Watch: Iowa homeowners talk property taxes with Des Moines Register
Homeowners discuss Iowa’s property taxes as Iowa legislative leaders make property tax reform their No. 1 goal this legislative session.
Part of an ongoing series on Iowa property taxes.
While fast-growing suburban cities have dangled property tax abatements to lure data warehouses and other new developments, Des Moines has focused steadfastly on property tax breaks for rehab-ready homes, older apartment buildings needing a little love, and newer commercial buildings — projects that give the grand dame of the metro a facelift.
“We’re an older city, and we need to keep revitalizing and incentivizing people to do that work,” Mayor Connie Boesen says.
Tax abatements have been granted for home improvement and rehab in nearly every neighborhood of the city.
They’ve also gone to projects that will change the landscape more dramatically, from Kemin Industries’ new 340,000-square-foot warehouse at 2200 Maury St. on the east side to the 7-story Tempo apartment building that opened this summer in the East Village, and the new, 33-story skyscraper going up downtown at 515 Walnut St.
For a capital city that long has had more than its share of tax-exempt government buildings, schools and nonprofits, Des Moines’ investment in urban revitalization has been significant: Almost $1.3 billion worth of property was off the tax rolls in 2024 because of temporary property tax abatement programs, county assessor records show.
That was about 6.5% of the city’s total assessed valuation. And it made up about 36% of the value of all the property off Des Moines’ tax rolls.
Most of the other property is exempt from property taxes because it is owned by charities, churches, hospitals and colleges, or is government or school buildings
In all, roughly a quarter of the actual land within the city is off the tax rolls, county officials say.
Des Moines leaders have long believed tax abatements for urban revitalization, which can gradually ramp down over time — along with a mix of private incentive programs like Invest DSM — pay off big. Housing stock improves, blight disappears, valuations increase and Des Moines grows.
“Tax abatement has been a critical lever, or trigger, for the good things that have happened in Des Moines’ neighborhoods,” City Council member Chris Coleman said.
Abatements have been used by residents rich and poor for scores of home remodeling projects and additions. Coleman himself is one of several city and county leaders who have used them. An abatement on an addition to his home helped tremendously when he and his wife had a houseful of kids in 2007.
“We had one shower and seven of us living there, and the kids were going to middle school,” he said. “We either had to add on or move.”
But those abatements, used since the 1980s in most corners of the city, will be under a microscope this year as Des Moines faces its worst budget crisis in years and Iowa legislators eye new proposals to rein in local property taxes.
City Manager Scott Sanders said cuts to all sorts of programs and services are on the table as the city faces a $17 million budget shortfall for the new budget year that begins July 1.
More cuts likely will mean fewer abatements, city leaders say
Currently, abatement programs are available for all qualified improvements, residential and commercial, that begin on or before Dec. 31, 2028, and are completed on or before Dec. 31, 2029.
Changing what projects are eligible or how abatements work would require City Council action. But Sanders and other city leaders say they don’t think Des Moines can hand out as many property tax breaks while continuing to sustain cuts to taxes from the Legislature.
“There is a conversation taking place about the value that we receive through the abatement programs,” Sanders said. “We might end up lowering it. That is part of the conversation.”
Across Iowa, city, county and school district leaders have been combing budgets for any flab, identifying any possible new revenue sources, counting how long reserves will last and weighing the cost for any new debt, fearing what could be coming with a third change to the state’s property tax system in a dozen years.
With few new sources of revenue, some municipal officials say property tax abatements as a primary tool for revenue growth will have to be reduced or eliminated to make ends meet. That’s because abatements temporarily shrink a local tax base, causing the need for reductions in services, budget cuts or a combination of both.
“Property tax exemptions really haven’t played into the property tax reform so far, but I believe that will change (this) session,” said Polk County Assessor Randy Ripperger.
Ripperger said property tax changes by the Legislature wind up shrinking local tax bases, not expanding them.
“True property tax reform should include exploring ways to increase the tax base,” he said.
Will city need PILOTS to stay aloft?
Des Moines city officials, and some in other metro cities, say they also have been weighing whether nonprofits — those that own tax-exempt hospitals and medical centers, universities, churches and charities — may need to chip in more for local services, such as public safety, fire protection, street cleaning and snow plowing.
Most cities in the metro have seen a surge in the value of religious, charitable or educational organizations that are exempt by law from paying property taxes, a Reader’s Watchdog analysis of those properties found.
In Des Moines, local hospitals like Mercy and Methodist used to voluntarily provide PILOTs, or payments in lieu of taxes, Sanders said. But they stopped contributing.
“The conversation has been that they are struggling with their budgets as well,” he said.
Sanders said two churches and the nonprofit Community Foundation, as well as Des Moines Waterworks and the Des Moines Metropolitan Wastewater Reclamation Authority, currently are the only organizations making PILOTs to the city.
At some point, he said, other large tax-exempt organizations based in Des Moines that serve the metropolitan region may also need to provide PILOTs.
Sanders said the city has tried to heed concerns about Iowa’s higher property taxes, lowering the city levy by 60 cents six years ago. The city also charges a 5% franchise fee for all utility users but has few other new sources of revenue to keep up with rising expenses and the budget shortfall.
Cuts and tapping the city’s more than $50 million in reserves are in the offing for the 2026 budget to be approved in the spring.
“We were already looking at services levels even without a further change to property taxes this year,” Sanders said. “We’ve got a lot of tough decisions to make before April.”
Hits on property taxes keep coming
In 2013, when the Iowa Legislature attempted a major property tax overhaul, The Tax Foundation, a Washington, D.C.-based advocacy group, showed commercial property in Iowa was taxed at about 2.25 times the rate of residential property. Using 2010 figures, it found that Iowa was just outside the top half of states for that disproportion.
At the time, commercial, industrial and railroad properties were taxed at 100% of their valuation. Homes were taxed at a rate about half that.
Reforms passed at the Statehouse lowered the level at which commercial, industrial and railroad properties were taxed to 90% over two years. From 2013 to 2017, residential levels increased to 56.94% from 54.4%.But that overhaul left local taxing districts with too little revenue to make ends meet and fell far short of delivering projected benefits to businesses.
By 2017, the state had paid out $391 million to cities, counties and school districts to help fill that gap, but it failed to fully reimburse local taxing entities all the revenues they lost. Local governments missed out on a combined $107.2 million, a Register investigation found at the time.
Businesses that were expected to benefit the most through lower taxes saved about half as much as the state projected in 2013, the Legislative Services Agency found.
Further cuts two years ago consolidated 15 individual tax levies into a general services levy for cities, which was capped at $8.10 per $1,000 in taxable value. Des Moines’ levy already is at that limit.Last year, the Legislature changed the system again, creating a more tiered system for allowable revenue growth that told cities and counties how much property taxes must be cut.
City officials complain their revenue sources have shrunk again while costs have escalated due to inflation. More than 200 of Iowa’s 947 cities saw shrinkage in revenue, Iowa’s League of Cities reported last year.
Some advocacy organizations, like Iowans For Tax Relief, have nevertheless suggested property taxes remain too high. But in the last five fiscal years through 2024, while tax collections statewide increased, consolidated tax levy rates for Iowans declined to $32.34 per $1,000 of property valuation. During the same span, the total taxable valuation statewide rose 18.4%, according to data provided by the Iowa Department of Management.
‘It’s time to come to Jesus’
The Des Moines metropolitan statistical area has been the fastest-growing large metropolitan area in the Midwest, growing 3.1% from 2020 to 2023.
But the value of land off limits to taxation also has risen significantly. Watchdog found:
- Property assessed at almost $7 billion was off the tax rolls in Polk County last year, a figure that grew 40% over the past five years, the analysis of tax-exempt property in the metro found. More than half, about $3.57 billion worth in 2024, was in Des Moines.
- While a slightly smaller percentage of Des Moines’ total land valuation is off the tax rolls compared with five years ago — less than18% versus 19% in 2020 — the value of land off the tax rolls grew more than 26% to $3.57 billion in 2024.
- The $1.3 billion worth of property in Des Moines that was abated last year because of urban revitalization programs was more than some tax-exempt segments like charitable, educational and religious organizations and or low-rent housing.
“I think we’ve finally gotten to that point where it’s time to come to Jesus,” said Art Wittmack, president of the Taxpayers Association of Central Iowa, a nonprofit with about 120 members.
Tax abatement programs like Des Moines’ have been used increasingly by cities in the metro to prime the economic development pump and grow local tax bases, Wittmack said. But with more cuts, he said, “the cities and the counties especially are going to get squeezed. And (regional) organizations like DART also are going to get squeezed.”
He said his organization has been among those hosting conversations to find ways for municipal governments to share expenses as a region or tap new sources of revenue.
Coleman said he feels strongly that Des Moines needs to keep its abatements, even if it has to scale them back.
“The city can never cut ourselves into the world-class city we want to be,” he said. “It’s important that in tough fiscal and political times we keep our foot on the gas and find a way to grow.”
He said taxing authorities already are being restrained by the Legislature, which he feels has hurt the quality of services and programs the city can offer residents.
“We have to balance the short-term need for cuts with the long-term goal of having a stronger, wider, expanding tax base,” he said.
City officials are still discussing what can be done, but Colement said he sees perhaps shortening the length of certain abatements, changing how gradual they are and maybe adding more requirements for obtaining them.
At the same time, he said, neighborhood leaders want to ensure services likely public safety aren’t hurt and infrastructure needs, like streets and sidewalks, are still tended to.
“We’re not going to have enough money to do all the things we’re supposed to do,” he said. “I’m afraid people think cities are like a boy crying wolf. But these cuts are real.”
Lee Rood’s Reader’s Watchdog column helps Iowans get answers and accountability from public officials, the justice system, businesses and nonprofits. Reach her at lrood@registermedia.com, at 515-284-8549, on Twitter at @leerood or on Facebook at Facebook.com/readerswatchdog.