Iowa City school district may use sales tax to lower tax rate increase

The Iowa City school district may use sales tax proceeds to lower a proposed tax rate increase.

The school board Tuesday night directed staff to rework an initial budget proposal by using school infrastructure local-option sales tax money to reduce a suggested tax rate increase of 14.9 percent.

The board did not name a target tax rate and asked administrators to present them with scenarios at its next meeting March 23.

Not every board member applauded that move, with Mike Cooper noting that voters were told that money would be used primarily on construction projects and equipment purchases when the sales tax was approved in 2007. Tuyet Dorau said shifting around funds was not the ideal solution to budget woes and the district needs to look harder at possible cuts.

“We can't constantly rob Peter to pay Paul,” she said.

The school district already is looking at making $3.4 million it cuts for next year, and the budget proposal calls for reducing spending by about $2 million from this year.

Still, board members made clear that the proposed tax rate was too high at a time when many residents are hurting financially.

“Anything we can do to tighten our belts ... I think it's something the board needs to discuss,” President Patti Fields said.

The draft $120.5 million budget for the year that begins July 1 includes a property tax rate of $16.30 per $1,000 of taxable value, compared with $14.19 this year.

At that rate, the owners of a $100,000 home would pay $764.93 on the school district portion of their taxes next year, compared with $646.97 this year.

Superintendent Lane Plugge and Paul Bobek, the district's executive director of administrative services, said the dire financial picture is primarily the result of a projected $12.7 million shortfall in state funding next fiscal year.

School board members suggested some of that money could come from cutting back on the number of construction projects.

The Iowa City school district is far from unique in proposing a significant tax increase for next year, with school systems across the state struggling financially.

The Cedar Rapids school board is considering increasing its tax levy by up to 12.6 percent. Marion Independent is looking at a 9.9 percent jump.

“I've never experienced an economic downturn like this,” Plugge said.

The board expects to vote on the budget April 13. How the state's budget comes together in the meantime could help reshape the district's budget.