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SF 652

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2025-2026 Regular Session Introduced by Mark Koran

Recasts Iowa TIF/urban renewal to prioritize workforce housing, narrows LMI rules, and shifts school foundation and EMS levies back to districts, while capping future TIF use.

Referred to State and Local Government
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Bill Summary · SF 652

Summary — SF 652 (as amended S‑3173)

Title (as amended): An Act modifying economic development provisions relating to housing and residential development in urban renewal areas.

Status and procedural notes
- Bill: SF 652. Introduced Jan 27, 2025; committee report approving; placed on Ways & Means calendar; introduced May 9, 2025.
- Amendment S‑3173 filed and adopted May 13, 2025; HF 1037 was substituted (then withdrawn).
- Referred to State and Local Government.
- Companion: HF 2015.

Purpose
SF 652 revises Iowa’s urban renewal / tax increment financing (TIF) law to (1) explicitly incorporate workforce housing into economic development, (2) change certain low‑ and moderate‑income (LMI) housing definitions and requirements, and (3) limit or modify how some property tax levies and TIF revenue may be diverted from standard taxing authorities.

Key provisions (by topic / division)
- Expansion of “economic development” and housing definitions (Division I / Secs. 1–4)
- Adds “provision of workforce housing” to the statutory definition of economic development (Iowa Code ch. 15A).
- Requires consideration of policies that advance workforce housing when public funds are used for economic development.
- Clarifies “low and moderate income families” as households earning ≤ 80% of the higher of county or statewide nonmetropolitan HUD median incomes.
- Defines “low and moderate income family housing” to include housing that meets Iowa Economic Development Authority criteria (Iowa Code §15.353).

  • Exclusion of school foundation levy from TIF (Division II)

    • The statewide $5.40 per $1,000 school foundation levy is excluded from TIF diversion for urban renewal areas created or expanded on or after Jan 1, 2026 (affects property taxes due FY 2028 and beyond). Instead this levy must be collected and paid to the school district like other general property taxes.

  • Exclusion of EMS levies from TIF (Division III)

    • Property tax levies for emergency medical services (Iowa Code ch. 422D) are excluded from TIF diversion beginning with property taxes due in FY 2027. (In FY2025, 24 counties had approved optional EMS taxes; 12 generated about $4.5M.)

  • Limits on TIF revenue diversion for long‑duration URAs (Division IV)

    • For URAs that currently have no expiration, after a timeline tied to new certification/debt the share of available increment that a municipality may deposit into its special fund is capped: 75% after the initial phase (about FY 2041 for existing debt), then 60% after a later phase (about FY 2047). Remaining increment would revert to other taxing districts.

  • Temporary, limited LMI exceptions and extended TIF term for certain housing projects (Division V / Sec. 5)

    • For housing/residential projects approved between July 1, 2025 and July 1, 2026 in an economic development area whose property has been inside city limits ≥ 20 years, the municipal LMI housing set‑aside requirement is capped at 20% of original project cost (regardless of other minimums).
    • For those projects, TIF revenue collection is extended to 20 fiscal years (instead of the current 10‑year maximum).

  • Phased cap on share of city assessed valuation in URAs (Division VI)

    • The bill contains provisions to cap the portion of a city’s assessed valuation that may be located in urban renewal areas (text and staging described in fiscal materials).

Who is affected
- Municipalities (cities) that create/use URAs and TIF.
- School districts (would receive school foundation levy revenue instead of that levy being TIF‑diverted for qualifying URAs created/expanded on/after Jan 1, 2026).
- Counties and EMS taxing districts (no longer subject to TIF diversion for EMS levies starting FY 2027).
- Developers and housing projects relying on TIF financing (changes to LMI requirements and available TIF term for certain projects).
- Other local taxing authorities (could regain portions of increment under Division IV).
- Property taxpayers indirectly, via future shifts in how TIF revenue is allocated.

Fiscal impact and timing
- The Fiscal Services Division indicates many impacts are unknown or difficult to quantify without parcel‑level data. Specific timing notes:
- School foundation levy exclusion applies to URAs created/expanded on/after Jan 1, 2026 (taxes due FY 2028).
- EMS levy exclusion effective for taxes due FY 2027 onward.
- Division IV (75% then 60% caps) is phased in far in the future (estimated FY 2041 and FY 2047 for current URAs with debt).
- Division V’s LMI cap and 20‑year TIF extension apply to projects approved between July 1, 2025 and July 1, 2026.
- LSA notes (FY2024 report): ~4,194 city/county/RIZ TIF districts with ~$4.45 billion outstanding TIF debt; 52.2% of TIF districts were created solely for economic development.

Bottom line
SF 652 refocuses parts of Iowa’s TIF and urban renewal law toward workforce housing and returns certain revenue protections (school foundation and EMS levies) to traditional taxing authorities for new/expanded URAs, while creating a narrow, time‑limited exception that reduces LMI housing requirements and extends TIF collection for some older, in‑city housing projects. Several fiscal effects are uncertain and would materialize over multiple years.

Compiled from official sources — confirm details with the bill’s official record.

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