Robert Willis LetterRobert P. Willis.
3921 Columbia,
Des Moines. IA 50313
March 20, 2001
The Mayor and City Council
Dubuque City Hail
1300 Main St. ~o?J
Dubuque LA 52~-
We, as contributing members of Common Ground-USA, fully reaiize that you are working hard
to retain existing residents and attract new people to your city by seeing to safe neighborhoods,
good schools, useable parks, ~liable mass transit, an attractive business climate and fair and
equitable taxation. Since the Iowa Legislature currently limits property tax levies, our cities can
raise additional funds only through locai user charges and local option sales taxes or beg for state
and federal funds. Begging for federai funds appears to be the primary objective of the April 4-
5, 2001 Washington D.C. meeting of the Council for Investment in the New American City.
Except for a minor property tax on the location vaiue of land Iowa's revenue choices leave in
place major impediments to developrvent - land speculation and deadweight taxes on families
and businesses. By privitizing development The Iowa Tax Shift Plan now in the hands of many
of Iowa's legislators will ailow the state and its counties, cities and towns to cut taxes on families
and-businesses and avoid spending-on aid to businesses and on other developmem programs.
The Plan needs support from mayors such as yourself if it is ever to be enacted.
THE IOWA TAX SHIFT PLAN:
* Permanently exempt ail new construction from property tax,
* Assess and tax utility and railroad lands separately from capitai vaiues.
* Tax ail classes of land at 100% valuation,
* Cut taxable building vaiues to meet legislated property vaiuation growth limits.
* Cap 100%actuaivaiuationof,*xistingimprovementsatFY2000assessments,
* Authorize city levy to fund user credits for water-utility minimum charges.
* Substitute state property tax levy for two-cents of Iowa's five-cent saies tax.
* Pemfit simple majority for voter approval of bond issues to replace !ocal sales tax.
· Permit locai tax levies that will maintain but not exceed current local revenues.
· Require voter approvai for ail bond issues by county govemmem.
* Allocate additional $70 per capita of state road funds to cities and townships.
Explanation: The Iowa Tax Shift Plan modifies Iowa's tax system to reduce deadweight
property and saies taxes and raise taxes on land. /Seepage 2for tax mcreuses on land and net
savings/parcel.) Raising taxes on land and permanently exempting new buildings from tax will
prod release of high vaiue urban lots to builders eager to erect tax-free commercial floor space,
apartments and single-family homes. With increased employment by builders and others and
less saies tax and user charges m pay families and businesses will become ready markets for the
increased supply of floor space, housing and other goods. Expected growth in taxable land
vaiues from increased demand by builders for lots and no change in Iowa's 4% annual limit to
growth of combined property vaiues will gradually lower taxable percentages and taxes on
existing improvements to zero. fsee pages 3 &4far illustration off our choices of taxable valuations by
propero, class as compared with projected re-evaluations as a result of exempting all new buildings from taxation4
1997 Assessmts. % consolidated late Cut Deadweight
Cites' populatio~ FY1997 Tax Plan Taxes
All cities 2,125,847 3.61 8.02 $1,227,595,674
All townships_ 774,153 2,58 4.76 $87,422,625
Ave all townships
Des Moinee 193,187 4.44 9.29 $156,553,493
Cedar Rapids 108.780 3.10 7.15 $67,822.723
Davenport 95.333 3.40 7,30 $57,814,362
Sioux City 80.505 3~55 7.75 $42,465.761
Watedoo 66.467 ' 4.10 8.75 $37,700,75r4
59;738 3.15 6~75 $28.818.649.
Iowa City - . _
Dubuoue 57.546 2.96 7.20 $26.949.883
Council Bluffs 54.315 3.83 8.25 $27.794.070
Ames 47.198 2.39 5.37 $19.143.611
Cedar Falls 34.298 3.74 7.94 $14.839.781
West Des Moines 32.007 3.84 7.84 $28.712.489
Clinton 29.201 3.54 8.39 $11.786.302
Mason C~' 29,040 3.21 7.45 $17,811,184
Bettendorf 28.139 3.18 6.87 $13,566,298
Burlington 27.208 3.45 8.17 $12.507.633
Fort Dodge 25.894 3.90 8.94 $15.397.454
Marshailtown 25.178 4.02 9.57 $12.693.535
Ottumwa 24.488 4.57 10.71 $11.897,752
Urbandale 23.567 3.32 6.98 $12.131.017
Muscatine 22.881 3.70 8.48 $10.253.963
Marion 20,374 3.59 7.57 $11,311,964
Ankeny 18.482 3~69 7.55 $11,220,656
Newton 14,789 4.36 9.42 $7.590.494
Keokuk 12.451 3.51 8.78 $5,663.687
Boone 12,392 3.70 8.52 $5,54%324
Fort Madison 11.618 3.74 9.30 $4 110.464
Indianola 11.340 3.86 8.17 $5.041.090
Spencer 11.066 2.81 7.22 $5.989.396
Oskaloosa 10.600 3.88 7.85 $6.043.357
Coralville 10.347 2.92 6.48 $6.908.899
Clive 7.462 - 3.12 6.74 $7.085.835
Altoona 7.230 3.83 7.64 $4.507.625
Washington 7.074 3.21 7.76 $3.166.575
Perry 6.652 3.90 8.77 $2.904.162
Windsor Heights 5.190 3.74 7.39 $1.718.087
Johnston 4.703 3.41 7.11 $2.835.622
Emmetsburg 3.940 3.62 9.37 $1.398.017
Pleasant Hill 3.671 4.09 8.09 $1.311.683
Mount Vernon 3.657 3.19 6.67 $1.365.439
Audubon 2.524 3.53 9.31 $1.188.838
Greenfield 2.074 3.30 8.29 $1.062.221
Mitchellville 1.670 4.12 8.39 $432.923
Bonduraant 1.584 3.98 7.96 $5.677.508
Durant 1.549 3.06 7.68 $620.918
N'ranly 1.349 3.61 9.60 ~288.856
State Center 1.248 3.00 8.27 $341.396
Hedrick 810 3.30 9.87 $171.360
Ossian 810 2.90 8.30 $290.025
Farrnington 655 3.47 10.19 $201.604
Dexter 628 3.17 8.41 $194.889
Beacon 509 3.19 6.87 $91.642
Malcom 447 2.68 8.18 $485.236
Elkhart 388 3.40 %37 ~;201.592
Alleman 340 3.49 7.27 $121.780
Sheldah[ 315 3.04 5.56 $35.374
Runnells 306 3.60 8.40 $160.764
Waucoma - 277 2.49 8.48 $74.008
Lockfidge 270 2.76 9.38 $50.943
Crawfordsviue ~'" - 265 - ' 3.24 -10.70 . $67:846
Joico 245 2.69 8.52 $33.886
Clare 183 3.00 7.74 $12.822
Superior 122 2.55 7.24 ($9.572)
Clio 103 3.20 11.73 $23.322
Greenville 84 2.35 13.46 $13.404
Beaman 2.87 8.34 $29.586
Tax Increase on lots Savings per percel.O.~A, ~.~__
Reeideeflat Com. & Ind. Residential Com. & Ind.
304% 128% $226 $1,369
236% 90% $60 $2,730
(92% ag-land tax increase)
281% 115%
319% 137%
291% 120%
297% 124%
288% 119%
290% 120%
394% 150%
293% 121%
310% 131%
287% 118%
272% 110%
332% 143%
323% 138%
293% 122%
331% 143%
317% 135%
334% 145%
326% 140%
283% 116%
317% t35%
284% 116%
272% 110%
294% 122%
355% 156%
320% 137%
353% 155°/0
286% 118%
369% 164%
268% 108%
304% 128%
294% 122%
264% 105%
341% 149%
309% 131%
260% 103%
280% 114%
371% 166%
260% 103%
280% 115%
397% 170%
375% 158%
271% 109%
264% 105%
357% 158%
385% 173%
402% 183%
442% 206%
421% 194%
435% 201%
383% 172%
293% 122%
455% 213%
294% 122%
280% 114%
234% 88%
325% 140%
519% 249%
518°/0, 249%
502°/~ .~ . 239%
477¥~ .225%
370% 165%
417% 192%
568% 277%
942% 487%
429% 198%
$256 $801
$162 ($49,675)
$123 $939
$228 $70
$319 ($709)
($160) ~ ($504)
$214 $168
$290 ($217)
($152) $30
$180 $545
($396) ($6.740)
$330 $1.801
$227 $1.827
($62) ($944)
$264 $2.056
$419 $%594
$365 $2.213
$448 $1.363
($268) ($4:282~
$316 $1.248
($144) $1.656
($389) $132
$145 $2.024
$431 · $2.439
$345 $2.220
$479 $2~220
($72) $2.833
$261 $2.096
($32) $3.050
$409 $2,547
($390) ($7,716)
($165) ($1,610)
$272 $2,865
$342 $2.428
($225) ($347)
($726) t$11921)
$429 $3.006
($106) ($73~
($178) $3.059
$406 ($3.262)
$297 $3.124
$32 $3.444
($76) $3.052
$225 $2.772
$409 $3.434
$233 $3~243
$556 $3.577
$343 $3.358
$390 $3.477
$324 $3.385
$441 $3.072
$530 $2.940
($40) $3.652
($291) $3.611
$221 $4.017
$114 $3.117
$501 $2.626
$409 $3.604
$455 $3.443
$566 $3.242
$482 $1.507
$694 $3.949
$581 $3.822
$$46 $3.441
$445 $1.343
1997 STATEWlDE AGGREGATE VALUES vs PROJEOTED RE-EVALUATIONS~
AGRICULTURAL ~rWith ag-land values at 75% of average per acre market value times total acres
rollbacks 100% values rollback both bldg. only rollback
96.42% Land . $ 20,590/895,136 $ ~9.853.864.636 $ 20,590,895.136
96.42% '~Buildings ,-$ 8,282,391,336 $ 5.518.603.656 $ 4.781.573.156
...Exempt .: $ '$. 3.500.818.1~1 $ 3.500.818.181
total $ 28 873 ~86,473 $ 2&873.286.473 $ 28.873.286.473
'" AGRICULTURAL
[] Land [] Buildings
50% b~dg rollback ~*~e-valued. 50% RB
$ 20.590.895.136 $ 45,227,672,045
$ 2.390.786.578 $ -
$ 5.891.604.759 $ -~'""-
$ 2&873.2SE473 $ 45.227.672.045
[] Exempt
$50,000,000,000
$45,000,000,000
$40,000,000,000
$35,000,000,000
$30,000,000,000
$25,000,000,000
$20,000,000,000
$15,000,000,000
$10,000,000,000
$5,000~000,000
$-
RESIDENTIAL
~--o cr= 8~. o~ c~
co ocr ~ o.,i:
~ith 5 fold in.ease in lot values, taxable buiiding values at 50% of adj~ rollback.
Aggregate land values, building values, from summation of assessors abstract of assesssments.
rollbacks 100% values rollback both bldg. only rollback 50% bidg rollback re-valued. 50% RB
54.91% Land $ 11,214,114,581 $ 6,15%558,175 $ 11,214,114,581 $ 11.214.114.581 $ 56,070,572,905
54.s1% Buildings $ 46,788,906,529 $ 25.691.320,686 $ 20,634,764,280 $ 10,317,382.140 $ 2.126.284,525
Exempt $ $ 26,154,142.249 $ 26,154, 142,249 $ 36,471,524.389 $ 44.662,622,004
total $ 58,003,021,110 $ 58.003.021,110 $ 58,003,021,110 $ 58,003,021.110 $ 102,859,479.434
RESIDENTIAL
' [] Land [] Buildings [] Exempt
$120,000,000,000
$100,000,000,000
$80,000,000,000
$60,000,000,000
$40,000,000 000
-$2dooo,0oo,ooo
1997 STATEWIDE AGGREGATE VALUES vs PROJECTED RE-EVALUATIONS
COMMERCIAL With 5-fold increase in lot values, taxable building values at 50% of adj, rollback.
Aggregate land values, building values, from summation of assessors abstract of assesssments.
rollbacks 100% values rollback both bldg. only rollback 50% bldg rollback re*valued 50% RB
s7.3~% Land $ 3.723.632.343 $ 3.625,350.791 $ 3.723.632.343 $ 3.723.632.343 $ 18.618.161.715
97.36% Buildings $14.728.921.163 $14.340.166.018 $ t4.241.884.466 $ 7.120.942.233 $ 286.246.966
Exempt $ $ 487.036.697. $ 487,036.697 $ 7.607.978.930 $ 14.442.674:197
leo% total ' $18.452.553.506 $18.452.553.506 $ 18.452.553.506 $18.452.553.506 $ 33.347.082.878
COMMERCIAL
[] Land E Buildings [] Exempt
$35 000,000.000
$30,000,000,000
$25,000,000,000
$20,000,000,000
$15 000 000 000
$-
INDUSTRIAL With 18-fold increase in lot values and taxable buildin~-v~lues at 50% of adj. rollback.
Aggregate lan~ values, building values, from summation of assessors abstract of assesssments,
'ollbacks 100% values rollback both bldg. only rollback 50% bldg rollback re-valued 50% RB
100% Land $ 367.575.537 $ 367.575.537 $ 367.575.537 $ 367.575.537 $ 6.616.359.666
100% Buildings $ 6.228.853.634 $ 6.228.853.634 $ 6.228.853.634 $ 3.114426.817 $ 121.963.336
Exemp~ $ $ $ $ 3.114.426.817 $ 6 106.890.298
total $ 6.596.429.171 $ 6.596.429.171 $ 6.596,429,171 $ 6.596.429.171 $ 12.845.213.300
INDUSTRIAL
[] Land EB Buildings'E] Exempt
$14,000.000,000
$12.000.000,000
$10.000.000.000
, .ooo.ooo.ooo
$6.000.000,000
$4.000.000.000
$2,000,.000.000
An Open Letter to the Mayors of the Cities and Towns in the United States
By Edward J. Dodson, Cherry Hill, NJ, 2-21-01
Governing a community, any c0mmun~ty' presents tremendous challenges to elected officials,
and the person Who serves as may. or is very:much in the spotlight. His or her decisions and
policies arq subject to constant scrutiny. To:day}-the challe~?ges are as great or greater than ever ·
before because many people and most businesses are apt ngt to have firm roots in any particular
community. Businesses come in search of markets and stay when the effort proves profitable.
People follow employment opportunities and -- when able to choose -- they look at the other
attributes of the places where they might live, work and play.
As mayors working to retain existing residents and attract new people in, you are certainly aware
of the importance of safe neighborhoods, good schools, useable parks, reliable mass transit,
bearable taxation and a welcoming climate for businesses. To a very great extent, full
employment results in these desired characteristics. At the same time, a community must find
ways to fund all of the desired amenities when they are not now present. This has proven to be an
elusive goal for many cities and towns.
Common Ground members live and work in many of the communities you serve. We want to
stay and make our contribution to the quality of life for our neighbors and our families. That is
why we urge you to think seriously ab mt the way our municipal govemmems raise revenue to
pay for the public goods and services we believe are necessary for our quality of life
One perspective - the one that has driven public policy for a very long time - is that the least
harmful way to raise public revenue is by taxing just about everything and everyone - but as
moderately as possible. Over th'ne, govermnem has imposed taxes on the wages of every
working person, on the homes and automobiles and other personal assets of every resident, on
the assets and gross revenue and profits of_~¥ery business, on every exch.a~nge of goods and
services, and eve~ penalizing Visitors by taXing ~tays in hotel r00m~i The r~sult f03 mb. ny cities
has been an ongoing loss of people and commerce.
In place of self-sufficiency has come a perpetual dependency on state and federal govemmenzs
for revenue at a time when state and federal elected officials have adopted the tenets of "new
federalism" that returns authority and responsibility to communities to solve their own social and
financial problems. On the bright side communities now realize that heavy taxation of businesses
and working people only serves to drive them away. People who have options will not hesitate to
abandon a city or region if government is not doing the right things from their perspective.
Taxes are only one contributing factor to a high cost of liv~g or of doing business. With markets
often global rather than national or regional, a locatiot/to be desirable must allow businesses the
oppommity to compete internationally, absorb local costs of producing goods or offering
services and still make a profit for the owners. The responsibility and challenge to our $1ected
representatives is to strike the right balance between the need for revenue and the need for a
healthy, nurturing economy.
What cities have to offer most is location. Cities are where they are because at some time in the
past the location was adx~antageous: an excellent harbor, a navigable river, rich farmland, mild
weather, the crossroads of natural trade.routes. With the increase in population coming to live in
the same geography, locations.come to have exchange value. In fact, ex, cry location has, some
annual rental- Value in the market place. This~ rental value is what people are wiltii~g to gJ~ve'up
from what they Produce as payment for control over a particular location.
In our cities the most valuable locations are usually in or near the ~enh:al business districts.
Values tend to decline the further away from the ce~er one goes (until you get close to another
business district or a riverfront or ocean beach or mountain vista). An important practical
observation is that this location rental value grows or falls independent of what any individual
does with a location. Location value is created by aggregate public and private investment. As
such, this value ought to be - we would say "needs"~ to be -- fully captured by government to pay
for public goods and services.
When, as is largely the case, location rental values are only lightly taxed, the market recognizes
the net rental value as "imputed income" to the holder of the land deed. This income s~ream is
capitalized into a selling price2 Here is a simple example. Say a parcel of land can be leased for
$10,000 a year and a market rate of return on investments is 10%. The $10.000 in rental income
is capitalized, at 10%, into a selling price of $100,000 for that parcel. However, if Iocation rents
are rising every year, the owner will try m capture this future increase in income by charging a
price greater than "current value" would suggest.
The lower the annual tax in relation to location rental value, the greater is the imputed income to
be capitalized. Thus. a city with a low effective tax rate on location rental values will experience
high levels of land hoarding and speculation. Its land markets will have a strong tendency to
spiral upwards rapidly, t~hen crash when businesses cm~ no longer afford to absorb the higher
costs of doing business triggered by the speculative land market. Strangely, we have come to
~ceept these dynamics as the unfortunate consequences of a market economy, of the business
cycle, when rational public policy could attack the problem at its core.
Consequently we urge you to take the lead in support of legislation to remove one of the most
serious impediments to the economic health of our cities by looking to location rental values as
the primary source of public revenue vnd removing the burden of taxation from the productive
activities in which we engage.
Taxing (i.e., collecting) location rental values brings in revenue, discourages land speculation
and pressures those who own land parcels to improve them according to "highest and best use"
as dictated by the market. Zoning and planning measures are important factors in these
investment decisions, and current thinking is to encourage mixed-use development so that people
can live, work and play in the same geography - reducing our dependency on the automobile and
costly imported fuels and paving the way to a cleaner environment. When the land owner then
makes an investment in a home or office building or store - improwng the land parcel to its
highest and best use - the best thing the city can do is exempt these assets from taxation.
Selective and limited abatements have been employed for decades. Exempting all property
improvements from taxation simply extends this wise policy to all property owners. Never again
should anyone be penalized by an increase in their taxes as a result of constructing a new
building or renovating an old one.
The same logic applies to taxes on the wages and salaries of working people and on the sales of
goods. These fom~s of taxation started out at very. low levels and have been increased over time,
often in response to revenue shortfalls. The long-term impact of these measures has been to drive
people and businesses to lower (or no) tax geographies. All across the United States, people live
in.one state because there are lower real estate taxes, work across a border because the wage
taxes are lower and shop in another state because there are no sales taxes. Most people behave
rationally, even if our tax policies are ~ot.
Every city or town would benefit, we believe, by the measures we have described. Perhaps more
to the point, the people who work and produce and contribute to the economic andsocial health-'
of our communities will be rewarded - as they should - for doing so. Those who enjoy the
privilege of controlling the use of the most desirable and potentially profitable locations in our
communities wilt, finally, pay for this privilege.