- Associated Press - Monday, May 12, 2014

The Des Moines Register. May 10, 2014.

Cities, counties need revenue options

Potholes and sewers can’t repair themselves. Police officers don’t work for free. Public hospitals can’t survive on donations. Iowans expect cities and counties to provide basic services. We pay property taxes to help cover the expense and likely believe that everyone should pay their fair share.

Except that is not necessarily how things work.

In Des Moines, 13 percent of assessed property is not subject to property taxes, according to a Des Moines Sunday Register investigation. These properties, valued at more than $1.3 billion, include hospitals, colleges, government buildings and nonprofit organizations.

Churches are exempt from taxation. So are the state office buildings that run for blocks east of the city’s downtown. So is AIB College of Business, Drake University and Grand View University. So are numerous other properties.

When so many entities don’t contribute to the local government, homeowners and businesses pay more to make up the difference. Even that isn’t enough money. Des Moines and Polk County officials struggle to find enough money for police and fire departments, parks and streets and schools. As the number of tax-exempt organizations grows, the revenue problem for cities and counties is only going to get worse.

The Iowa Legislature must finally recognize this reality and muster the political courage to make alternative sources of revenue available to cities and counties to pay for government services on which the people, businesses, schools and nonprofit entities rely.

Unfortunately, many lawmakers are not keen on helping local governments find new sources of revenue. When they add to the list of tax-exempt property, legislators add to local governments’ financial challenges.

The Iowa Code contains a long list of classes of property that shall not be taxed. It includes provisions for cemeteries, religious associations, agricultural entities, charities, nonprofit nursing homes, low-rent housing, public television stations, community development organizations, Web-search portals and data center businesses.

Lawmakers should rethink whether all of these entities deserve preferential tax treatment. While many nonprofits benefit the community, it is not always clear that benefit outweighs the cost of the revenue the government body is forced to forgo. Government services funded by taxes are frequently the most equitable, transparent way to provide help to residents, businesses and other organizations.

And it’s not just the states that exempt certain organizations from taxes. These days, pretty much anyone can say they are providing a community service and be granted tax-exempt status by the Internal Revenue Service. Nonprofits are one of the fastest-growing sectors of the United States’ economy, and the number of “charitable” organizations has nearly tripled over the past 20 years. The resulting loss of revenue to all levels of government can seem unfair and have voters wondering whether some entities earn or need their preferential tax status.

Hospitals, for example, are not required to provide a specific amount of charity care to qualify as tax-exempt by the federal government. U.S. Sen. Chuck Grassley’s investigation found nonprofit hospitals paying for CEOs’ country club memberships while pressuring the poor to pay their bills.

Elected officials say they care about quality of life. Yet that quality can suffer when a town can’t open its swimming pool or plow the streets as often as it should or hire enough police officers.

Rethinking preferential tax status must be part of the conversation to ensure those services are adequately funded.

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