Cedar Rapids Mayor Tiffany O’Donnell: City exploring spending cuts as Iowa lawmakers reduce property taxes

It’s “incredibly encouraging” the state Legislature this year cut Iowans’ property taxes, Cedar Rapids Mayor Tiffany O’Donnell said in a television appearance Friday, but the resulting reduction in revenue to the city’s coffers could mean Cedar Rapids looks to scale back some spending.

O’Donnell and West Des Moines Mayor Russ Trimble, both registered Republicans, appeared on Iowa Press last week and urged lawmakers to maintain local control as tax cuts reduce property tax revenue coming to city governments. Their appearance covered topics including economic development, LGBTQ inclusion, downtown revitalization and use of federal COVID-19 relief funds.

Iowa lawmakers this year passed — and Gov. Kim Reynolds signed — a bill that will provide $100 million in property tax relief to homeowners, but it limits revenue growth for cities and counties. Under the new law, when property assessments increase between 3 and 6 percent, the growth in the levy is capped at 2 percent. When assessments go up 6 percent or more, the levy growth is limited to 3 percent.

Mayors are “uniquely connected to the individuals that are feeling the pinch these days,” O’Donnell said. While functions such as public safety will be held harmless when reducing spending, O’Donnell said the city may be less able to augment public safety with some mental health supports currently in place.

The Cedar Rapids Police Department has a Crisis Intervention Team of officers trained to respond to incidents involving a mental health crisis, where the individual is given further assistance beyond the response to the incident. The department employs two mental health liaisons, and the police work with Foundation 2 Crisis Services to respond to mental health incidents.

“When revenue is affected, this might force us to either put that on pause, or something has to go,” O’Donnell said. “There's no free lunch, right? So something has to go, knowing that law enforcement isn't going to be affected in terms of being cut.”

City Manager Jeff Pomeranz told The Gazette there’s no doubt that limitations on property taxes will have an impact on the overall city budget, though no spending decisions for fiscal 2025 — the budget year spanning July 1, 2024 through June 30, 2025 — are final. The council will vote on the budget in March 2024.

“We have to examine all revenues as well as expenditures in order to balance our budget,” Pomeranz said. “... Everything’s on the table. It’s going to be a tough budget year.”

Trimble, also the chief of staff in the state treasurer’s office, said he appreciated that the bill helps reduce property taxes for Iowans. He said West Des Moines will look to piggyback on that — continue to reduce property taxes when possible and find efficiencies in city government.

“We need to make sure that we're also providing essential services that our residents have come to depend on,” Trimble said. “And I think that's extremely important and why it's important for local decision-makers to make those decisions, because we know the tax revenue that we need to provide those essential services.”

Asked if the legislation penalizes growing local governments, O’Donnell said she didn’t think so, but that cities will have to figure out how to adapt to the tax policy changes. In adapting, she said it’s important municipalities have local control to fill gaps with tools such as tax increment financing or local-option sales taxes.

One proposal this session would have raised the state sales tax by a penny and given some of that revenue back to cities, but eliminated municipalities’ option to raise their own sales tax. Members of the Cedar Rapids City Council in February’s city budget session lamented the proposal and feared the impacts to the city’s Paving for Progress street-repair program, which brings in about $20 million annually in local-option sales tax revenue to go toward road improvements.

“Local citizens should have the right to say, ‘I will pay for streets in my neighborhood,’” O’Donnell said. “It's not that they don't trust Des Moines, but to add another layer in there, especially after a city like Cedar Rapids has actually already passed a local-option sales tax, I think would be unfair.”

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