FY26 Proposed Budget

Property Tax Overview

The taxable valuation of property subject to all levies in Iowa City increased approximately 2.3% in Fiscal Year 2026, and assessed growth increased approximately 0.9% over this same period. This follows a period of largely stagnant taxable valuations due to residential tax rollbacks imposed by the State which significantly reduced the taxable portion of certain residential properties. Prior to FY 2015, multi-residential properties were classified as commercial and taxed at 100% of assessed value. Since then, the taxable percentage of multi-residential properties dropped 3-4% annually and in FY 2024, the taxable percentage dropped over 9%. Multi residential properties are now permanently taxed at the same rate as residential properties. While the 2013 property tax reform legislation provided significant benefit to multi-residential property owners, it places additional strain on the City’s budget.

Taxable % of Residential Properties

40.0% 50.0% 60.0% 70.0% 80.0% 90.0% 100.0%

FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24 FY25 FY26

Taxable % of Multi-Family Taxable % of Residential

95.0% 90.0% 86.3% 82.5% 78.8% 75.0% 71.3% 67.5% 63.8% 54.7% 46.3% 47.4%

54.4% 55.7% 55.6% 56.9% 55.6% 56.9% 55.1% 56.4% 54.1% 54.7% 46.3% 47.4%

With multi-residential properties now subject to the residential rollback rate, a higher percentage of the City’s tax base is exposed to annual fluctuations set by the State. The FY 2025 residential rollback rate dropped 8.3% to 46.34% causing a significant reduction in taxable valuation for residential properties. While the residential rollback rate increased 1.1% to 47.43% in FY 2026, it is still far below residential rollback rates experienced throughout the last decade. The 2023 State of Iowa tax reform eliminated both the Emergency and Library property tax levies and added them to the General Fund levy taking it from $8.10 to $8.57. However, State-mandated growth limitations forced this levy down to $8.40 in FY 2025 and capped it at that amount for FY 2026. The levy must be no higher than $8.10 by FY 2029 (although State growth limitations may lower it beneath $8.10 before then). This change, along with new property tax exemptions for seniors and military veterans, will further strain the City’s primary revenue source in the future and place additional pressure on other property tax levies and alternative revenue sources. For FY 2026, the taxable valuation of property subject to all levies in Iowa City increased slightly by 2.3% while total assessed values grew by 0.9%. While new construction and higher property values pre-pandemic were sufficient to make up for the reduction in the taxability of residential and multi-residential properties, this will likely no longer be possible due to the State’s caps on growth in taxable value implemented as part of the 2023 tax reform. The residential rollback rate increased slightly for FY 2026, however is still well below rates in the recent past. It is important to remember that property reassessments occur in a two-year cycle.

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