Des Moines Faces Tax Cap Squeeze on TIF Funding
A new state property tax law could limit the city's ability to capture revenue for development incentives and services.
Updated on Nov. 3, 2026 in Property Crime
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City staff warned the Des Moines City Council that a new state law capping property tax revenue growth at 2% beginning in fiscal year 2027-2028 may weaken tax increment financing funds and slow growth. The city is also addressing an estimated $11.5 million budget deficit for that year.
Why it matters
The cap applies to existing properties, while new construction is exempt, and properties coming off a tax abatement are subject to the cap. City officials said the rules may prevent Des Moines from capturing enough new tax revenue to fund project incentives and services.
The city has cut 43 staff positions to address an estimated $11.5 million deficit for FY 2027-2028, and it will eliminate its tax abatement program in December. City staff anticipates about $5 million in additional cuts for FY 2028-2029, and how the remaining gap will be closed has not been detailed.
The players
Des Moines City Council
The elected governing body of Des Moines that received the update on tax increment financing and the potential impact of the new property tax law.
The details
The state law limits revenue growth for cities and counties to 2% beginning in fiscal year 2027-2028 and caps all TIF districts at 23 years. It also limits revenue use for TIF districts without sunsets to 60% starting in 2046, and restricts the use of urban revitalization and urban renewal programs.
Timeline
December: The city eliminates its tax abatement program.
FY 2027-2028: The 2% property tax revenue growth cap takes effect.
FY 2028-2029: The city expects to cut about $5 million.
2046: The 60% TIF revenue limit for non-sunset districts begins.
Legal Context
The 2% cap on property tax revenue growth from the new state law, beginning in fiscal year 2027-2028, sets the statutory framework that now constrains how Des Moines can fund tax increment financing projects. New construction is exempt from the cap, while properties coming off a tax abatement fall under it.
Residents may see the effects through city budget decisions, since staff cuts and possible reductions in services are being considered. Property owners and developers may also face different tax treatment depending on whether their properties are new construction or coming off an abatement.
The takeaway
Tax increment financing depends on how much new tax revenue a city can capture, so the new cap and restrictions may require Des Moines to rely more on tax rate adjustments and service reductions. Watching how the council balances these tradeoffs will show how the budget shifts over the coming years.
What happens next
The city will eliminate its tax abatement program in December, and the 2% revenue growth cap takes effect in fiscal year 2027-2028.
Further reading
For related local coverage, see Property Crime reporting in Des Moines.
Source note: This article includes information reported by Business Record.
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