Summary of the New Property Tax Law -House File 718 House File 718 (HF 718) passed in 2023, with multiple areas of impact on city governments. At a high level, these include: Division 2: Consolidation of levies and creation of a newly-defined adjusted city general fund levy (ACGFL) Levy limitation based on property tax valuation growth “tiers” Division 6: New military service exemption expansion Division 2 creates a new combined ‘adjusted city general fund levy’ (ACGFL) that combines several current levies into one. This new ACGFL is then subject to potential limitation or reduction for Fiscal Years 25-28, depending upon the city’s non-TIF taxable valuation growth compared to the previous year. Beginning in FY 29, cities retain the new ACGFL levy, but all cities go to an $8.10 ACGFL maximum going forward. (Note that those cities under $8.10 in FY 28 will be allowed to go up to the $8.10 maximum beginning in FY 29; those cities above the $8.10 in FY 28 will be reduced to a maximum of $8.10). The League anticipates that this division will have a significant financial impact. Please see the League’s web page for more detail and a breakdown of impacted levies. The League will continue to update the website as more information is available. Division 5: New homestead exemption for residential property owners of age 65 or more Division 6 increases the military service exemption for eligible property owners to $4,000 beginning FY 25. The military exemption will not be funded by the state in any amount beginning FY 25 and forward. This will result in a reduction in taxable value for local governments. Division 7: Property tax abatement agreements and limits Division 5 creates a new homestead exemption for property owners aged 65 and over, in addition to the current homestead credit. This additional exemption is $3,250 for FY 25 and increases to $6,500 beginning FY 26 and forward. There is no state reimbursement for the exemption created in this division, which will reduce taxable value for local government. Division 7 requires that minimum assessment agreements for commercial properties be created and agreed upon in writing with the municipality before the project is eligible for property tax abatement under a revitalization area established under Chapter 404. This applies to revitalization areas created in FY 25 and after and for first-year exemption applications in existing revitalization areas filed on or after July 1, 2024. In addition, Division 7 prohibits property tax abatement for the school district portion of revitalization areas for residential projects established under Chapter 404, beginning with revitalization areas created in FY 25 and after, and for first-year exemption applications in existing revitalization areas filed on or after July 1, 2024. Cities are encouraged to consult their bond counsel on the potential impact of this provision of the legislation. Division 8: Regional transit funding Allows the city of Des Moines to go up to 7.5% franchise fees, with any portion above 5% required to be dedicated to regional transit (DART). 18 | June 2023 | Cityscape
Cityscape June 2023: Page 18
