Cedar Rapids' proposed budget cuts commercial, industrial tax bills

Residential property owners would pay slightly more; no need for new street debt

Rick Smith
Published: January 30 2014 | 7:30 am - Updated: 29 March 2014 | 2:52 am in
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City Manager Jeff Pomeranz is proposing a new city budget with few changes that reduces the city’s portion of the local property-tax bill for commercial and industrial properties by 5 percent while increasing the tax on a typical residential property by 2.99 percent.

By and large, both percentage changes stem from actions by the state of Iowa, which has decreased the percentage of valuation of commercial and industrial property subject to tax from 100 to 95 percent while increasing the percentage of residential valuation subject to tax by 2.99 percent, from 52.8166 percent of value to 54.4002 percent of value.

At City Hall on Wednesday, Pomeranz said a highlight of the proposed budget for the fiscal year beginning July 1 is the reduction, as promised, in borrowing for streets and other city infrastructure projects.

In a typical budget year, the city has borrowed $10 million to $12 million for street and other infrastructure project, Pomeranz and city Finance Director Casey Drew said. But the new budget will not take on such debt and the taxes needed to support it, but instead, will depend on $18 million a year in new revenue for streets that will come into the city via the voter-approved local-option sales tax, Pomeranz said.

With the help from the local-option sales tax as well as annual state fuel tax money, the proposed budget calls for $35.3 million in street improvements in the new budget year, up from $20.5 million in the current fiscal year and $11.3 million the year before that.

The state of Iowa has said it will cover the property-tax revenue lost by the city in taxes on commercial and industrial property, which Drew estimated at $1 million a year.

The increased valuation of property in the city, driven largely by the increase in residential value subject to taxes, will bring in an estimated $971,000 in new property-tax revenue, Drew said.

Local jurisdictions set a property-tax levy rate, and Pomeranz’s budget proposes to hold the city’s levy rate at $15.22 per $1,000 of taxable valuation for the sixth consecutive fiscal year.

The levy rate remains lowest among Iowa’s largest eight cities except for Dubuque, he said.

In the proposed new budget, the owner of a $150,000 home in Cedar Rapids will see the property-tax bill from the city increase from the current $1,206 to $1,242, or an increase of $36.

For the owner of a $1-million commercial or industrial property, the city’s portion of the property-tax bill will drop $761 from the current $15,216 to $14,455.

The city’s share of the local property-tax bill is currently 39.8 percent of the total in the Cedar Rapids school district, with the school district’s portion, 40.4 percent, Linn County’s, 16 percent, and the rest going to smaller tax entities such as Kirkwood Community College.

Pomeranz will present his budget to the City Council at a budget meeting at 5 p.m. today at City Hall.

Pomeranz said his proposed budget is balanced despite the rising pension costs paid to the Municipal Fire and Police Retirement System of Iowa, which will require the city to contribute an amount equal to 30.41 percent of the wages of police officers and firefighters or about $7.5 million into the pension fund in the next budget year.

Pomeranz also said that the new budget will bring in $1.5 million less in revenue than expected from the city’s 2-percent franchise fee on electric and natural gas bills because of earlier overestimates of what the fee would generate from MidAmerican Energy Co. The franchise fee is expected to bring in $5.1 million in the new fiscal year.

The proposed new budget also anticipates that the city’s network of traffic enforcement cameras will continue to net the city about $3 million a year.

Other features of the budget proposal:

— The cost of the city’s package of utility services will increase 3.1 percent or $29 a year for a typical residential customer.

— The number of city employees will stay about the same. The city has about 1,200 full-time employees and the equivalent of 1,440 full-time employees when part-time and seasonal employees are factored in. The new budget will reduce FTEs by 2.49 employees.

— Employees will receive a 2-percent wage increase plus pay step increases for employees who reach certain seniority levels.

— About $500,000 will be transferred from the city’s general fund to support the city’s new convention center and renovated arena while net profits from the city’s hotel will go to pay debt taken on for the hotel renovation.

— The city’s economic development fund will be financed with $500,000 from the city’s enterprise funds, such as water and wastewater, and $250,000 from the city’s general fund.

— The city will take on $28 million of new debt for the parking ramp to be built for the proposed Cedar Crossing casino, if the casino obtains a state gaming license. The debt will be paid off from property taxes generated by the casino property.

-- It remains uncertain  how the city will pay for the $6.5 million in money spent on landfill fees for flood debris from the former Sinclair plant site now that FEMA has denied reimbursement.

— There is a new flood protection fund (the Growth Reinvestment Initiative Capital Improvement Fund) into which revenue from the city’s award of $264 million in state sales tax revenue over 20 years and federal and local dollars will go to build the city’s flood protection system.

— The budget includes a general fund reserve of $35.6 million or an amount equal to 31.6-percent of the proposed $112.7 million general fund operating budget.

Pomeranz said the budget was balanced with a stable tax rate and strong reserves and keeps the city in a solid financial position.

"That’s our goal. And more importantly, it allows us to provide critical services at the highest level possible," he said.

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