North Liberty charges higher tax rate than intended because of budget error

NORTH LIBERTY — North Liberty property owners are paying a total of about $234,000 more in property taxes this fiscal year than the City Council intended because staff forgot to count money the city already had on hand.

In August, city staff realized the certified property tax rate for fiscal 2022 — which began July 1 — was 19 cents higher than what the North Liberty City Council intended. The council had agreed to a city tax of $11.32 per $1,000 in taxable property value, but instead a rate of $11.51 per $1,000 was certified.

Due to a spreadsheet input error, the city’s reserve funds were not applied as intended, City Administrator Ryan Heiar wrote in a memo to council members.

The certified tax levy did not account for $234,000 of reserve funds that were intended to reduce the city’s tax levy — not raise it. So the error will result in the collection of a like amount in new property taxes — the equivalent to $1.97 per month for an owner of a median value home in the city. A median value home in North Liberty is $220,800.

The city provided estimates of how the 19-cent difference might impact homeowners and businesses:

Ted Nellesen, who works on the certification of local government budgets with the Iowa Department of Management, said in an email to The Gazette that the department hears “about a similar situation every few years” but does not track instances of it happening. Nellesen said these errors typically occur when a city does not account for cash on hand that will be used to pay down debts.

The way to address the error depends on when the county and the state are notified of it, Nellesen said.

If the error is reported before the end of June, the rate can usually be adjusted in time for the fiscal year to start. If the error is reported after the fiscal year starts — like in North Liberty’s case — the city has two options: use the funds to reduce the tax in the next fiscal year, or work with the County Treasurer’s Office to issue refunds to taxpayers.

Refunding taxpayers is “a significantly more challenging option from a logistical standpoint" since it requires the county to track and communicate to the city when a payment has been made, Nellesen said

“The best option is usually the first option of holding over the funds for the next fiscal year, as the fewer moving parts leaves less room for further mistakes,” Nellesen said.

This is the route North Liberty has decided to take. Heiar said the city intends to apply the funds and any accrued interest to the fiscal 2023 budget to reduce the property tax levy then.

“As the person charged with presenting a budget to the City Council, I take full responsibility for not catching his error sooner in the process,” Heiar said, adding that he wants to apologize to residents for this error.

There is nothing residents need to do, Heiar said.

“Our intent here was just to be very transparent with the public, to make sure everyone understood what was going on,” he said.

Heiar said new steps will be implemented in the budget process to ensure this error doesn’t happen again, including several review points to ensure the values are consistent. The city administrator, city clerk and city treasurer will independently review the budget before it is certified, Heiar added.

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