Iowa City budget proposal includes tax rate decrease, staff cuts

Officials concerned tax reform could cost Iowa City $50 million over next decade

Gregg Hennigan
Published: December 19 2013 | 4:26 pm - Updated: 29 March 2014 | 1:06 am in
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Iowa City property owners would see a lower tax rate next fiscal year under a budget proposal released Thursday, although most homeowners would still pay more in taxes and fees.

The rate decrease would be accomplished in part by fee increases and cutting several positions from the city workforce.

Also, city leaders as expected are contemplating seeking voter approval to reinstate a special sales tax that expired this past summer.

City Manager Tom Markus’ 396-page budget proposal kicks off the public phase of the budgeting process for fiscal year 2015, which starts July 1. The City Council will discuss the budget throughout the month of January and could make changes before holding a public hearing and voting on it in March.

The budget includes $52.4 million in general fund expenditures, down from $52.8 million this year.

Markus is recommending a property tax rate of $16.71 per $1,000 of taxable value, compared with this year’s $16.81. That’s a 0.6 percent decrease, and it would be 6.4 percent lower than in fiscal 2012.

Markus has stressed the need for the city to be more competitive with its tax and utility rates. Iowa City’s current tax rate is higher than what property owners pay in Cedar Rapids, Coralville, North Liberty and Davenport, and it is significantly more than the first three towns.

“The large difference plays a role in private sector economic development decisions and Iowa City needs to work to close that gap,” Markus wrote in the budget document’s introduction.

Her referred questions Thursday to the city’s finance director,

Because of an increase in the state-set rollback, which is the percentage of a residential property’s value that is taxed, the owner of a $100,000 home would pay $909 in city taxes under the proposed tax rate, up $21 from this year.

Markus also suggests increasing water fees by 5 percent and the refuse collection fee by 40 cents a month.

With taxes and fees combined, that owner of a $100,000 home would pay $42 more in fiscal 2015 than this year.

The city believes the majority of businesses would pay less in property taxes and fees under the proposed budget.

Markus said moves that have enabled the tax rate to be lowered include debt restructuring, favorable health insurance rates, pursuing cost-sharing agreements for services like a new animal shelter, fee increases and the proposed reduction of the equivalent of 6.5 city employees.

Those employees would come from the Finance Department, the Housing Authority, cable TV, Community Development and a manager for a project that is nearly complete. They would occur through a combination of layoffs and attrition from people retiring or leaving the city, Finance Director Dennis Bockenstedt said.

The city's 615-person workforce is 22 full-time positions less than two years ago.

Markus and City Council members have said in recent months that they need to be proactive in planning for leaner times. They have warned in particular that property tax reform undertaken by state lawmakers earlier this year could cost Iowa City $50 million over the next decade.

The state has said it will backfill lost tax revenue, but local government leaders statewide are skeptical of that. In response, Markus is recommending the creation of an emergency fund should the state backfill fail to occur.

He said service cuts and a 1 percent local-option sales tax also could help offset a loss in revenue.

A voter-approved local-option sales tax from 2009 to this past summer generated more than $34 million for flood projects.

Markus said a new tax could go toward road work, property tax relief, affordable housing, neighborhood school partnerships and sustainability projects. But he did not recommend the council seek the tax, and he did not identify possible service cuts.

“I think, in general, it’s to initiate discussion,” Bockenstedt said.

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