Another Des Moines metro city may suspend its property tax abatement program because of financial concerns stemming from the state’s new property tax law.
The Altoona City Council will consider the measure at its Monday, July 20 meeting.
The decision to suspend accepting new applications to the tax abatement program starting Feb. 1, 2027, would make things more difficult for first-time homebuyers in the city. Mayor Dean O’Connor said he likes the program, which can offer a discount of up to $75,000 off the assessed value of eligible new or improved homes for up to five years.
But O’Connor said the city’s long-term financial outlook is too bleak to avoid starting to cut non-essential services — and even essential services could face cuts.
“What we’re doing is trying to make decisions early based on the math we see coming down the pipeline,” O’Connor said Friday, July 17.
A state law enacted this year, Senate File 2472, implements a 2% growth cap on local governments’ general fund levies — with exceptions for new construction — and prevents valuation made through tax abatement or tax increment financing incentives from counting as new construction.
The law is projected to lower Iowans’ property tax payments by $4.2 billion over six years.
But it presents challenging math for Altoona and other cities — such as Pleasant Hill, which recently suspended its tax incentive program, and Des Moines, which is weighing whether to rollback tax incentives it has used to spur new development. Other metro cities have said they are reviewing the law’s impacts but had not made decisions about their tax incentive programs.
Altoona may have three or four years before its finances may be more seriously impacted, O’Connor said. But sooner or later, costs outrun revenue when rising expenses exceed the state’s 2% levy growth cap.
“The future is fairly bleak for us financially,” he said.
Altoona’s population grew almost 14.7% from 2020 to 2025, with 2,871 new residents, according to the results of a special census released in June.
That means more roads that have to be plowed or repaired, and more calls for fire and emergency medical services and police.
“We’re going to get back into protecting those main things,” O’Connor said — public works, fire/EMS and police services. And going forward, that will entail things such as park development being delayed by years, trails not being repaired, and activity spaces such as new pickleball courts and splash pads not being installed, he said.
How many would-be Altoona homeowners may be affected in the future?
Altoona usually receives about 125 applications for single-family residential tax abatement each year, city finance director Andrew Lent said.
Currently, 619 homes in Altoona are receiving more than $45.5 million in abated value, according to the Polk County Assessor’s Office.
Not having new applicants receive assistance may change the character of the community, O’Connor said. He worried that fewer young people will buy their first home in Altoona. And if they buy their first home elsewhere, they would probably be less likely to buy their second home in Altoona, and so on.
“You want to capture that young person looking for a community to live in,” he said.
He said he understands the reasons behind state legislators’ push to change the state’s property tax laws — homeowners’ increased valuations and increased bills.
And cities do have other revenue sources, such as sales taxes, hotel/motel taxes and utility fees. Voters in Ankeny will decide in September whether the city will enact a 1% local option sales tax. Johnston, Urbandale and West Des Moines have in recent years been among metro cities to enact franchise fees on electric and gas utilities.
But cities’ funding system is based on property taxes, O’Connor said.
Altoona already has a local option sales tax and the state-mandated cap of 5% franchise fees on gas and electric utility sales.
“It feels like the state’s taken away our revenue stream” and has not given anything else as an alternative, O’Connor said. He hoped legislators would revisit the issue and provide other options.
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: Altoona may end residential tax abatement program over budget concerns
Reporting by Phillip Sitter, Des Moines Register / Des Moines Register
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By Phillip Sitter, Des Moines Register | USA TODAY Network
