March 11, 2005
Citing the negative impact on the state’s economy and residents, three apartment property owners filed suit today against the State of Iowa and the Iowa Department of Revenue and Finance seeking an order that the inequitable property tax treatment of apartment buildings is unconstitutional. The lawsuit presents a major and significant challenge to Iowa’s property tax system.
Michael Dee, an attorney with the Des Moines law firm of Brown Winick Graves Gross Baskerville and Schoenebaum, said the suit has been filed in Polk County District Court on behalf of Timberland Partners XXI, LLP, Edward L. Hendrickson and James C. Conlin.
The lawsuit was announced at a Statehouse news conference organized by The Concept Works, a public and government relations firm in West Des Moines. The announcement received statewide media coverage in The Des Moines Register, the Cedar Rapids Gazette, Iowa City Press Citizen, Fort Dodge Messenger, Sioux City Journal, Ames Daily Tribune and numerous newspapers that subscribe to The Associated Press, as well as on Radio Iowa, KCCI-TV, WOI-TV, WHO-TV, KDSM-TV, WHO Radio, KUNI Public Radio and WOI Public Radio.
An apartment building is taxed at 100 percent of its assessed value, while a condominium across the street that is essentially the same structure is taxed at 50 percent of its assessed value.
Dee said, “As the lawsuit states, condominiums, are taxed as residential property even where the condo owner rents the unit to a tenant. There is no legitimate reason for this disparate tax treatment between apartment buildings and condominiums. The bottom line is that the current system is grossly unfair to apartment property owners and, more importantly, to apartment property tenants who are paying those higher taxes through their rent.”
Michelle Ogden, regional property manager for Timberland Partners in Cedar Rapids, said Iowa’s effective tax rate on urban apartments is roughly double the national average.
“The current situation is a clear indication that our property tax system is broken and needs to be fixed. Ultimately, we’d like to see the Legislature and governor address all of the problems with Iowa’s property tax structure, but our suit is intended to remedy what can only be described as a glaring inequity,” Ogden said.
Conlin, founder and Chief Executive Officer of Conlin Properties in Des Moines, said tenants feel the burden of higher taxes and are unable to take advantage of the residential home owner property tax rollback.
“We represent the tens of thousands of Iowans who rent apartments to satisfy their housing needs. Many are unaware that up to 20 cents of every dollar they pay in rent goes to pay real estate taxes,” Conlin said. “These people already pay state, federal and local taxes, sales taxes and gasoline taxes. The real estate tax level on apartment communities has reached a point where it can no longer be defended and local officials know it.”
Ed Hendrickson noted that the tax inequity is magnified in a college community such as Ames, home of Iowa State University.
“Why should a single college student who is struggling to make ends meet pay twice as much in property taxes to rent an apartment than his or her professor is paying on a condo of the exact same size across the street?” Hendrickson asked. “It’s too bad that we have to resort to court action to make our state more tax friendly.”
He added, “The Iowa Supreme Court recently ruled that the state is required to tax casinos evenly. Does the state care more about its casinos than it does about renters and property owners?”