Is the property tax compromise being voted on today in the Iowa Legislature worth the decades-long struggle to deal with the issue?
Commercial real estate professionals answer with a resounding "maybe."
Randy Minear, president and CEO of Terrus Real Estate Group LLC, did some quick calculations after a compromise was announced between plans favored by Gov. Terry Branstad and Statehouse Republicans and a bill advanced by Senate Democrats, and determined that the plan would save owners of commercial property about 2 cents a square foot.
That's not going to shake a lot of investment money for the properties Terrus manages and sales.
In short, the bill provides a rollback on commercial and industrial property taxes to 90 percent of valuation over 10 years, lowers the taxation formula on some properties to the much lower residential rate on the first $145,000 of valuation and limits the annual growth of statewide valuations to 3 percent from its present 4 percent.
Click here to download an analysis of the compromise by the Legislative Services Agency.
"It takes quite a bit of effort to sell it to people," said Rick Krause of CBRE/Hubbell Commercial. Krause searches properties for high-net-worth investors and publishes a newsletter that analyzes the market.
He has followed the commercial property tax debate for several years, and the result has left him a little disappointed.
Minear joked that the complexity of the new formulas might require him to add an extra division at the brokerage and property management business he co-founded.
"The simpler and more constant and clear you can make it is what we'd prefer," he said.
Kris Saddoris is vice president for development at Hubbell Realty Co., and she is on the hunt for equity partners for commercial projects.
She appreciates the effort lawmakers have put into coming up with a solution and hopes it points to better legislation down the road.
"This is an issue with a lot of moving pieces, so it's nice to see that they've done something," Saddoris said.
Among the major improvements in the state's property tax scheme is the effort to move multifamily housing to a residential classification from commercial, she said.
Taxing apartments based on 100 percent of value made it difficult to find national equity investors for local projects, Saddoris said. Residential taxes are based on a little more than 50 percent of valuation. Multifamily housing would reach that rate over 10 years under the compromise bill.
"I'd like it to go from zero to 50 percent immediately, but 10 years make sense to me," Saddoris said.
She said the previous system stymied development of multifamily projects.
The compromise bill will help "Iowa compete nationally," Saddoris said.