Cedar Rapids’ fiscal 2023 budget calls for infrastructure investments despite derecho, COVID-19 expenses

CEDAR RAPIDS — While managing the expenses of the 2020 derecho recovery, ongoing impacts of COVID-19 and reduced revenue from state property tax changes, Cedar Rapids’ proposed fiscal 2023 budget calls for an investment in infrastructure, programs that support a green future and measures that will promote economic development for a growing community.

Among the highlights in Cedar Rapids’ proposed budget for fiscal 2023 — the budget year that begins July 1 and ends June 30, 2023 — include continued investment in flood protection and street repairs, as well as funding for utilities capital improvement projects. Budget highlights were presented this week to the Cedar Rapids City Council and The Gazette.

The budget also allocates $1.4 million in federal funds to offset lost revenue from COVID-19, covers another $1 million for post-derecho reforestation and takes into account tax revenue decreases from state law changes.

To help fund the city’s permanent $750 million Flood Control System, the budget includes an increase in the property tax levy rate of 15 cents per $1,000 of taxable property valuation.

Overall, homeowners would see a city tax rate of about $16.03 per $1,000 in taxable value.

The City Council approved this boost in 2018 to allow Cedar Rapids’ debt service levy to fund $36 million in general obligation bonds for permanent flood protection. Overall expenditures in fiscal 2023 will total $53 million.

This tax hike, coupled with state and federal funds, has enabled the city to accelerate the speed of adding flood protection. Cedar Rapids plans to spend $237.2 million over the next five years — up substantially from the 2014-2018 budgets when this expense was $65 million.

The city’s rate still is lower than the property taxes levied by Waterloo, Council Bluffs, Davenport and Des Moines, but above Iowa City, Sioux City, Dubuque and Ames.

According to the city, total assessed value in fiscal 2023 is $13 billion, which is up 5.36 percent or $663.7 million from the current fiscal year ending June 30. Of this increase, the city reports that $62.5 million, or 10 percent, is related to tax increment financing development areas.

Total taxable value will rise by 2.37 percent to $7.2 billion, with multi-residential property showing the biggest increase of $81.8 million, or 35.59 percent. Over the last 12 years, according to the city, taxable valuation has gone up over $2.4 billion.

“It is good, solid growth,” City Manager Jeff Pomeranz told the council.

But Cedar Rapids is factoring in dwindling revenue as the result of state property tax changes made by the Iowa Legislature. Multi-residential properties will have the same rollback percentage as residential properties in fiscal 2024, but for this budget year they will be taxed at 63.75 percent of property value.

The state “backfilled” losses to local governments from commercial and industrial properties since 2013. But in 2021, Iowa lawmakers moved to phase out the backfill. Cedar Rapids’ portion will be phased out over eight years, resulting in state property tax backfill revenue of $3.64 million in fiscal 2023 — down from $4.13 million in the 2022 budget year.

General fund

The total general fund revenue and expenditure budget — which funds police and fire, parks and recreation and public works — is $146.9 million, up 3 percent or $4.7 million from fiscal 2022.

Cedar Rapids will dedicate $1.4 million in federal American Rescue Plan Act pandemic relief funds, from its total $28 million allocation, to offset lost interest revenue to the city.

The general fund budget does not include new programs and services, but does allocate $250,000 in funding to grow sustainability programs. It will add full-time equivalents for a building services permit tech to decrease turnaround time in processing the record amount of building permits from derecho damage and high levels of development, as well as a plans examiner to decrease turnaround plan examination time.

Additionally, the general fund increase will support another mental health liaison for the police department, street materials cost increases, year one of two to fund a ladder truck for the fire department, an expansion of the Rollin’ Recmobile and a $1 an hour pay boost to seasonal aquatic cashiers, among other items.

The city projects that its unassigned general fund reserve balance by the end of fiscal 2023 will be at $40 million, or 27 percent of the annual operating budget of $146.9 million.

As the city is far from receiving full reimbursement for approximately $80 million in expenses for derecho recovery, Pomeranz told The Gazette the city is working with the Federal Emergency Management Agency and is “positive about getting the full reimbursement, but it's going to take time going through the federal process.”

Cedar Rapids will be on the hook for 15 percent of the costs, between $12 and $15 million. Pomeranz said he and Mayor Tiffany O’Donnell will be requesting some relief from that full sum.

“We know we can handle it, we will figure it out, but we are going to look for assistance,” Pomeranz told the council.

Utility rates

Cedar Rapids’ utility rate will increase 5.2 percent, or by $68.16 annually, for the typical residential customer who uses a 10 units each of water and sewer.

Most of this increase will fund operations and capital improvement projects for water, water pollution control, stormwater and sanitary sewer, according to the city.

The city plans to spend $47.9 million on capital improvement for the Water Pollution Control facility, with the five-year plan calling for an estimated $250.3 million. Much of that is funded by the state revolving loan fund.

“This is really to help reinvest in structures that are at the end of their useful lives,” Finance Director Casey Drew told The Gazette. “Some of the facilities were built in the late ‘70s, and so they have a very significant capital improvement plan for the next five years to help put in place equipment and buildings that are coming out of their useful life cycles.”

The residential rate for solid waste and yard waste collection will stay the same.

What’s next?

The city will hold a public hearing at the council’s 4 p.m. Feb. 22 meeting and the council will vote to adopt the maximum property tax revenue. A public hearing and the adoption of the budget will take place March 22.

Comments: (319) 398-8494; marissa.payne@thegazette.com