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Iowa House approves restrictions on TIF

James Q. Lynch, CR Gazette –

DES MOINES – Iowa House Republicans scaled-back their tax increment financing (TIF) reforms, but opponents still called them job-killers.

House File 2460 that would limit the scope of TIF use won House approval April 11 54-43 with no Democratic votes. Four Republicans opposed the measure.

It now goes to the Senate where Ways and Means Committee Chairman Joe Bolkcom, D-Iowa City, says House Republicans have done a good job of identifying problems with TIF.

“The House has made some progress in protecting the interests of Iowa taxpayers,” Bolkcom said. He called parts of HF 2460 “sensible TIF reform.”

The bill is the product of numerous subcommittee and committee meetings as well as House-Senate working group meetings.

As he said at nearly every subcommittee, committee and working group meeting on TIF, floor manager Rep. Chuck Soderberg, R-Le Mars, opened House debate telling his colleagues that regardless of what he’s been accused of, “it’s not the intent of this bill to kill TIF, but to strengthen it.”

Rep. Chuck Isenhart, D-Dubuque, suggested repeating that mantra likely increased skepticism about the reforms. The bill, he said, weakens TIF, which is used by 399 Iowa cities as an economic development tool, making it “functionally impractical.”

“This is a job kill bill,” Rep. Dave Jacoby, D-Coralville, charged. Rather than “slapping local government in the face,” the Legislature should be thanking cities for the economic development – and the corporate, income and sales taxes generated by TIFs.

Local governments use TIF to finance public improvement projects and economic development. In theory, the improvements will increase the property tax base, and that the “increment” or difference between the original tax base and post-development tax base will cover the costs of improvements.

HF 2460 would restrict the types of projects allowed for future TIFs, prohibits the creation of new urban renewal areas under certain circumstances, increases urban renewal and TIF reporting and auditing requirements to increase accountability and transparency, and establishes a procedure that will set a termination date for existing urban renewal areas that do not currently have a statutory end date. It also eliminates provisions relating to local option sales tax TIFs.

Under the bill cities could use TIF to finance public buildings – fire stations, city halls and community centers, for example – only if a majority of the other taxing entities – schools, community colleges, county boards – agreed.

Soderberg said he wasn’t blaming local government for using TIF, but sees “gray areas” in Iowa law that may have led to misuse of TIF.

That might have been one area of HF 2460 on which there was broad agreement. The bill has few supporters and several opponents, including the cities of Cedar Rapids, Iowa City, Coralville and Cedar Falls. The Iowa League of Cities as well as the Metro Coalition, which represents Iowa’s 10 largest cities — Ames, Cedar Rapids, Council Bluffs, Davenport, Des Moines, Dubuque, Iowa City, Sioux City, Waterloo and West Des Moines – opposes it.

The Iowa Association of School Boards, Urban Education Network and the Iowa Farm Bureau Federation support the bill.

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