POLICY PERSPECTIVES | April 1, 2018
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Tax Increment Financing (TIF) Under Attack
 
Most of you are already aware that an extremely damaging new TIF bill, HSB 681, was introduced on March 20. The bill would decimate TIF by pulling both the uniform education levy ("the $5.40") and the county basic levy ($3.50/1000) out of the increment (but allow it to be opted back in by the school board or the county). Thank you to those of you that have already weighed in about the bill. If you haven't yet weighed in, please do so!!
 
A subcommittee meeting was held this past Thursday morning to discuss HSB 681. There were about 40 people in attendance at the meeting - about 5 stated they were undecided/monitoring the bill, and the remaining 35 or so all stated their opposition to HSB 681. Despite this overwhelming display, Representatives Rob Taylor and Dave Deyoe signed the committee report in order to move the bill on to full committee for consideration. They expressed interest in finding language that would preserve TIF, but also "ensure predictability for both the State and the local governments affected by TIF."
 
In conversations after the subcommittee, a number of ideas were batted about, including capping overall TIF usage, restricting use for public buildings, etc. The single piece of TIF though that the legislators seem intent on addressing is the $5.40 levy, for which local school districts are backfilled by the State (as opposed to just waiting with the other taxing bodies for the bonds to be paid off and the increment is released). If you are on the distribution list for your House Republican legislator, you may have seen an article in their latest newsletter addressing that very issue. If not, you can view Representative Pat Grassley's HERE.  
 
Since Representative Grassley chairs the House Appropriations Committee, HSB 681 is very likely to be passed by the committee. Please take a moment to share with your legislators how damaging such a drastic change to TIF as this would be to your efforts!
Legislative Session Update
With just two full weeks left before legislative per diems end, legislators are clearing calendars and turning attention toward budgets.   April 17 is the 100th day of the 2018 Legislative Session, the unofficial "last day."  Of course, legislators can (and usually do) go longer, but they do so on their own dime and mostly without the help of their clerks.

Time is running out; there are only 10 working days before April 17 and legislators have 10 budget bills to pass and there are still plenty of tough policy debates ahead.  There are 38 bills eligible for debate right now in the House, and 59 bills on the Senate calendar.  Still on calendars waiting for debate are issues including:
  • Sanctuary Cities
  • Abortion ban after fetal heartbeat detected
  • DRAM shop reform
  • Opioid Epidemic Response
  • School lunch shaming ban
  • Traffic camera ban
Even though many of the remaining 97 bills may not look controversial, even seemingly boring and mundane bills can heat up and take up valuable debate time.  And the clock could just run out on some of the more emotionally or politically charged issues.  The only thing we can say with certainty is that nothing but the passage of budgets is certain.  It's the only thing left that legislators must do.
 
TAXES & BUDGETS
I don't know if it's a coincidence, but lawmakers are talking about tax cuts this year, and the session is set to adjourn on April 17, which happens to be Tax Day 2018 (the day your federal taxes are due).  While the only thing legislators have to do this year is pass a budget, they cannot do that until a decision is made on taxes.  More specifically, tax cuts.  Here's a quick review on where we're at with taxes & budgets:
 
Current Year Budget Cut (aka "Deappropriation)
The Legislature passed, and the Governor signed, a bill (Senate File 2117) that cuts $23.3 million in spending from the current state budget, and stops another $10 million from being used for economic development by the Iowa Economic Development Authority (IEDA). You can read more about these cuts here
 
Next Year's Budget & Tax Cuts
People always think that when one party controls the Legislature and the Governor's Office, negotiations are a breeze.  Not so.  Legislative leaders have been working on budgets for next year (fiscal year 2019, which begins July 1).  However, the budget is complicated this year by an effort to cut taxes.  The Iowa Senate wants to cut taxes by over $1 billion per year (when fully phased in); the Governor recommended $1.7 billion in cuts but over 5 years.  The Senate wants to cut taxes for both individuals and businesses; the Governor's plan focuses on individual tax cuts but suggests a task force to review business tax cuts before making changes.  Cutting taxes means less money is available for budgets.  So, it is impossible to come up with a budget until there is a decision on tax cuts.  
 
There is apparently light at the end of the tunnel.  House Speaker Linda Upmeyer and Senate President Charles Schneider agreed that next year's budget will be more than the $7.25 billion currently being spent (after deappropriations).   "I anticipate it will be a little bit bigger, yes," Upmeyer told reporters this week. "We will fund the priorities of Iowa. That's not to say that nobody might move backwards, they may."  Schneider added, "Our numbers are very close to one another. There's not a whole lot of daylight between the two of us."   There is a rumor that there may be a public hearing on tax cuts coming up in the next week, so watch for alerts.

Budget Targets  
The first step in getting a budget moving is to announce budget targets. Once leaders decide how much money they want to spend next year, they will divide it up between the 10 budget areas (Administration/Regulation, Agriculture/Natural Resources, Economic Development, Education, Health/Human Services, Judicial Branch, Justice Systems, Infrastructure, Standings, and Transportation).  Each of those budget subcommittees will then take that number and decide how much each agency, service, or program will get.  That process takes time, even if budget targets have been agreed to by both the House and Senate.  Without joint budget targets, the House and Senate will come up with their own budget bills, and then have to negotiate.  It adds to the overall time needed to pass a budget.

Other News
Jerry Foxhoven was finally confirmed as Director of the Department of Human Services on March 21.  The Senate voted to confirm him 38- 11; he needed 34 votes (2/3 of the Senate) 
 
Earlier this week, Governor Kim Reynolds fired the Director of the Iowa Finance Authority after finding "credible accusations of sexual harassment."  David Jamison, a former Story County Treasurer, ran the agency since 2011.  The agency offers housing, community development, and infrastructure programs and runs the state's title guarantee program.   Carolann Jenson, who served as IFA's chief program officer, will act as interim director. 
 
The Senate still needs to confirm over 150 of the Governor's board and commission nominees (but they can do most of them with a single "en bloc" vote).
 
Property Tax Backfill to Local Governments
Discussion about phasing out the backfill continues behind the scenes at the Statehouse. The best thing that proponents of the backfill can do is to keep contacting your legislators about this. Remind them that local governments had to certify their FY 2019 budgets on March 15th, so it's too late to make cuts in the backfill to FY 2019.
 
Publication Note
At this time, it is appropriate for us to note that this email, which typically comes out every two weeks during session, will NOT be published two weeks from now IF it looks like the Legislature could adjourn in the near future. If that is the case, we will instead wait and publish AFTER they adjourn for the year. In the mean time though, keep an eye out for timely alerts requesting you to take action.
What Should You Be Doing?
 
In these closing weeks of the legislative session, it is imperative that legislators keep hearing about your priorities, about the challenges you face locally in trying to create jobs, recruit workforce and housing, and recruit and expand businesses. As you know, successful economic development relies on a number of factors, and legislators need to hear your feedback about how minimizing TIF, eliminating or reducing tax credit programs or underfunding the IEDA or job creation and training programs affects your ability to be successful. Now is the time to make your voice heard!

Bills Being Tracked for PDI

This is a list of the bills being tracked for PDI. The bill list is updated constantly, so if you wish to see the updated bill list, just go to
http://www.ialobby.com/billtracker/pdi/  
 
Bill# Title Status
HF2038 
Nonreversion/Reallocation of State Funds
Summary | Details 
House Appropriations Committee 
 
Allows state agencies to keep up to 10% of the funds appropriated that are unencumbered or unobligated at the close of the fiscal year (funds won't revert).
HF2046 
Sales Tax Collection
Summary | Details 
House Ways & Means Committee 
 
Amends definition of "retailer maintaining a place of business in this state" for the collection of sales tax from out-of-state retailers.
HF2047 
Legislative Tax Credit Review Committee
Summary | Details 
House Ways & Means Committee 
 
Creates a legislative tax credit review committee.
HF2063 
Urban Renewal Law Changes
Summary | Details 
House Ways & Means Committee 
 
Makes changes to the urban renewal law.
HF2098 
Job Training Tax Credit Program
Summary | Details 
House Ways & Means Committee 
 
Creates a job training tax credit program.
HF2253 
Construction Competitive Bidding Requirements
Summary | Details 
Sent to Governor
 
Makes changes to competitive bidding requirements for construction on properties that certain government entities will lease or lease-purchase.
HF2321 
Criminal History Checks
Summary | Details 
Sent to Governor
 
Requires a criminal history check for department of workforce development applicants and makes changes to unemployment insurance requirements.
HF2343 
State Agency Restrictions
Summary | Details 
Signed
 
Prohibits a state agency from implementing or enforcing any standard, requirement, or threshold unless explicitly required or permitted by a state statute or a federal statute or regulation.
HF2373 
Property Taxation
Summary | Details 
House Ways & Means Committee 
 
Modifies property taxation relating to assessment and exemption of certain property, modifies provisions relating to property assessment appeals, and provides for the reimbursement of certain appeal costs.
HF2374 
Tax Credit Repeal
Summary | Details 
House Ways & Means Committee 
 
Repeals certain state income tax credits, and provides for the future repeal of tax credits.
HF2438 
SAVE Fund Extension
Summary | Details 
House Floor
 
Extends the 6 percent sales tax rate and the allocation to the SAVE fund until January 1, 2050.
HF2440 
Water Quality Programs
Summary | Details 
Senate Unfinished Business Calendar
 
Makes changes to existing water quality programs.
HF2447 
High Quality Jobs Program
Summary | Details 
House Ways & Means Committee 
 
Requires that at least 50 percent of awards made through the High Quality Jobs Program be awarded to small cities.
HF2448 
Sports Betting
Summary | Details 
House Ways & Means Committee 
 
Authorizes gambling licensees to conduct sports betting.
HF2458 
Future Ready Iowa Act
Summary | Details 
Sent to Governor
 
Creates the Future Ready Iowa Act.
HF2463 
Workforce Housing Tax Incentives Program Eligibility
Summary | Details 
Senate Ways & Means Committee 
 
Amends the definition of "small city" for eligibility for the Workforce Housing Tax Incentives Program to include any city or township located in whole or in part in one of the 88 least populated counties.
HF575 
Bottle Bill Repeal and Replace
Summary | Details 
House Ways & Means Committee 
 
Repeals the beverage containers control law and replaces it with new recycling, litter control, and community enhancement programs.
HF597 
The WISE Solution for Water Quality
Summary | Details 
House Ways & Means Committee 
 
A permanent $180-200 million/year that flows into the Natural Resources and Outdoor Recreation Trust Fund, at least 60% of which would have to be used for specific water quality.
HF603 
Eminent Domain
Summary | Details 
Senate Unfinished Business Calendar
 
Addresses the use of eminent domain and the procedures and compensation required for the use of eminent domain.
HF656 
TIF - $5.40 Levy Removal
Summary | Details 
House Ways & Means Committee 
 
Would remove the $5.40 levy from the TIF increment for all future projects.
HSB636 
Innovation Fund Tax Credit Program
Summary | Details 
House Ways & Means Committee 
 
Extends the innovation fund tax credit program.
HSB672 
Telephone Company Property Tax Assessment Process
Summary | Details 
House Ways & Means Committee 
 
Changes the central assessment process for telegraph and telephone companies.
HSB678 
Property Tax Backfill
Summary | Details 
House Appropriations Committee 
 
Phases out the roughly $150 million property tax backfill, starting in FY 2019 (which starts July 1, 2018).  Cuts one-third ($50 million) from the backfill in Year One and then $25 million every year thereafter.
HSB681 
TIF Destruction - Removes the $5.40 and County Basic levies
Summary | Details 
House Appropriations Committee 
 
This bill would remove the $5.40 school levy and the county basic levy (roughly $3.50/1000) from the TIF increment, drastically lowering the amount for which can be bonded for on a project.
Opt-In: This bill would allow a school district to opt all or a part of their $5.40 levy into the increment voluntarily, but with the understanding that the revenues would no longer be backfilled by the State. The bill would allow the county to opt all or part of their county basic levy into the increment voluntarily. 
Summary: The bill would reduce by roughly $8.90/1000 the bonding capability of TIF, crippling the tool in most cases.  Unless a developer was able to get the school and county to opt the levies into a project, but since some counties and school boards do not meet very often, the timing required to put deals together could kill projects.
SF2043 
Inheritance Tax Repeal
Summary | Details 
Senate Ways & Means Committee 
 
Repeals the state inheritance tax and the state qualified use inheritance tax.
SF2069 
Forest Reservation Property Tax Exemption
Summary | Details 
Senate Ways & Means Committee 
 
Lowers the property tax exemption for forest reservations.
SF2074 
Raceway Facility Construction Sales Tax Rebate
Summary | Details 
Senate Ways & Means Committee 
 
Makes changes to sales tax rebates for construction at certain raceway facilities.
SF2080 
State General Fund Expenditure Limitation
Summary | Details 
Senate Appropriations Committee 
 
Revises calculations for the general fund expenditure limitation, increases reserve fund balances, creates a safety net fund, creates an Iowa personal income tax rate reduction fund, and provides for related state personal income tax rate reductions.
SF2081 
Commercial and Industrial Property Tax Replacement Claims
Summary | Details 
Senate Appropriations Committee 
 
Eliminates the appropriation for commercial and industrial property tax replacement claims.
SF2117 
FY18 Deappropriation
Summary | Details 
Signed
 
Cuts the current fiscal year (FY18) budget by $50.1 million, about $20 million more than the Governors' recommendation.  Cuts regional tourism marketing, skilled worker and job creation fund, hawk-i, autism support program fund, Regents universities, community colleges, vocational rehabilitation, autism support program, human services,
 
SF2152 
Tax Credit Transferability
Summary | Details 
Senate Ways & Means Committee 
 
Provides an exception to the tax credit transfer restrictions placed on housing businesses under the enterprise zone program
SF2161 
Agriculture and Natural Resources Programs
Summary | Details 
Senate Ways & Means Committee 
 
Amends several agriculture and natural resources programs.
SF2267 
TIF Reduction
Summary | Details 
Senate Ways & Means Committee 
 
Makes changes to Tax Increment Financing.
SF2287 
High Quality Job Program Tax Incentives
Summary | Details 
Senate Ways & Means Committee 
 
Allows investment tax credit to an eligible business.
SF2311 
Public Utilities
Summary | Details 
House Unfinished Business Calendar
 
Modifies various provisions relating to public utilities.
SF2353 
State and Local Workforce Development Boards
Summary | Details 
House Floor
 
Makes changes to the state and local workforce development boards.
SF2383 
Senate Tax Reform Package
Summary | Details 
House Ways & Means Committee 
 
The Senate's tax reform package.
SF2388 
Telephone Company Property Tax Assessment Process
Summary | Details 
House Ways & Means Committee 
 
Changes the central assessment process for telegraph and telephone companies.
SF2393 
SAVE Fund Extension
Summary | Details 
Senate Floor
 
Extends the 6 percent sales tax rate and the allocation to the SAVE fund until January 1, 2050.
SF2398 
Industrial Hemp Act
Summary | Details 
Senate Floor
 
Creates the Iowa Industrial Hemp Act.
SF512 
Water Quality/Wastewater Treatment
Summary | Details 
Signed
 
Modifies existing wastewater treatment program, establishes new water quality programs, and creates a water service excise tax and sales tax exemption.
SSB3195 
Tax Reform
Summary | Details 
Senate Ways & Means Committee 
 
Makes changes to income taxes, the sales and use taxes and local option sales tax, the hotel and motel excise tax, the automobile rental excise tax, the Iowa educational savings plan trust, and the Iowa ABLE savings plan trust.
SSB3200 
Workforce Housing Tax Incentives Program
Summary | Details 
Senate Ways & Means Committee 
 
Modifies the workforce housing tax incentives program.
SSB3201 
EDA Housing Agreements
Summary | Details 
Senate Ways & Means Committee 
 
Allows EDA to grant an extension for up to one year from the date the extension for eligible housing businesses to complete building or rehabilitation projects.
 
Your Legislative Team
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