Vernon: Turn to reserves, not tax increase

CEDAR RAPIDS - City Council member Monica Vernon last night suggested that the council lean on cash reserves to help balance the budget for the fiscal year beginning July 1 in a way that does not raise property taxes for homeowners.

The council last night spent a second two-hour session listening to the details of a budget proposed by City Manager Jeff Pomeranz, a budget that calls for residential property taxes to increase 7.84 percent over what residential owners are paying in the current budget year.

Vernon noted that the city's policy directs the city to keep a cash reserve in its general operating fund equal to 25 percent of the general fund operating budget, which is $99 million. The reserve account, though, sits at about 30 percent of the operating budget, which means that there is nearly $5 million in “excess reserves,” Vernon said after last night's meeting.

“It may be the year to do that,” she said of dipping in this money.

In fact, the council tapped the reserve fund for $1.8 million to balance last year's budget which allowed the council to contain a residential property tax increase to 2.89 percent while holding commercial and industrial rates the same.

However, council member Kris Gulick said last night that revenue from the city's traffic-enforcement cameras and other areas likely will allow the city to operate in the current budget year without actually using the $1.8-million in reserve funds it had thought it would need.

Even so, last year's budget passed on just a 5-4 vote, with Gulick objecting to the use of reserves to balance the budget.

Last night, he said he would oppose such a move again, calling it, in essence, “deficit spending.”

“It's bad to spend more money than you're collecting (during the budget year),” he said.

Council member Chuck Swore also expressed an interest in reducing the proposed 7.84-percent property-tax increase on homeowners.

After last night's meeting broke up, Pomeranz said a healthy reserve fund during a time of an expensive flood recovery might make sense.

Pomeranz continued to point out that the residential property-tax increase in his proposed budget is being driven by an increase in the average valuations of residential property in the city - not something City Hall controls - and by a state formula that will require residential property owners to pay tax on a larger percentage of the value of their property, 48.53 percent up from 46.9 percent in the current budget year.

At the same time, average valuations haven't changed for the city's commercial and industrial properties nor has the fact that those owners pay taxes on 100 percent of the value of their property. As a result, those classes of property face no increase in city property taxes in Pomeranz's proposed budget.

The City Council controls the city's tax levy rate, which is applied the same to all classes of property. Pomeranz proposes to keep the levy rate as it is, $15.22 per $1,000 of valuation, in the new budget. However, the rate will need to fall to offset the two other factors driving the residential property-tax increase. The rate would go down, too, for commercial and industrial properties owners, who then would see the city portion of their property-tax bill drop below what they pay now.

The council has another budget meeting slated for next week. It must have a budget in place by March 15.