Fiscal Note
Fiscal Services Division
HF 353 – Levee and Drainage Districts (LSB1205HV)
Staff Contact: Jeff Robinson (515.281.4614) jeff.robinson@legis.iowa.gov
Fiscal Note Version – New
Description
House File 353 allows agricultural property to benefit from a new property tax exemption if the
property is located within a levee and drainage district that is adjacent to both the Iowa and
Mississippi rivers and encompasses at least 35,000 acres in total.
The new exemption is available for agricultural property that is subject to a per-acre levee and
drainage district assessment that is in excess of the average agricultural levee and drainage
district per-acre assessment for all agricultural property in the county. The exemption is
calculated as the difference between the per-acre levee and drainage district assessment for
the property and the per-acre average for the county, multiplied by the number of acres of the
property, with the result divided by 7.0%. The value of the new property tax exemption is limited
to no more than 50.0% of the property’s productivity land value.
The special exemption is available for assessment year 2024 and after (taxes paid in FY 2026).
Background
Iowa property taxation law and associated administrative rules result in a total net productivity
value per agricultural property acre for each Iowa county. This productivity value, expressed as
net income per agricultural acre, is further adjusted by subtracting the per-acre real estate taxes
paid on agricultural property within the county. The real estate tax adjustment includes the
county total of all levee and/or drainage district assessments that are applied to agricultural
property. Net income per acre after the adjustment is then capitalized at a statutory rate of
7.0% as specified in Iowa Code section 441.21(1)(e). The capitalized per-acre income amount
is multiplied by the agricultural acres in the county to determine a total net agricultural
productivity value for the county, and that total is then spread by the assessor to individual
agricultural acres in the county each assessment year as specified in Iowa Code section
441.21(1)(f).
This method of determining the value of all agricultural property in a county from aggregate
income and expense estimates for the agricultural property in the entire county means that
inequities in the valuation of individual properties will develop, as no two properties are subject
to the same income and expense situation. In the case of levee and drainage assessments, the
assessments are paid only on property within the applicable levee and drainage areas, yet the
amount paid is distributed through the averaging process to every agricultural acre within the
county. It is possible, however, that assessors, when spreading the aggregate net productivity
value of the county to the agricultural properties, do take the additional expense of levee and
drainage assessments into account when allocating a county’s aggregate value.
The only known levee and drainage district that meets the size and location requirements of the
Bill is the Two Rivers Levee and Drainage District (District), located in southeast Iowa. The
District is composed of approximately 13,515 acres in Louisa County and 31,446 acres in Des
Moines County, for a combined acreage of 44,961 (70.3 square miles).
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Since the Two Rivers Levee and Drainage District assessments are already fully incorporated
into the productivity calculation for Des Moines and Louisa counties, the proposed new property
tax exemption will double-count a significant portion of the levee and drainage district charges
assessed to landowners within the District.
The District assessments will first be
subtracted from the gross agricultural
income of each county through the
productivity formula process. With the new
exemption, the second adjustment will
occur when agricultural land within the
District is allowed a special property tax
exemption that compensates the District’s
landowners for the fact that the levee and
drainage assessments they pay are shared
across all agricultural landowners within the
counties.
The following provides a calculation of the
estimated property tax reduction under
current law, which is the result of the
countywide agricultural property value
adjustment for levee and drainage district
assessments:
• Des Moines County:
• Assessment year 2019 agricultural acres totaled 203,858.
• The county productivity calculation included a $3.31 downward adjustment in the per-
acre productivity of agricultural property due to levee and drainage district assessments.
Applied to 203,858 agricultural acres, the levee and drainage district adjustment totals
$674,770. This amount capitalized at 7.0% results in a $9.6 million reduction in the
county’s aggregate net productivity value.
• At the AY 2022 agricultural rollback factor of 91.6430%, the reduction in countywide
taxable value is $8.8 million.
• At the FY 2023 countywide average agricultural consolidated property tax rate of $24.59
per $1,000 of taxed value, levee and drainage district assessments will reduce FY 2024
property taxes paid from agricultural property in the county by approximately $216,000.
Through the action of the school aid formula, $48,000 of the reduction is backfilled by an
increase in the State General Fund appropriation to K-12 schools. The remaining
$169,000 represents reduced local government revenue. All amounts will vary each
year due to the differences in levee and drainage district assessment amounts and
rollback percentages from year to year.
• Louisa County:
• Assessment year 2019 agricultural acres totaled 217,895.
• The county productivity calculation included a $2.35 downward adjustment in the per-
acre productivity of agricultural property due to levee and drainage district assessments.
Applied to 217,895 agricultural acres, the levee and drainage district adjustment totals
$512,053. This amount capitalized at 7.0% results in a $7.3 million reduction in the
county’s aggregate net productivity value.
• At the AY 2022 agricultural rollback factor of 91.6430%, the reduction in countywide
taxable value is $6.7 million.
• At the FY 2023 countywide average agricultural consolidated property tax rate of $24.16
per $1,000 of taxed value, levee and drainage district assessments will reduce FY 2024
property taxes paid from agricultural property in the county by approximately $162,000.
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 Through the action of the school aid formula, $36,000 of the reduction is backfilled by an
increase in the State General Fund appropriation to K-12 schools. The remaining
$126,000 represents reduced local government revenue. All amounts will vary each
year due to the differences in levee and drainage district assessment amounts and
rollback percentages from year to year.
Combining the two counties, the Two Rivers Levee and Drainage District assessments reduce
property taxes on agricultural land in Des Moines and Louisa counties by $378,000 through the
current law net productivity value calculation.
Assumptions
• Two Rivers Levee and Drainage District assessment amounts equaled $956,000 for
FY 2019 and $1,254,000 for FY 2022. The average annual rate of assessment growth over
the three years was 9.5%. For this estimate, annual assessment growth for FY 2024
through FY 2026 is assumed to equal 6.0% each year.
• Based on land parcel information provided by the Department of Revenue, annual
assessments are assumed to fall 63.1% in Des Moines County and 36.9% in Louisa County.
• The new exemption is equal to a property’s levee and drainage assessment amount that is
in excess of the countywide per-acre assessment average. Parcel data for the two counties
indicate that the exemption will result in an exemption amount equal to 86.8% of the District
assessment in Des Moines County and 92.6% in Louisa County.
• The Bill limits the exemption amount for an individual property to no more than 50.0% of the
full assessed value of the property’s agricultural land. Based on parcel-level actual levee
and drainage district assessment and land value amounts, this limitation is determined to
have a de minimis impact, and the limitation is ignored in the impact calculation.
• The rollback percentage for agricultural property varies significantly from year to year and
can move in unpredictable directions. The AY 2022 rollback of 91.6430% is used for all
future years.
• The FY 2023 average consolidated property tax rate for Des Moines County was $24.59 per
$1,000 of taxed value, while the average rate for Louisa County was $24.16. The basic levy
for school finance represents $5.40 of each counties’ consolidated property tax rate. The
rates are assumed to be constant for future years.
• Through action of the school aid formula, property tax exemptions increase the State
General Fund appropriation for school aid by an amount equal to $5.40 per $1,000 of
exempted value that would otherwise be subject to property tax.
• In addition to the automatic increase in the State school aid payment to local school districts
that is caused by new property tax exemptions, exemptions also elevate school district
property tax rates that are tied to the State school aid formula when compared to a situation
without the new property tax exemption. New exemptions also automatically increase debt
levy rates, the income from which is used to repay debt that is outstanding at the time of the
implementation of the new property tax exemption. Other local government property tax
rates that are not tied to either the school aid formula or existing local government debt may
also increase in response to the reduced property tax base that results from a new property
tax exemption.
Fiscal Impact
The new property tax exemption created in the Bill will reduce property taxes on agricultural
land located within the Two Rivers Levee and Drainage District by an estimated $491,000
compared to current law for FY 2026. The reduction in property taxes paid will result in an
estimated increase in the FY 2026 State General Fund appropriation for school aid of $109,000
and an estimated reduction in local government property tax revenue of $382,000, with a portion
of the local government revenue reduction replaced through school and debt levies that are
automatically increased when the relevant tax base decreases.
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The projected fiscal impact will continue beyond FY 2026, changing with increases or decreases
in annual Two Rivers Levee and Drainage District assessments.
Sources
Department of Revenue county property tax data
Department of Management property tax rate and value files
Two Rivers Levee and Drainage District
Legislative Services Agency analysis
/s/ Jennifer Acton
March 1, 2023
Doc ID 1370144
The fiscal note for this Bill was prepared pursuant to Joint Rule 17 and the Iowa Code. Data used in developing this
fiscal note is available from the Fiscal Services Division of the Legislative Services Agency upon request.
www.legis.iowa.gov
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Statutes affected:
Introduced: 427.1
Reprinted: 427.1, 441.21