Property taxes, utilities rates to increase under North Liberty’s proposed budget

NORTH LIBERTY — Officials with the city of North Liberty are proposing a balanced budget for next year that includes an increase in both property taxes and utility rates.

Under a proposal presented last month, North Liberty’s total budget would increase $1.2 million from the current fiscal year, to $19.9 million in Fiscal Year 2026, which begins July 1 and ends June 30, 2026.

While the city has not been able to capture all of the growth in its tax base due to property tax reform passed by the Iowa Legislature and signed by Gov. Kim Reynolds, it has experienced more than $1 million in growth in the general fund. Some of that growth has come through Iowa’s Monies and Credit Tax, thanks to the location of GreenState Credit Union’s headquarters in North Liberty.

“I wasn't sure what the revenue situation would look like, especially given some of the property tax law changes that occurred last legislative session. But overall, things look fairly promising for this fiscal year,” City Administrator Ryan Heiar said at a recent budget work session.

While Heiar said the outlook for next fiscal year is positive, he cautioned that the city may face more financial pressures in the coming years

The city has general fund reserves of a little over $6.7 million.

Property tax, utility rate increases

The proposed property tax levy for next year is $11.87 per $1,000 of taxable valuation, up 32 cents from $11.37 in the current fiscal year. The city said the proposed rate increase is related to debt service, in part due to capital projects such as construction of a new City Hall.

Additionally, water rates would increase 6 percent under the proposed budget, for the first time in four years.

General fund revenue growth

North Liberty’s general fund revenues experienced growth of a little more than $1 million last year, due to increased demand for services such as permits, and an increase in revenue collected through the Monies and Credit Tax from GreenState Credit Union.

Under Iowa Code, state credit unions are taxed a portion of each dollar in legal or special reserves funds managed by the credit union. Thirty percent of that tax goes to the city’s general fund. In Fiscal Year 2025, the city already has collected $650,000, up $250,000 from the previous fiscal year.

“The unanticipated revenue bump has made balancing the general fund a bit easier than expected going into the budget season,” Heiar wrote in a memo to the city council.

Inability to capture tax base growth

In 2023, Iowa lawmakers passed legislation that limits the amount of tax revenue local governments can capture from a growing tax base.

Because of this, North Liberty and other growing cities across Iowa have had to scale back what can be captured by the general fund levy, if valuation growth exceeds the caps set by the legislation.

For the current fiscal year, North Liberty’s general fund levy was reduced from $8.10 to $7.86, Heiar said. The city’s total taxable value grew by 6.6 percent last year, but the city was only able to capture 3.5 percent growth in property tax revenue.

Heiar said the general fund levy could have brought in an additional $275,000 in Fiscal Year 2025, had the levy been $8.10 per $1,000 of taxable valuation, but because of the cap, he estimates a loss of around $575,000 for fiscal year 2026.

“It's real money, and we'll have some real consequences, I believe, down the road,” Heiar said at a recent budget work session.

Next Steps, public input

Two separate public hearings are required before the budget can be approved. The first one will be held April 8, followed by a second April 22, after which the city council will vote on the proposed budget.

Comments: megan.woolard@thegazette.com

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