In Des Moines, the local school board faces a potential $6.8 million shortfall in their budget for the coming school year. The sum is staggering enough that even the board’s citizen advisory committee is considering property tax hikes to resolve the problem[1]. While most members hoped to increase district property taxes somewhere between $1 and $2 million, some members want to make up the entire deficit through tax increases. “Whatever is paid by the average citizen in property taxes is very minute compared to all they pay. Property taxes are not high,” explained one board member. However, the majority of the committee wanted a lower rate of increase.

The property tax hike is the most preferred option over other options like mandatory furlough days, firings, frozen wages and reduced benefit packages. However, even if the committee is “very careful that we talk about shared responsibility for the education of our children,” members fear a strong backlash from community property owners already struggling with finances. However, as one committee member pointed out, “If the community of Des Moines doesn’t want to ante up for their school, then what’s going to happen to their property values?”

If the tax increase proves untenable, then the area could see more tax lien certificates for property going up for sale in area auctions. In Iowa, the redemption period is 21 months on tax liens and the liens can accrue up to 24 percent interest. County tax lien sales occur in June.

As a tax lien investor, do you monitor your target investing areas for property tax increases?

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[1] http://www.desmoinesregister.com/article/20110220/NEWS/102200340/Property-tax-hike-favored-to-plug-Des-Moines-school-district-s-budget-hole