Adel’s current Chapter 404 Urban Revitalization Ordinance, which began in 2011, includes 15 successive and separate 7-year tax abatement periods, the last of those starting in 2025 and ending in 2032.
Chapter 404, titled Urban Revitalization Tax Exemptions was intended to target blighted areas within a city that have deteriorated to the point that the tax base has eroded and is no longer beneficial to the citizens and the city. It is questionable whether it was intended to be applied to an entire city.
In the Code language, one of the conditions mandatory for determining if an area is eligible for revitalization is that it “is necessary in the interest of the public health, safety, or welfare of the residents of the city.” Blighted area is defined as “an area of a municipality within which the local governing body of the municipality determines that the presence of a substantial number of slum, deteriorated, or deteriorating structures” exist. It goes on to define “Blighted area” does not include real property assessed as agricultural property for the purposes of property taxation.”
In developing the current plan, the City Council declared the entire city of Adel, everything within the corporate limits of the city, as “blighted.” That seems to be counter to the results of a windshield survey done a few years ago in all cities by the county economic development group to evaluate the general condition of residential and commercial structures in the county. As I recall, Adel was shown to have only 3 percent, or less, of its structures considered blighted.
There is no doubt that under a revitalization plan the idea is to enhance economic development, meaning to increase the tax base of the city. However, the Council appears to have stretched the intent by using economic development as the sole justification for the Revitalization Plan.
Adel’s interpretation of Chapter 404, Urban Revitalization Tax Exemptions, that is being used to justify the current Residential Tax Abatement Program is, in my opinion, outside the intent of Chapter 404 and is creating a classic Gordian knot that will be very difficult to unravel. Parsing the Code to fit an agenda is nothing new. Whether it is permissible under the law may be for the courts to decide.
Even bad policy attracts constituencies. There is nothing inherently evil about developers, builders, or real estate agents, however, after those constituencies invest time and money based on assumptions of future policy, it becomes extremely difficult to change the policy.
Why does this matter?
The current ordinance pits neighbor against neighbor. Not a good idea in a relatively small community.
It devalues existing non-blighted properties in the same value range as the new abated structures.
It distorts the market for residential housing and inflates the prices of new homes beyond the normal inflation rate. Does it have an impact on the current assessment issues? The assessor says it does not but a rising tide raises all boats?
It violates the obligations that we all share to pay taxes.
It greatly impacts the funding for schools and grossly transfers the obligation for school funding to others.
If the number of new houses is the measure, it would appear to be wildly successful. However if many cities used the same process, it would create chaos statewide. Anyone who has looked at their real estate tax payment knows that 60 percent, more or less, goes to the local school district. New homes bring new families with new children in school. If they don’t contribute to the funding of their children in school, who does? In simple terms, someone else does. That is in no way intended as a slight to any new families moving into Adel, who can blame them. They are only taking advantage of what is made available to them.
School budget limits are set by the state legislature, currently at approximately $6,600 per student, and real estate taxes provide a major part of school financing. If the assumption is made that real estate taxes make up 50 percent of the budget, where does the money come from to replace the abated taxes? The answer is that the rest of the budget is transferred to other taxpayers and the state.
Obviously, that would create a huge problem statewide if many more cities adopted the same policy. The Code needs some definite tightening and the legislature needs to address it but, in the meantime, the Adel City Council should consider shortening the ordinance to curtail the abatements after the existing and active 7-year abatement periods are complete.
This isn’t about not wanting the city to grow, it’s about fairness. Like is often said, “there’s nothing wrong with taxes, especially if someone else pays them.”