Property taxes would increase under Iowa City budget plan

IOWA CITY – Iowa City homeowners would pay more in taxes and fees for some services next fiscal year under a budget proposal released Thursday.

The $54.6 million budget from City Manager Tom Markus also calls for cutting five employee positions in a money-saving move.

The City Council will start its budget deliberations in early January and will have the final say over what is approved.

With big question marks surrounding the global economy and the call from state lawmakers for commercial property tax reform, Markus believes the city's fiscal year 2013 budget may need to be revisited even after the council adopts it in March.

“There is a lot of risk between now and when the fiscal year starts” July 1, he said.

For now, though, Markus and city staff are proposing a lower property tax rate, $17.27 per $1,000 of taxable value compared with the current year's $17.84.

But the rollback, which the state sets and is the percentage of a residential property's value that is taxed, is increasing from 48.53 percent to 50.75 percent, so homeowners would pay more in property taxes.

Under the budget proposal, the owner of a $100,000 home would pay $877 in city taxes next fiscal year, up from $866 this year.

Markus also is calling for increases in water, landfill and storm-water fees and bus fares.

Taking the property tax and utility fees together, the average owner of a $100,000 home would pay 2.7 percent more next year compared with this year, according to the city.

Markus and Finance Director Kevin O'Malley noted that figure is lower than the consumer price index, which increased 3.4 percent in the past 12 months.

Iowa City businesses would pay less in property taxes because commercial and industrial properties are not subject to the rollback.

Commercial property is a wild card in local governments' budget plans right now, however.

There's general agreement among state lawmakers from both parties on the need to lower property taxes on businesses, which pay 100 percent of the assessed value of their property. But Democrats and Republicans differ on how to do that.

Local governments fear what reform would mean to their property tax-dependent budgets. Republican Gov. Terry Branstad said this month that he'll ask the Legislature to spend $50 million a year to reimburse local governments, according to the Associated Press.

Some local officials are skeptical the state would backfill the full amount of the lost revenue, which could cause them to look to residential property taxes and budget cuts to make up the difference.

City budgets are due with the state March 15, which is the middle of the Legislature's session, so Markus said Iowa City may have to amend its budget depending on what the state does with commercial property tax relief.

“There's a lot of uncertainty out there,” O'Malley said.

Staff cuts will continue to be part of the city's plan for saving money. The equivalent of nearly 11 positions have been eliminated this year, and another five are targeted for next fiscal year among transit and document services employees.

The cuts have mostly been done by not filling open positions, but the five new ones will include layoffs. Markus said every opening is reviewed, so there could be more reductions than are currently planned.

On the fees, bus passes would cost 28 percent more and fares would increase 33 percent, going from 75 cents to $1. That could be a burden on low-income people who ride the bus, but Markus said the last fare increase was in 1997.

“If it was OK to charge 75 cents 15 years ago, when fuel rates and employee pay rates were substantially lower, it's hard to me to understand the argument” that raising them now is a problem, he said.

Other proposed increases are 10 percent for water use, $2 per ton more for landfill tipping fees and 50 cents more each month for storm-water use.