One of Des Moines’ suburbs has indefinitely paused its tax incentive program due to changes in state law.
The Pleasant Hill City Council voted to discontinue applications for the program, which provided property taxes a deferment on the incremental value of new residential and commercial projects and qualifying remodels or additions.
The pause will be in place until there is a change to state property tax law, which city officials say penalizes economic development. That will mean developers may not get the level of assistance they want, and that large multifamily housing, commercial or industrial projects may not come to Pleasant Hill, they said.
Des Moines, Ankeny, Grimes, Waukee and West Des Moines officials are also reviewing what the state law means for their tax incentive programs, but they have not ended their programs, according to city spokespeople.
Ben Champ, Pleasant Hill city manager, said the city still needs more housing and more economic development. “But how that happens — frankly, things may slow down without partnerships” that had been available through tax incentives, he said.
Gov. Kim Reynolds signed Senate File 2472 this year to overhaul Iowa’s property tax system. The law implements a 2% growth cap on local governments’ general levies, with exceptions for new construction, and an inflation-adjusted 10% homestead tax exemption up to $20,000. The changes are projected to lower Iowans’ property tax payments by $4.2 billion over six years.
But the law also prevents valuation made through tax abatement or tax increment financing incentives from counting as new construction valuation that would go into cities’ general funds, according to a Pleasant Hill City Council document.
“This creates a uniquely untenable situation where incentivizing economic development for the long-term health of the community will now penalize municipal operations and create upward pressure on tax levies,” Champ wrote.
During a recent city council work session, Des Moines Director of Development ServicesCody Christensen said ending the city’s tax abatement program is the only “fiscally responsible” option.
In May, Des Moines suspended its use of tax increment financing. Known as TIF, the tool allows local governments to waive property taxes for a period of years on the value of improvements to help developers offset the cost of construction.
Champ said communities are going to have to think long and hard about their needs and choices.
He said Pleasant Hill understands the importance of being a partner with developers, especially as construction, labor, interest and other costs continue to make development difficult. But being a partner will look different without offering incentives.
In the long-term, the city is hoping for beneficial legislative changes, “but it’s going to be a year of conversations amongst developers, economic development professionals and local government” about the new landscape, he said.
Phillip Sitter covers the suburbs for the Des Moines Register. Phillip can be reached via email at PSitter@usatodayco.com. Find out more about him online in the Register’s staff directory.
This article originally appeared on Des Moines Register: Pleasant Hill suspends tax incentives, Des Moines metros consider same
Reporting by Phillip Sitter, Des Moines Register / Des Moines Register
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By Phillip Sitter, Des Moines Register | USA TODAY Network
