Iowa City, Johnson County prepare for Iowa property tax legislation - The Daily Iowan

dailyiowan.com · Ariel Kolder · September 9, 2026

# Iowa City, Johnson County prepare for Iowa property tax legislation - The Daily Iowan

Author: Ariel Kolder Published: 2026-09-09T00:30:40+00:00 Source: dailyiowan.com (dailyiowan.com) Language: en

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# Iowa City, Johnson County prepare for Iowa property tax legislation

Local officials are reviewing future budgets and evaluating potential changes to services and fees as the legislation takes effect.

Ariel Kolder, Politics Reporter • September 8, 2026

City Manager Geoff Fruin detains the Orchard Court LIHTC Loan during the Iowa City city council meeting on Tuesday, Sept. 1, 2026 in Iowa City, Iowa. The resolution will authorize a $5.1 million loan to aid in the construction of affordable housing. (Annika Nelson/The Daily Iowan)

As 2027 approaches, local governments are preparing for Iowa property tax shifts, reviewing budgets for upcoming tax cuts.

Signed into law in May 2026, Senate File 2472 will save Iowa homeowners $4.2 billion over six years, according to a press release from Gov. Kim Reynolds’ office.

The law limits how much cities and counties can increase property tax revenue from certain levies, generally limiting annual growth to 2 percent, while excluding new property from the calculation. The law will take effect Jan. 1, 2027 and apply to property taxes and budgets for fiscal years beginning on or after July 1, 2027.

RELATED: Iowa lawmakers pass sweeping property tax overhaul

The law also replaces the homestead tax credit with a homestead tax exemption, which exempts 10 percent of a home’s taxable value from taxation.

A Common Sense Institute Iowa analysis ranked Iowa 11th most burdensome nationally for local property taxes and 19th for total local tax burden.

Iowa Rep. Carter Nordman, R-Guthrie, said the bill will “finally” put Iowa taxpayers first.

“For too long our property tax system has put certainty for government budgets over the certainty of family budgets,” he said.

While the bill didn’t include everything the democratic caucus wanted, Iowa Sen. Tony Bisignano, D-Polk, said they had input in the bill that was written.

“We think at this point this is the best bill that we’ve seen,” he said. “Not one that we wrote, but one that we have some input, and that’s significant in and of itself.”

The balance between tax relief and funding for local services is one of the broader issues raised by the bill. Phuong Nguyen, a professor in the University of Iowa School of Planning and Public Affairs, said communities face a trade-off between more money or more tax burdens, with local services provided.

“This may reduce their budget significantly, and local residents may see cuts in services as well in the future,” Nguyen said.

Nguyen speculated on how local governments could offset reductions and said communities could see increased fines and fees.

“We don’t know for sure what [they are] going to do to offset the cuts,” he said. “If they can’t compensate for the loss and they cut the personnel, you can see a lower response rate to some services, and we’re not sure which one we’re gonna get cut first.”

Geoff Fruin, city manager for the City of Iowa City, spoke to the Iowa City City Council Sept. 1 about the property tax changes and said the challenge is unlike those council members may have experienced in the past.

“It’s not time-constrained, meaning that when you have an economic recession, there’s a reasonable belief conditions will change. That’s not what we’re looking at here,” he said. “We’re looking at structural reform of local government finance.”

Fruin said the different services Iowa City offers will need to be “watered down” and may not meet expectations in all areas.

According to Fruin’s presentation, property taxes make up 70 percent of the general fund revenue. A rough estimate found about a $2.5 million reduction in taxes for the city.

Nicole Davies, finance director for the City of Iowa City, said looking forward to the year 2036, there is an estimated gap between revenue and expenditures of $8.9 million or 8.2 percent of the general fund budget. For the transit fund, there is an estimated gap of $4.8 million, which is 27.7 percent of the budget.

Options were proposed to the city council as ways to close the gap, including increasing fees for permits, services, and programs, increasing the utility franchise fee, utilizing the Local Option Sales Tax to replace services currently funded by the general fund, and maximizing employee benefits levy — which would include a 34.5 percent increase in property tax levy.

Options for the transit fund include increasing fees for parking permits and hourly services, charging bus fare for transit services, increasing utility franchise fees, utilizing the Local Option Sales Tax, and eliminating or modifying services to the public.

Davies said not one of these would make a huge difference by itself, but rather some combination of all the options.

Johnson County Supervisor V Fixmer-Oraiz said they were disappointed by the bill, finding it to be anti-growth and taking away local control.

“I think in general tapping our ability to utilize property tax at certain levels means that we cannot pay for the services that our residents have come to know and why they live and move to Johnson County,” Fixmer-Oraiz said.

Heading into the county’s budget season in November, Fixmer-Oraiz said the county is looking into internal policies to find more efficiencies. They said the county is still waiting on rules on how to apply these property tax laws.

“It doesn’t make any sense, and they still don’t have actual rules as to how to apply this,” they said.

Cedar Rapids resident Tyler Gibson said the bill didn’t mean much to him, calling it “political lip service,” using the tax cut to say they did something while not offering substantial change.

Gibson said the current property tax system is pushing people out of the state, with him personally seeing family and friends leave. While Gibson said he’d like the tax cut, he believes the state needs to cut state property taxes entirely for Iowans, comparing property taxes to renting the house you own.

“If you want to tax something, tax your initial purchase,” Gibson said. “But continually paying for something that you already bought is absurd.”

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