Continue Tax Abatement

The Des Moines City Council is deciding whether or not to continue offering tax abatement to new construction and renovation in targeted areas of the City.

Tax abatement is essentially a rollback of the increase in property taxes attributed to property improvements. For example, if I put a $50,000 addition on the back of my $100,000 home, tax abatement would freeze my property taxes at the pre-improved value for a specified number of years (usually 5 or 10, depending on location). Tax abatement is an incentive to add value to property in areas of the City that have been determined to derive needed benefit from this subsidy.

In general, I believe that tax abatement is a great tool to help balance the massive subsidies driving construction on the fringes of the metropolitan area, and I am strongly in favor of continuing such municipal investment. As part of this discussion, City Council members should solicit advice from the Community Development Department professionals on how to best target tax abatement incentives to support sustainable development projects.

I suggest the following:

  • Additional tax abatement (perhaps two years more?) for homes and buildings that meet EnergyStar standards.
  • Graduated return to normal taxation levels rather than all-or-nothing programs (perhaps 5 years full abatement followed by a 20% per year increase to full levels in 10 years for new construction)
  • Targeting commercial and residential tax abatement to neighborhoods in accordance with neighborhood plans.
  • Definition of "circuit breaker" circumstances where tax abatement would be phased out when no longer needed in an area.

The Council needs to demonstrate commitment to continuing this program, even as they are debating it - don't hold it hostage until the last minute (see also: debt ceiling).

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