from county and city officials who must be at the table.” She called for a solution that is simpler, transparent, permanent and targeted to Iowans who need help — without handicapping local governments.
“I don’t see those proposals, as they stand, are workable for local government,” Weiner said, noting the governor’s own budget proposes a 3.5 percent increase.
Republicans signaled they expect revisions as discussions continue.
“We tweak it a little bit and keep moving forward,” said Rep. Jane Bloomingdale, R-Northwood.
Rep. David Young, R-Van Meter, called the proposals a mix of “bold action” and edge-trimming, saying constituents want relief and the process is just beginning.
Nordman, closing the House subcommittee hearing, said lawmakers would keep working through the details with stakeholders.
“We are talking about them, and we are going to eventually find a place where we are doing something good for the taxpayer,” he said.
Erin Murphy and Maya Marchel Hoff of the Gazette-Lee Des Moines Bureau contributed to this report.
Comments: (319) 398-8499; tom.barton@thegazette.com
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