Error in state property tax puts others in limbo

Boone County Assessor Paul Overton, who is also president of the Iowa association of assessors, has never seen anything like what is in front of the state in his 35 years of working.

Iowa legislators are researching how to best fix an error in taxes when multi-residential properties were included with residential properties and the rollback rate. The rollback is an adjustment to limit tax asking expecting property assessments to increase.

“There are no prior incidents,” Overton said of past miscalculations and the complexity and magnitude of this issue.

The combination of both means property owners will pay a cumulative of about $127 million than required under how the regulation was originally written. Media outlets report the state recognized the error in October as cities and counties unknowingly continued their planning for fiscal year budgets.

“I became aware of this calculation error on Jan. 20 when the Assessor Association sent out an email about SSB1056,” said Union County Auditor Mindy Schaefer on Wednesday. “My budget had already been published and the public hearing set, I called the Department of Management for advice on how to proceed. Because there was and is so much unknown about how the state will manage this error, I was advised to have my public hearing as normal.

Her fiscal year 2024 budget hearing was held Thursday, Jan. 26 and budget was approved.

Tax cuts in 2013 and 2021 changed how multi-residential properties, like apartment buildings, are taxed to not have them as different than other residential properties. The fix would have owners pay what was expected, but that would mean cities and counties would have less tax revenue since budgets were written using the flawed calculations and totals.

“We are working with legislators,” Overton said. “This was all new to us so it caught us off guard. There is nothing wrong with the original numbers. If we knew about it we could change and have new numbers. But the law won’t allow it.”

Schafer explained a way to correct the error. She said to determine the exact impact to her budget would be to manually calculate the residential and agriculture dwelling revenue with the correct rollback.

“This would be simple enough until you get to the new two-tier assessment limitation for commercial properties where the residential rollback is on the first $150,000 of assessed value and the commercial rollback on the remaining value. This would need to be calculated on an individual parcel basis which is possible but very involved,” she said.

Overton and Schaefer said a correction will have consequences.

“A decrease in taxable valuation would mean a decrease in tax revenues. If this is how the state decides to move forward, all taxing entities that have already set their budgets will receive less revenue than expected and each entity will have to make decisions on how to provide their services without that revenue,” Schaefer said. “If taxing entities have not set the budget and there is enough time once the state decides the correction, the difference in revenue can be accounted for and budgets can reflect the new taxable valuation. Until the state decides how they want to go forward, we will not be able to determine the impact to taxpayers, budgets, or services provided.”