HomeMy WebLinkAboutA031 - August 25, 2026, Regular Meeting of the Ames City CouncilITEM #:33
DEPT:ADMIN
August 25, 2026
Staff Report
IMPACTS OF SF 2472 RELATED TO PROPERTY TAXES
BACKGROUND:
Two documents are attached to this staff memo for City Council review.
Impact of SF 2472 Report
The report provides a detailed analysis of SF 2472 and its anticipated effects on the City’s
budget, property tax revenues, and development incentive programs. It addresses limitations
on General Fund revenue growth, the treatment of new valuation, changes to property tax
exemptions and rollbacks, and the implications for the City’s existing TIF and tax-abatement
programs. The report also discusses potential policy responses and the timing considerations
associated with any future changes.
Property Tax and Development Incentives Update Presentation
The presentation summarizes the information included in the report noted above, but also
provides background on the City’s development incentive tools, including urban renewal and
tax increment financing under Iowa Code Chapter 403, urban revitalization and tax abatement
under Chapter 404, and industrial tax exemptions under Chapter 427B.
Staff will review the attached materials during the meeting and seek City Council
direction regarding the possible strategies reflected in the report.
ATTACHMENT(S):
IMPACT OF SF 2472
Property Tax Update & Dev Incentive Presentation
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Impacts of SF 2472
As part of the Council Communication issued on June 19, 2026, staff provided an
update on the impacts of Senate File 2472 (SF 2472). That report included preliminary
information about the bill, as understood at the time, and identified alternatives for the
City Council to consider regarding the City’s development incentive programs, primarily
tax abatement and tax increment financing (TIF).
Staff is still awaiting additional details and guidance from the Iowa Department of
Management (IDOM). However, following consultation with the Iowa League of Cities,
Iowa State University Extension, Bond Counsel, and other Iowa cities, staff believe
sufficient information is available for the City Council to provide direction regarding the
City’s existing incentive programs.
This report focuses on the major areas of concern with SF 2472 and does not
address the bill in its entirety. As additional information becomes available through
IDOM, staff will follow up with the City Council and provide updated estimates of the
financial impact.
This report is divided into three primary sections: City Budget and Property Tax Impacts,
Development Incentives, and Summary. Throughout the document, staff have identified
strategies for the City Council to consider, which are summarized at the end of the
document.
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City Budget and Property Tax Impacts
General Fund Growth Limitations
One of the most significant provisions of SF 2472 is the limitation on growth in the City’s
Combined General Fund Levy. The bill limits annual revenue collected under this
levy to 102% of the previous year’s collection in addition to the new valuation
from growth as described below. This calculation is no longer dependent on
taxable valuation growth, as the previous system under HF 718 used a ratcheting
mechanism tied to valuation growth.
This limitation applies only to the General Fund Levy. Other levies available to the City
that are not currently used, but could be used if necessary, include:
• Iowa Code Section 384.12(3) - Commonly referred to as the Liability and
Property Insurance Levy, this levy is available up to the amount necessary to
cover eligible insurance-related expenses.
• Iowa Code Section 384.6 - The Trust and Agency Levy may be used to pay
eligible costs associated with police and fire retirement, FICA and IPERS costs for
employees, and other City-related benefits. The levy is limited to the amount
necessary to cover eligible expenses.
Costs associated with these purposes are currently paid from the City’s General
Fund Levy. If the City Council chooses, eligible costs could be shifted to these levies in
future years. However, it should be emphasized that this strategy uses one-time
available funding that will be depleted over time. Therefore, continued use of
these levies will eventually reduce the City’s remaining financial flexibility. Staff
believes budget-balancing efforts should be exhausted before relying on these
currently untapped resources.
SF 2472 also places a limitation on the City’s transit system by limiting annual
transit levy collections to 102% of the previous year’s collection, with no new
valuation associated revenue.
The bill did not place an additional limitation on the use of the City’s debt service
levy. That levy remains limited to 5% of the City’s total assessed value, or
approximately $328 million.
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Treatment of New Growth
In addition to the 2% annual growth permitted under the General Fund Levy, SF 2472
provides an additional revenue opportunity for valuation that qualifies as “new
valuation.” As currently understood, new valuation includes:
• New construction
• Improvements to property that are more than normal maintenance and repair
• Annexation
Taxable valuation returning to the tax rolls after the expiration of tax abatement,
or valuation that was previously captured as TIF and is later released, is not
considered “new valuation.” Therefore, this new valuation does not provide
additional General Fund Levy revenue authority beyond the 2% limitation.
Strategic implication: Because qualifying “new valuation” can increase allowable
General Fund revenue, the incentive strategies later in this report focus on
preserving first-year taxable valuation where practical while still maintaining tools
that support development and redevelopment.
Rollback and Credits/Exemptions
Although previous versions of the bill amended the rollback system, the final bill keeps
the current rollback system in place for most property and re-establishes the multi-
residential property tax classification.
For FY 2027/28, the multi-residential rollback will be the same as the State
calculated residential rollback plus 3%. For FY 2028/29 and all subsequent years,
the multi-residential rollback will be the same as the State calculated residential
rollback plus 6%.
SF 2472 also eliminated the homestead credit and created a homestead
exemption. The exemption equals 10% of the taxable value of the property, with a
minimum exemption of $5,500 and a maximum exemption of $20,000. The maximum
exemption will be adjusted annually by CPI through a “cumulative adjustment factor”
beginning in FY 2028/29. The bill also retains the $6,500 homestead exemption for
property owners age 65 and older.
In addition, the State will no longer backfill the Business Property Tax Credit
“Two-Tier” rollback system, under which the first $150,000 of commercial and
industrial valuation is taxed at the residential rollback . Elimination of this backfill
is estimated to reduce State-funded assistance to the City by approximately
$400,000 beginning in FY 2027/28.
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Other Miscellaneous Information
In addition to the material impacts described above, the following items will need to be
considered as the City develops its annual budget:
• Debt Service for General Operations - While the City has never used the debt
service levy for general operations, SF 2472 eliminates this as a possibility.
• General Fund Reserve - Staff is still seeking additional direction from IDOM, but
the bill limits the “unassigned general fund reserve” to 35% of budgeted
expenditures. It also provides for an obligated funds account that is not included
in the calculation. Additional IDOM guidance is still pending to help clarify what
this exclusion includes.
• Taxpayer Statements - The bill revises the taxpayer statement used in recent
years and provides an option for online posting. The Iowa League of Cities and
Iowa State Association of Counties are expected to assist with development of the
statement, along with IDOM.
Residential Property Tax Calculation Example
The order in which the rollback and exemptions are applied is important when
calculating taxable value for residential properties.
On May 20, 2026, the Iowa Department of Revenue issued an informal opinion
regarding application of the new homestead tax exemption. The following example
reflects the calculation for a home valued at $300,000:
Residential Property Value: $300,000
Apply rollback (45%): $135,000 Taxable Value
Apply new homestead exemption: ($13,500)
Apply 65+ exemption (if applicable) ($6,500)
Final Taxable Value: $115,000
As demonstrated, the calculation must be applied to each property individually,
making the impact on the City’s overall taxable value difficult to determine. This is
particularly important because residential valuation represents roughly 67% of the City’s
taxable valuation. Staff intends to continue working with the City Assessor and
County Auditor to evaluate the impact on the City’s taxable value.
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Development Incentive Programs
Iowa law provides three primary tools that cities may use to encourage development
and redevelopment. SF 2472 affects the long-term financial value of these tools
differently, particularly because of the bill’s treatment of “new valuation.”
Iowa Code Chapter 403 - Urban Renewal / Tax Increment Financing
Chapter 403 authorizes cities to undertake urban renewal projects through the collection
of Tax Increment Financing (TIF). TIF allows taxes generated from increased valuation
within an urban renewal area to support eligible projects and obligations within that
area.
Iowa Code Chapter 404 - Urban Revitalization / Tax Abatement
Chapter 404 authorizes cities to exempt property taxes levied on a portion of the
increased valuation of qualifying property within a designated urban revitalization area.
The exemption schedules vary as noted below.
Iowa Code Chapter 427B - Industrial Tax Exemption
Chapter 427B authorizes cities to exempt increased valuation of qualifying industrial
property according to a schedule provided by State law as shown below.
The following sections provide background on each tool, describe the known impacts of
SF 2472, and identify strategies for the City Council to consider in order to reduce
additional financial pressure on the City.
Iowa Code Chapter 403 - Urban Renewal and TIF
The City of Ames currently has six urban renewal areas:
South Bell Urban Renewal Area
Campustown Urban Renewal Area
ISU Research Park Urban Renewal Area
Barilla Urban Renewal Area
North Dayton Urban Renewal Area
Downtown Reinvestment Urban Renewal Area
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To collect TIF in an urban renewal area, the City must establish one or more TIF
districts. Each urban renewal area may contain multiple TIF districts. For example, the
ISU Research Park and Downtown Reinvestment Urban Renewal Areas currently
contains two TIF districts, each of the other urban renewal areas contains one.
Historically, TIF has been one of the City’s primary tools for encouraging selected
project-specific redevelopment, infrastructure investment, economic
development, neighborhood revitalization, and public improvements necessary to
facilitate private investment. TIF has been used throughout Iowa to finance public
infrastructure, site preparation, utility improvements, streets, developer rebates, and
other improvements that support development and redevelopment projects.
A significant traditional benefit of TIF was that, after an obligation was repaid and
the increment was released, the full taxable value returned to the overlapping
taxing jurisdictions and contributed to future tax-base growth. Under SF 2472,
that valuation still returns to the tax rolls, but it is not considered new
construction for purposes of calculating allowable General Fund revenue growth.
Consequently, the City will continue to receive property tax revenue associated
with the released valuation, but the release does not generate additional General
Fund Levy authority beyond the 2% limit. This change substantially alters one of
the traditional long-term fiscal benefits of TIF districts.
SF 2472 also changes the duration and value of TIF districts. The following reflects the
material changes currently understood by staff:
TIF Ordinance Duration
Before SF 2472: No limit for blight remediation; 20 years for
commercial/industrial and LMI housing developments; and 10 years for mark et-
rate housing.
After SF 2472: TIF ordinances adopted after May 18, 2026, are limited to 23
years from the calendar year following the calendar year in which the City
certifies indebtedness.
Perpetual TIF ordinances adopted before May 18, 2026, are granted 20 years
from May 18, 2026, or 20 years from the first certification if indebtedness has not
yet been certified. Additionally, for perpetual TIF districts, after 20 years, the City
can collect 60% of TIF revenues, but the calculation will no longer include the
$5.40 school foundation levy in the TIF rate.
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TIF Rate
Before SF 2472: The TIF rate included nearly all tax levies for property-tax-
supported entities except debt service, PPEL, and certain other smaller school
levies.
After SF 2472: If a TIF ordinance is adopted before January 1, 2027, the
calculation remains the same. If adopted on or after January 1, 2027, the
school foundation levy is removed from the calculation unless approved by
the school district. This change has a significant impact on this incentive
since the school foundation levy represents approximately 25% of the
City’s TIF rate of roughly $21.
LMI Requirement
Before SF 2472: TIF used to support market-rate housing projects was required
to set aside funding for low-to-moderate-income (LMI) projects. In Ames, the set-
aside was roughly 50% of the total TIF collection.
After SF 2472: Market-rate housing projects are considered economic
development and are no longer subject to the LMI set-aside requirement,
with a 23-year limit on collections. TIF used for housing projects remains
limited to the cost public infrastructure.
Strategy 1 - Targeted New URA and TIF Ordinances Before January 1, 2027
To preserve automatic inclusion of the school foundation levy in the TIF rate, the
City Council could adopt TIF ordinances before January 1, 2027, in targeted areas
where future growth is reasonably anticipated, rather than waiting until a specific
project is ready. This approach would require a forward-looking review of potential
development areas and timely Council action to maximize potential benefits. In
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order to accomplish this strategy, the Council will need to review new or revised
Urban Renewal Plans by October 2026.
Based upon Ames Plan 2040 designations and known Council priorities, staff
believe the following new or expanded Urban Renewal Areas with TIF District
should be considered before January 1, 2027 :
Expand Downtown URA from Kellogg to S Duff, include proposed CityLight area
north of 6th Street. Include Redirection Area for 6th and Northwestern.
Expand Campustown URA to coincide with planned redevelopment areas.
Create East Industrial/Prairie View Industrial URA
Expand ISU Research Park URA to include all areas of Research Park and
abutting vacant land within the City
Create URA for commercial and industrial land at 570th and E 13th Street
Create new residential URAs for housing development incentives, e.g. The Bluffs,
Greenbriar, Hayden’s Preserve, Ontario/Scholl.
It should be noted that the adoption of a TIF ordinance related to the
designation of an Urban Renewal area does not obligate the City to approve
future incentives. The action taking place prior to January 1, 2027 merely
preserves the maximum TIF incentive should the Council choose to offer it.
Strategy 2 - Limit First/Second-Year TIF Collection
When qualifying new construction first appears on the assessment rolls, the City
could limit or defer TIF collection during the first year (and second year, if partial
year valuation involved) so the valuation may be recognized as “new valuation” for
General Fund Levy purposes. TIF collection could then be increased in subsequent
years to the amount necessary to meet the City’s obligation.
For large scale projects with phased development, each phase will need to be on
distinctly separate lots. Each phase will also need to be in a distinctly separate TIF
district.
Iowa Code Chapter 404 - Urban Revitalization
The City currently has several urban revitalization areas intended to encourage housing
investment, reinvestment, redevelopment, historic preservation, and economic activity in
targeted areas of the community. In addition, the City Council adopted a City-wide
Ownership Housing program in 2024.
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SF 2472 did not make material changes to the Chapter 404 incentive authority itself.
However, the bill’s treatment of “new valuation” is likely to place additional pressure on
the City’s General Fund Levy if existing programs continue to fully exempt qualifying
valuation in the first year it appears on the tax rolls.
City-wide Ownership Housing Tax Abatement Program
The City-wide Ownership Housing Tax Abatement Program is administered through a
city-wide Urban Revitalization Area adopted by the City Council in 2024. The program
was established to encourage new owner-occupied housing construction throughout
Ames and to support housing goals identified in Ames Plan 2040.
The program is currently scheduled to run through the end of 2028. Under the existing
program, homes for which building permits are issued before December 31, 2027 and
that are completed before December 31, 2028 are eligible for partial property tax
abatement on the first $500,000 of improvement value.
Eligible projects generally include new single-family homes, townhomes, condominiums,
accessory dwelling units, and two-family homes that satisfy the requirements
established in the Urban Revitalization Plan for owner-occupied housing.
The current exemption schedule is:
Year 1 - 100%
Year 2 - 80%
Year 3 - 60%
Year 4 - 40%
Year 5 - 20%
Since creation of the program, the number of building permits issued has not
changed substantially
2023 - 61 permits (pre-incentive)
2024 - 59 permits, 24 approved for the abatement (7 months of incentives)
o Average value of claimed abatement (full and partials) was $471,000 when
accounting for $500k limit, actual average home value would be higher than the
qualifying abatement amount.
2025 - 68 permits, 52 approved for the abatement (full year of incentives)
o Average value of claimed abatement was $421,000 (full and partials) when
accounting for $500k limit, actual average home value would be higher than the
qualifying abatement amount.
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This difference reflects construction timing and the fact that not all newly constructed
homes meet the requirement to serve as the property owner’s primary residence (rental
units don’t qualify).
This permit data does not show a notable increase in owner-occupied
construction activity following adoption of the program. It is more likely that
mortgage rate reductions are more important than a partial tax abatement
incentive in stimulating new housing demand. In addition, at the time of the City
Council’s recent housing development discussions it was noted by the local
developers that the abatement was not increasing construction of new ownership
housing.
Because of this, the City Council has chosen to offer TIF and other City
incentives to developers in lieu of a home buyer tax abatement incentive for
ownership housing. As a result, changes to the program are necessary to ensure
consistency with the previously agreed upon incentives.
It should also be noted that if the current schedule remains unchanged, the City
would not realize any qualifying “new valuation” from properties receiving the
100% first-year exemption.
Strategy 3 - Phase Out City-wide Ownership Housing Tax Abatement
Staff recommends ending the broad City-wide Ownership Housing Tax Abatement
Program. To provide adequate notice and transition time, staff recommends limiting
eligibility to homes for which the lot was final platted by August 1, 2026, a permit is
issued by December 31, 2026, construction is completed by December 31, 2027,
and the home is the primary residence of the owner by January 31, 2028 .
It should be noted that under this recommendation the following subdivisions
which will receive other housing development incentives from the City or
platted after August 1st will not be eligible for the City-wide Ownership
Housing Tax Abatement incentive: Greenbriar, Auburn Trail, Hayden’s Preserve,
Domani 3rd Addition, Scholl/Ontario, Ansley Future Addition, Bluffs at Dankbar
Farms Future Additions, North Sunset Ridge Future Additions.
Other Urban Revitalization Programs
The City operates several other urban revitalization programs that provide exempt ions
for increased valuation in targeted areas. These include: Downtown, Campustown,
North Sheldon, and other individual commercial sites identified by the City Council for
tax abatement incentives.
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In general, in these areas improvements must increase the assessed value of a
property by at least 5% to qualify for tax abatement. Applications are administered by
the Planning and Housing Department and are reviewed by the City Council and City
Assessor as part of the verification process.
Property owners generally may select from one of the following exemption schedules:
3 year 5 Year 10 year
Year 1 100% 100% 80%
Year 2 100% 80% 70%
Year 3 100% 60% 60%
Year 4 N/A 40% 50%
Year 5 N/A 20% 40%
Year 6 N/A N/A 40%
Year 7 N/A N/A 30%
Year 8 N/A N/A 30%
Year 9 N/A N/A 20%
Year 10 N/A N/A 20%
The following urban revitalization areas are currently accepting applications:
Downtown Urban Revitalization Area
The Downtown Urban Revitalization Area, created in 2001, is intended to encourage
rehabilitation and reinvestment in Downtown projects through building improvements
and redevelopment. The program focuses on improving facades, promoting occupancy
of vacant buildings, encouraging retail and commercial activity, preserving historic
building character, and supporting continued investment in the Downtown district.
Eligible projects must increase property valuation by at least 5% and satisfy design,
occupancy, and use requirements established by the City. The program also requires
compliance with the Downtown Design Guidelines. It was established in conjunction
with the Downtown Facade Program, and its criteria were recently adjusted to apply to a
broader range of project types, including residential mixed -use projects. The tax-
abatement component has been used infrequently because rehabilitation work does not
always result in a qualifying increase in assessed value.
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Campustown Urban Revitalization Area
The Campustown Urban Revitalization Area, also created in 2001 and subsequently
amended, is intended to encourage redevelopment of underutilized and blighted
properties, support mixed-use development, increase structured parking, improve urban
design, and strengthen the commercial core serving Iowa State Universit y and
surrounding neighborhoods. Projects may qualify through redevelopment of blighted
properties, construction of mixed-use projects with structured parking, or adaptive reuse
of older buildings. Additional design standards encourage pedestrian -oriented
development, high-quality building materials, commercial activity, and compatibility with
the Campustown district.
This program supported a number of student-housing projects in the prior decade but
has not recently been used for new development. The Cranf ord Apartment building at
the corner of Lincoln Way and Stanton is currently benefiting from approximately
$300,000 of abatement value attributed to rehabilitation of the historic building
improvements.
North Sheldon Urban Revitalization Area
The North Sheldon Urban Revitalization Area, created in 2006, is intended to encourage
preservation and rehabilitation of historically significant residential structures. Eligible
projects generally require retention of a substantial portion of the existing structure a nd
preservation or restoration of original architectural materials and design features. The
program has not been used.
Other Urban Revitalization Areas and Policy
The City has two small urban revitalization areas within existing HOC-zoned areas of
SE 16th Street and SE 5th Street. Furniture Mart on SE 5th Street is currently benefiting
from a five-year tax-abatement schedule. There are no other lots available for
development in the SE 5th Street area.
The former Deery auto dealership development on SE 16th Street includes five
properties eligible for a three-year, 100% tax-abatement schedule. This area includes
the recently completed Olive Garden. One additional lot is planned for development of a
McDonald’s. A development agreement is in place for the Urban Revitalization Area and
also applies to development in this area. Olive Garden is expected to apply for tax
abatement in January 2027.
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The City also has a commercial and vacant land policy for considering
establishment of new urban revitalization areas. The policy is limited to HOC-
zoned land and focuses on brownfields, land vacant for seven years or more, and
development complicated by City wellhead-protection and stormwater
requirements, among other factors. The policy has not been used to incentivize a
project since 2015, when the Squeaky Clean laundromat building on Lincoln Way was
approved. Because this is currently only a policy, no project is eligible for tax abatement
unless the City Council creates a new urban revitalization area. Staff currently inform
developers of the policy as an alternative when a project appears to meet the policy
requirements.
Strategy 4 - Redesign Other Chapter 404 Urban Revitalization Programs
Modify the City’s existing Chapter 404 tax-abatement schedules so that qualifying
improvements receive 0% abatement in Year 1. This would allow the City to
recognize the full first-year valuation before providing an abatement benefit in later
years.
Iowa Code Chapter 427B - Industrial Tax Abatement
Program
Iowa Code Chapter 427B allows cities to create industrial tax-abatement programs. This
authority is separate from the City’s Chapter 404 urban revitalization programs and is
intended to encourage investment in industrial, manufacturing, research and
development, warehouse, distribution, and technology-related facilities. The program
applies citywide regardless of zoning. It applies to a limited set of eligible uses, is
generally based on completion of improvements within one year and may apply to
longer buildouts if approved by the City Council.
The City currently offers a five-year declining schedule on the value added by qualified
improvements:
Year 1 - 75%
Year 2 - 60%
Year 3 - 45%
Year 4 - 30%
Year 5 - 15%
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The purpose of the program is to reduce the initial tax burden associated with significant
capital investments, encourage business expansion, support job creation, promote
research and innovation, and enhance Ames’ competitiveness for industrial and
technology-related development projects. Most communities in Iowa use this program.
As with the other abatement programs described above, abated “new valuation” does
not support additional CGFL growth. The City Council therefore must weigh the
competitive value and policy results of the incentive against the opportunity to recognize
qualifying first-year new valuation.
It should be noted that at the direction of the City Council, the City could establish a
Chapter 404 – tax abatement incentive program using the following schedule:
Year 1 - 0%
Year 2 - 70%
Year 3 - 60%
Year 4 - 50%
Year 5 - 40%
This schedule would provide a complete abatement incentive of just slightly less than
the existing schedule noted above.
Strategy 5 - Modify or Restructure the Industrial Tax Abatement Program
Consider limiting the first-year benefit under the industrial program, replacing
Chapter 427B with a Chapter 404 structure that provides no first -year abatement
but a similar overall incentive.
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Summary and Recommendations
SF 2472 significantly reduces the City’s financial flexibility and places greater
importance on realizing taxable value that qualifies as “new valuation.” The City’s
existing development incentive programs remain useful policy tools, but their current
structure can prevent first-year valuation from contributing to allowable CGFL growth.
The strategies below are intended to preserve development flexibility while reducing the
long-term General Fund impact of the City’s incentive programs.
For Council discussion and direction, the five strategies identified throughout this report
are summarized below:
Strategy 1 - Targeted TIF Ordinances Before January 1, 2027
Adopt TIF ordinances before January 1, 2027 in targeted areas where future
development is reasonably anticipated. Doing so preserves automatic inclusion of
the school foundation levy and provides the City with greater flexibility when
considering future TIF-supported development incentives.
As noted above, the adoption of a TIF ordinance related to the designation of an
Urban Renewal area does not obligate the City to approve future incentives. The
action taking place prior to January 1, 2027 merely preserves the maximum TIF
incentive should the Council choose to offer it.
Strategy 2 - Limit First/Second-Year TIF Collection
Limit or defer TIF collection in the first year (and second year if partial year
involved) qualifying construction appears on the assessment rolls so that the
valuation may first be recognized as “new valuation” for CGFL purposes. Increase
TIF collection in later years as needed to satisfy the related obligation.
Strategy 3 - Phase Out Citywide Ownership Housing Tax Abatement
End the broad Citywide Ownership Housing Tax Abatement Program because
permit data does not show a substantial increase in owner-occupied construction
and the current 100% first-year exemption prevents recognition of new valuation.
Staff recommends limiting eligibility to homes for which the lot was final platted by
August 1, 2026, a permit is issued by December 31, 2026, construction is
completed by December 31, 2027, and the home is the primary residence of the
owner by January 31, 2028.
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Strategy 4 - Redesign Other Chapter 404 Urban Revitalization Programs
Modify the City’s existing Chapter 404 Urban Revitalization tax-abatement
schedules so that qualifying improvements receive 0% abatement in Year 1. This
would allow the City to recognize the full first-year valuation before providing an
abatement benefit in later years.
Strategy 5 - Modify or Restructure the Industrial Tax Abatement Program
Consider limiting the first-year benefit under the industrial program, replacing
Chapter 427B with a Chapter 404 structure that provides no first -year abatement
but a similar overall incentive.
Implementation Timing and Next Steps
If the City Council chooses to implement any of these strategies, timing will be
important. The most immediate decision is whether to establish any additional TIF
districts before January 1, 2027 in order to preserve inclusion of the school foundati on
levy in the TIF rate.
Also, amendments to the City’s tax-abatement programs should occur immediately to
also provide adequate notice to property owners and developers so projects currently
under consideration have a reasonable opportunity to meet any transition, permit,
construction, or program requirements established by the City Council.
Staff will continue to monitor IDOM guidance and work with the City Assessor, County
Auditor, Bond Counsel, and other resources to refine the estimated impacts of SF 2472
and return to the City Council as additional implementation details become available.
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PROPERTY TAX AND
DEVELOPMENT INCENTIVES
UPDATE
City Council August 25, 2026
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Presentation Outline
Urban Renewal/Tax Increment Financing (TIF)
Urban Revitalization/Tax Abatement
Senate File SF2472/Property Tax Impact
Strategy for Urban Renewal/TIF
Strategy for Urban Revitalization/Tax Abatement
Next Steps/Direction
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Urban Renewal (TIF) – Iowa Code Ch. 403
`
▦UR Plans can designate the UR Area as appropriate
for one or more purposes:
✓•Blight/Slum Remediation
•Economic Development
o Infrastructure to support residential development
o Commercial development
o Industrial development
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Urban Renewal Plan Adoption
Plan drafted
Two City Council meetings, including a public hearing
Consultation with “Affected Taxing Entities” (County & School)
P&Z recommend conformity with Comprehensive Plan
Plan approved by Resolution after public hearing
TIF District established separately, by Ordinance
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Tax Increment Financing in Iowa
1 Step 1: Establish an
Urban Renewal Area
The City establishes an urban renewal
area and may create one or more TIF
districts within that area.
⌖The City identifies and establishes
an urban renewal area.
□One or more TIF districts may then be
created within that urban renewal
area.
⌂The TIF district is the area where tax
increment is captured. Increment
can only be used in this URA.
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Tax Increment Financing in Iowa
Base Taxable Value 2 Step 2: Freeze
the Base Value
Property taxes generated from the
original taxable value continue to flow
to all taxing bodies.
▦The original taxable value is established
as the “base taxable value.”
✓This base value is frozen and does not
increase over time.
▥Property taxes generated from this base
value continue to flow to all taxing
bodies just as they did before the TIF
was created.
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Tax Increment Financing in Iowa
New
Value
Base
Value
3 Step 3: Increase in
Value
Property value increases from the
base value to a new, higher taxable
value.
As development occurs, the
property’s value increases.
The base value remains identified
and does not change.
The increase above the base value
creates the tax increment.
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Tax Increment Financing in Iowa
Tax
Increment
(on increase
in value)
Eligible Urban
Renewal /
Economic
Development
Costs
Base
Taxes
(on base
value)
City, County,
School, and
Other Taxing
Bodies
4 Step 4: Capture the
Increment
The taxes on the increase in value (the
increment) may be used to help pay
eligible project costs.
The tax increment (from the increase in value)
can be used to support eligible urban renewal
or economic development costs (rebate,
infrastructure)
Base taxes on the original value continue to be
paid to the City, County, School District, and
other taxing bodies as before.
✓TIF does not create a new tax rate, it redirects
taxes from increased property value within the
TIF district for authorized purposes.
25
How to Compute TIF
▦
New Value After Improvements $2,000,000
Less: Frozen Base Value $ 50,000
Incremental Value $1,950,000
%Combined Tax Levy FY 2025/26 $30.58 per $1,000
Less: Debt Service Levies (All 3 taxing entities) & School
PPEL & ISPL, etc. (physical plant and equipment levy)
(instructional support levy)$ 9.66 per $1,000
Net TIF Levy $20.92 per $1,000
=Incremental Value x Net TIF Levy = Tax Increment
$1,950,000 x $20.92/$1,000 = $40,824 Tax Increment per year
26
How to Compute TIF (after SF 2472)
▦
New Value After Improvements $2,000,000
Less: Frozen Base Value $ 50,000
Incremental Value $1,950,000
%Combined Tax Levy $30.58 per $1,000
$ 9.66 per $1,000
Net TIF Levy $15.52 per $1,000
=Incremental Value x Net TIF Levy = Tax Increment
$1,950,000 x $15.52/$1,000 = $30,264 Tax Increment per year
School Foundation Levy $ 5.40 per $1,000
Less: Debt Service Levies (All 3 taxing entities) & School
PPEL & ISPL, etc. (physical plant and equipment levy)
(instructional support levy)
27
Ames School District
Net Taxable Valuation 3,304,286,102
TIF Valuation 29,528,905
Total Valuation (w/TIF) 3,333,815,007
Uniform Levy Rate 5.40$ 17,843,144.95$
Additional Levy Rate 1.9420 6,416,924
Instructional Support Levy Rate 0.4400 1,466,845
Management Levy Rate 0.5577 1,842,701
Voter Approved PPEL Rate 1.3400 4,467,312
Regular PPEL Rate 0.3300 1,100,159
Debt Services Levy Rate 4.0481 13,495,750
Total 14.0578$ 46,632,836
City of Ames
Net Taxable Valuation 3,656,669,644
TIF Valuation 22,973,002
Total Valuation (w/TIF) 3,679,642,646
General Fund 6.39$ 23,357,306.45$
Transit 0.5991 2,190,601
Debt Service 3.3177 12,207,803
Total 10.3043$ 37,755,711
Story County
Net Taxable Valuation 6,086,765,431
TIF Valuation 286,902,528
Total Valuation (w/TIF) 6,373,667,959
General Basic 3.5000$ 21,303,679.01$
General Supplemental 0.3500 2,130,368
Debt Service 0.1818 1,158,988
Total 4.0318$ 24,593,035
Others
DMACC 0.7805 49,076,634
AG Extension 0.1125 685,000
Assessor 0.3005 1,100,000
Story County Hospital 0.9950 6,056,332
Total 2.1885$ 56,917,966
Consolidated Levy Rate 30.58$ 165,899,547
Removed from
TIF Rate Under
SF 2472
Yellow = Not Included in TIF Rate
Lost City Rev
28
Process of TIF
Reimbursement
☼
Identify UR Project
City wants to utilize TIF
for econ dev/blight
▤
Adopt Urban Renewal
Plan or Amendment
establishing Urban
Renewal Area
▥
Adopt a TIF Ordinance
establishing the TIF
District and authorizing
tax increment capture
Debt or Dev
Agreement occurs ♙
New development is
first fully assessed
January 1, 2026
▣TIF Certification
(before Dec. 1,
2026)
$
Tax Increment
becomes
available
FY 2027–2028
≋
Tax Increment paid
into TIF Fund
FY 2027–2028
PAID
Reimbursement
from TIF Fund
FY 2027–2028
TIF Process
29
Urban Revitalization (Tax Abatement) - Iowa Code Ch. 404
$Urban Revitalization temporarily exempts some or all of the new taxable value
created by qualifying improvements.
H Housing development Single-family, multifamily, and related residential improvements.
C Commercial / industrial New construction, expansion, rehabilitation, or redevelopment.
B Blight or slum
remediation
Improvement of deteriorated, obsolete, unsafe, or underused
properties.
★Historic preservation Restoration or preservation of buildings with historic or architectural
significance.
i
30
Urban Revitalization - Process
1. Identify Project
City wants to undertake/assist
with a project that qualifies
under Iowa Code Chapter 404!▤
2. Prepare Urban
Revitalization Plan
Prepare Urban Revitalization
Plan that describes the area,
project, findings, and estimated
impact.
PLAN ✓
3. Adopt Urban
Revitalization Plan
City Council holds a public
hearing and adopts the Urban
Revitalization Plan, designating
the Urban Revitalization Area.
▥
4. Adopt Urban
Revitalization Ordinance
City Council adopts an ordinance
approving for the exclusion of
eligible increases in value from
taxation.
▥Qualifying improvements are
completed and the property is
assessed, establishing new
increased value.
5. Improvements are Made and
Assessed
6. Exemption Applied
The increase in taxable value
attributable to the qualifying
improvements is exempt from
taxation for the approved period
(per the plan and ordinance).
7. Exemption Period Continues
The exemption continues for the
number of years specified in the
ordinance
!
$
✓At the end of the exemption
period, the increase in value
becomes fully taxable and
property taxes are paid on
the full assessed value.
8. Exemption Expires
31
Current Abatement Schedules
32
Commercial Example Assumptions New Taxable Value After Improvements:
Less Existing Taxable Value:
Incremental Value Eligible for Abatement:
Combined Tax Levy:
Full Annual Tax on Increment:
$2,000,000
$50,000
$1,950,000
$30.58 per $1,000
$59,631
Estimated Annual Tax Abatement by Schedule
Year 3-Year %3-Year $5-Year %5-Year $10-Year %10-Year $
Year 1 100%$59,631 100%$59,631 80%$47,705
Year 2 100%$59,631 80%$47,705 70%$41,742
Year 3 100%$59,631 60%$35,779 60%$35,779
Year 4 —40%$23,852 50%$29,816
Year 5 —20%$11,926 40%$23,852
Year 6 ——40%$23,852
Year 7 ——30%$17,889
Year 8 ——30%$17,889
Year 9 ——20%$11,926
Year 10 ——20%$11,926
=Total 3-Year Abatement:
$178,893 (100%)=Total 5-Year Abatement:
$178,893 (60%)=Total 10-Year Abatement:
$262,376 (44%)
i
33
Industrial Tax Abatement – Iowa Code Chapter 427b
$Provides a partial property tax exemption on the
actual value added by qualifying industrial
improvements.
The existing base value remains taxable; the
exemption applies only to new value created by the
project.
Because the value is exempt, taxes are reduced for
all affected taxing bodies during the exemption
period.
Industrial real estate
Research-service facilities
Warehouses / distribution
centers
Standard 5-Year Exemption Schedule
Percentage of actual value added exempt from property
taxation
Year 1 75%
Year 2 60%
Year 3 45%
Year 4 30%
Year 5 15%
Exemption is applied City wide for qualifying projects,
does not require an area or district. Incentive is not
project specific, no City Council discretion.
$
$
$
34
Example Assumptions New Taxable Value After Improvements:$2,000,000
Less Existing Taxable Value:$50,000
Actual Value Added Eligible for Abatement:$1,950,000
Combined Tax Levy:$30.58 per $1,000Full Annual Tax on Added Value:$59,631
Estimated Annual Tax Abatement by Statutory 5-Year Schedule
Taxable Portion %Estimated
Abatement $
Exemption %Year
25%$44,72375%Year 1
40%$35,77960%Year 2
55%$26,83445%Year 3
70%$17,88930%Year 4
85%$8,94515%Year 5
=Total 5-Year Abatement: $134,170 (45%)
35
Senate File 2472
On May 18, 2026 the Governor signed Senate File
2472 (SF 2472)
Sweeping property tax reform bill with impacts on
property valuation, tax collection development
incentives, and more.
36
City Budgets and Property Tax Impacts
SF 2472 limits revenue collected under the General
Fund levy to 102% of previous years collection +
“New Valuation.”
No longer based on taxable valuation growth.
37
Other Levies
No impact to
Liability/Property Insurance Levy (384.12(3))
Trust/Agency (384.6) (all amount necessary)
Police/Fire Retirement
FICA/IPERS
Other city-related benefits
Debt Service (5% of total assessed value)
38
Transity Levy
Limits collection to 102% of previous year’s
collection
No additional revenue collection from “new
valuation”
39
“New Valuation”
New valuation is:
New Construction
Annexation
Improvements that exceed normal maintenance/repair
Value coming out of tax abatement or released
from TIF are NO LONGER considered new valuation
40
Rollback & Valuation
The rollback system remains in place, as it has been
in the past (approximately 45% in FY 2026/27)
New multi-residential rollback
FY 2027/28 – State calculated rollback + 3%
FY 2028/29+ – State calculated rollback + 6%
41
Elimination of State Backfill
No backfill of the Business Property Tax Credit
Two-tiered system – commercial and industrial taxed at
the residential rollback rate on first $150k of value
Beginning in FY 2027/28 – Reduction in state-
funded assistance of approximately $400,000
42
Homestead Credit/Exemption
Eliminated the homestead credit
Created homestead exemption
10% of taxable value
Minimum of $5,500 / Maximum of $20,000
Beginning in FY 2028/29 adjusted by “cumulative
adjustment factor”
Retains $6,500 65+ homestead exemption
43
Residential Property Tax Calc Example
Residential Property Value:$300,000
Apply rollback (45%):$135,000
Apply new homestead exemption:($ 13,500)
Apply 65+ exemption(if applicable):($ 6,500)
Final Taxable Value: $115,000
44
Other Changes
Eliminates utilization of the debt service levy to fund
operations
Creates a GF “unassigned general fund reserve”
limit of 35% less obligated funds
Revises taxpayer statements – can now be posted
online instead of mailed (Story County Auditor)
45
Development Incentives
Three primary incentive programs:
Iowa Code Chapter 403 - Urban Renewal / Tax
Increment Financing
Iowa Code Chapter 404 - Urban Revitalization / Tax
Abatement
Iowa Code Chapter 427B - Industrial Tax Exemption
46
Urban Renewal/TIF
Six UR Areas:
South Bell Urban Renewal Area
Campustown Urban Renewal Area
ISU Research Park Urban Renewal Area
Barilla Urban Renewal Area
North Dayton Urban Renewal Area
Downtown Reinvestment Urban Renewal Area
47
48
TIF in Ames
TIF Utilization has been focused on
Econ Development Incentives (rebates)
Public Improvements to facilitate private development
Neighborhood revitalization
49
Historical benefit of TIF?
Following repayment of obligations – funding
returned to the tax rolls, lowering overall tax
rate/impact to existing properties
SF 2472 – Valuation released from TIF obligation
does not count towards “new valuation”
No additional revenue benefit for GF
50
TIF Changes - Duration
Before SF 2472:No limit for blight remediation; 20
years for commercial/industrial and LMI housing
developments; and 10 years for market-rate
housing.
51
TIF Changes - Duration
After SF 2472:TIF ordinances adopted after May 18, 2026 are limited to
23 years from the calendar year following the calendar year in which the
City certifies indebtedness.
20-year TIF districts adopted before May 18, 2026 have no change to
duration.
Perpetual TIF ordinances adopted before May 18, 2026 are granted 20
years from May 18, 2026, or 20 years from the first certification if
indebtedness has not yet been certified. Additionally, for perpetual TIF
districts, after 20 years, the City can collect 60% of TIF revenues, but the
calculation will no longer include the $5.40 school foundation levy in the TIF
rate.
52
TIF Changes – TIF Rate
Before SF 2472:The TIF rate included nearly all tax
levies for property-tax-supported entities except
debt service, PPEL, and certain other smaller school
levies.
53
TIF Changes – TIF Rate
After SF 2472:If a TIF ordinance is adopted before January
1, 2027, the calculation remains the same.
If adopted on or after January 1, 2027, the school foundation
levy ($5.40) is removed from the calculation unless approved
by the school district. This change has a significant impact on
this incentive since the school foundation levy represents
approximately 25% of the City’s TIF rate of roughly $21.
54
TIF Changes – LMI Requirement
Before SF 2472:TIF used to support market-rate
housing projects was required to set aside funding
for low-to-moderate-income (LMI) projects. In Ames,
the set-aside was roughly 50% of the total TIF
collection.
55
TIF Changes – LMI Requirement
After SF 2472:Market-rate housing projects are
considered economic development and are no
longer subject to the LMI set-aside requirement, with
a 23-year limit on collections. TIF used for housing
projects remains limited to the cost public
infrastructure.
56
TIF Strategies - #1
To preserve automatic inclusion of the school foundation levy in the TIF rate,
adopt TIF ordinances before January 1, 2027
Proactively identify targeted areas where future growth is reasonably
anticipated to occur, rather than waiting until a specific project is ready.
To meet timing requirements – begin proactive strategy by October, 2026.
This strategy does not obligate the City to utilize TIF for the support of any
projects or development incentives in these targeted areas, unless
authorized individually by the City Council in the future.
57
TIF Strategies - #1
Potential Urban Renewal/TIF Districts:
Expand Downtown URA from Kellogg to S Duff, include proposed CityLight area north of 6th
Street. Include Redirection Area for 6th and Northwestern.
Expand Campustown URA (possibly match existing tax abatement areas) to coincide with
planned redevelopment areas.
Create East Industrial/Prairie View Industrial URA
Expand ISU Research Park URA to include all areas of Research Park and abutting vacant
land within the City
Create URA for commercial and industrial land at 570th and E 13th Street
Create new residential URAs for housing development incentives, e.g. The Bluffs, Greenbriar,
Hayden’s Preserve, Ontario/Scholl, as previously discussed with the City Council.
58
TIF Strategies - #2
Limit or defer TIF collection during the first or second year (if partial
year involved) so the valuation may be recognized as “new
valuation” for General Fund Levy purposes.
TIF collection (for debt service/developer rebate) could then be
increased in subsequent years to the amount necessary to meet the
City’s obligation.
For large scale projects with phased development, each phase will
need to be on distinctly separate lots. Each phase will also need to
be in a distinctly separate TIF district.
59
Urban Revitalization – Tax Abatement
Programs include:
Citywide Ownership Housing Tax Abatement
Several Other Urban Revitalization Areas
SF 2472 – Valuation coming off Tax Abatement
does not count towards “new valuation”
No additional revenue benefit for GF
60
Ownership Housing Tax Abatement
Created in 2024
Scheduled to run through end of 2028
Building permits issued before 12/31/2027
Construction completed before 12/31/2028
Property Tax abatement on first $500k
Primary residence - SF homes, townhomes, condos,
ADU, two-family homes
61
Ownership Tax Abatement Schedule
The current exemption schedule is:
Year 1 - 100%
Year 2 - 80%
Year 3 - 60%
Year 4 - 40%
Year 5 - 20%
62
Abatement Example(no credit/exempt)
Improve Home Value $500,000
Taxable Value (45%) $225,000
Year 1 Abatement 100% (excluding school levy)
School levy rate (ACSD) $13.96561per $1k/taxable
Tax Obligation $3,142
W/O abatement $6,881
63
Ownership Abatement Results
2023 - 61 permits (pre-incentive)
2024 - 59 permits (7 months of incentives)
24 Properties – Average Value $471,000 (full/partial)
2025 - 68 permits (full year of incentives)
52 Properties – Average Value $421,000 (full/partial)
64
Ownership Abatement Results
This permit data does not show a notable increase in
owner-occupied construction activity following adoption of
the program. It is more likely that mortgage rate reductions
are more important than a partial tax abatement incentive
in stimulating new housing demand. In addition, at the time
of the City Council’s recent housing development
discussions it was noted by the local developers that the
abatement was not increasing construction of new
ownership housing
65
Strategy #3
Program Phase Out
Staff recommends ending the broad Citywide Ownership
Housing Tax Abatement Program.
To provide adequate notice and transition time, staff
recommends limiting eligibility to homes that were final
platted by August 1, 2026, a permit is issued by December
31, 2026, construction is completed by December 31, 2027,
and the home is the primary residence of the owner by
January 31, 2028.
66
Strategy #3 – (continued)
The following
subdivisions are not
eligible for tax
abatement, given the
request for developer
incentives:
Greenbriar
Auburn Trail
Hayden’s Preserve
Domani 3rd Addition
Scholl/Ontario
Ansley Future Addition
Bluffs at Dankbar Farms
Future Additions
North Sunset Ridge, Future
Additions
67
Urban Revitalization – Tax Abatement
The following are the currently Urban Revitalization
Areas accepting applications:
Downtown
Campustown
N. Sheldon
SE 16th Street
SE 5th Street
68
HOC Policy
The City also has a commercial and vacant land
policy for considering establishment of new
urban revitalization areas. The policy is limited to
HOC-zoned land and focuses on brownfields,
land vacant for seven years or more, and
development complicated by City wellhead-
protection and stormwater requirements, among
other factors.
69
Current Abatement Schedules
70
Downtown Urban Revitalization Area
Created in 2001
Encourage rehab, reinvestment in downtown
Focus on facades, occupancy of vacant buildings, encourage
retail/commercial activity, historic preservation
Used infrequently – improve value by 5%
71
Campustown Urban Revitalization Area
Created in 2001
Encourage redevelopment of underutilized and blighted properties,
support mixed-use development, increase structured parking,
improve urban design, and strengthen the commercial core serving
Iowa State University
This program supported a number of student-housing projects in the
prior decade but has not recently been used for new development.
72
North Sheldon Urban Revitalization Area
Created in 2006
Encourage preservation and rehabilitation of historically significant
residential structures.
The program has not been used.
73
Other Urban Revitalization Areas
SE 16th Street
Olive Garden expected to apply for tax abatement
One remaining lot
SE 5th Street
Furniture Mart currently benefiting
No remaining lots
74
Other Urban Revitalization Areas
HOC Urban Revitalization Policy
Focuses on brownfields, land vacant for seven years or
more, and development complicated by City wellhead-
protection and stormwater requirements, among other
factors.
Unused since 2015
75
Strategy #4
Modify the City’s existing Chapter 404 Urban Revitalization
tax-abatement schedules so that qualifying improvements
receive 0% abatement in Year 1. This would allow the City to
recognize the full first-year valuation before providing an
abatement benefit in later years.
76
Industrial Tax Abatement Program
Authorized under Iowa Code Chapter 427B
Separate from Chapter 404
City wide
Encourage investment in industrial, manufacturing,
research and development, warehouse, distribution,
and technology-related facilities
77
Industrial Tax Abatement Schedule
Only applies to improved value
Five-year schedule
Year 1 - 75%
Year 2 - 60%
Year 3 - 45%
Year 4 - 30%
Year 5 - 15%
78
Strategy #5
Repeal the Chapter 427B program and create a
Chapter 404 five-year program with no first-year
abatement but a larger benefit in the last four
years to provide a similar overall benefit.
79
80
Summary of Strategies - #1
Targeted TIF Ordinances Before January 1, 2027
Adopt TIF ordinances before January 1, 2027 in targeted
areas where future development is reasonably anticipated.
Doing so preserves automatic inclusion of the school foundation
levy and provides the City with greater flexibility when
considering future TIF-supported development incentives.
There is no obligation for the City to provide an incentive based on
this action.
81
Summary of Strategies - #2
Limit First/Second (if partial)-Year TIF Collection
Limit or defer TIF collection in the first/second (partial) year
qualifying construction appears on the assessment rolls so that the
valuation may be recognized as “new valuation” for CGFL
purposes. Increase TIF collection in later years as needed to
satisfy the related obligation.
82
Summary of Strategies - #3
Phase Out Citywide Ownership Housing Tax
Abatement
End the broad City-wide Ownership Housing Tax Abatement
Program. To provide adequate notice and transition time, staff
recommends limiting eligibility to homes for which the lot was final
platted by August 1, 2026, a permit is issued by December 31,
2026, construction is completed by December 31, 2027, and the
home is the primary residence of the owner by January 31,
2028.
83
Summary of Strategies - #4
Redesign Other Chapter 404 Urban Revitalization -
Tax Abatement Programs
Modify the City’s existing Chapter 404 tax-abatement schedules
so that qualifying improvements receive 0% abatement in Year 1.
This would allow the City to recognize the full first-year valuation
before providing an abatement benefit in later years.
84
Summary of Strategies - #5
Modify or Restructure the Industrial Tax Abatement
Program
Repeal the Chapter 427B program and create a Chapter 404
five-year program with no first-year abatement but a larger
benefit in the last four years to provide a similar overall
benefit.
85
Timing/Next Steps
Establish additional TIF districts before January 1,
2027, to preserve inclusion of the school foundation
levy in the TIF rate.
Any amendments to the City’s tax-abatement
programs should provide adequate notice to
property owners and developers.
86