‘Significant’ property tax increase proposed for Iowa City

Iowa City property owners face a tax rate increase of 2.16 percent next fiscal year under a budget proposal released Thursday.

City staff is suggesting the tax rate be set at $18.14 per $1,000 of taxable value for fiscal year 2012, up from $17.76 this year. Among the reasons for the requested increase is the addition of several firefighters and police officers – something many residents asked for.

The proposed tax rate would be a “significant increase,” City Manager Tom Markus and Assistant City Manager Dale Helling acknowledge in a cover letter to the City Council in the budget document, but it is lower than had been projected.

The proposal would mean the owners of a $100,000 home would pay about $880 on the Iowa City portion of their tax bill, up from $833 this year.

That factors in an increase in the percentage of a residential property's value that is subject to taxation. That number, which is known as the rollback and is set by the state, is scheduled to increase nearly 2 percentage points to 48.53 percent next fiscal year.

Overall, the budget proposal calls for $60.8 million in expenditures in the taxpayer-supported general fund in fiscal year 2012, which starts July 1. That's down from an estimated $72 million this year, but that figure was driven higher by federal stimulus money and grants for flood-related work, Helling said. As a point of reference, when the council approved the budget last March, spending was expected to be $58.2 million.

The proposed budget maintains current service levels and leaves the number of city employees unchanged for general fund operations.

Iowa City, like many local governments, is still dealing with the economic blows brought by the Great Recession. One example is property valuations remaining relatively flat, which affects Iowa City because 62 percent of its general fund revenue comes from property taxes.

The City Council in recent years has often slightly reduced the tax rate from what was initially proposed. The council is tentatively scheduled to vote on the budget March 1 and will meet several times before then to discuss it.

Mayor Matt Hayek said he had not yet seen the budget proposal and said the council in January would zero in on what it must do versus what it wants to do.

“The wish list always exceeds what we can realistically do,” he said.

A year ago, the council, with strong public backing, felt it must hire more public safety personnel.

The council said it wanted nine new firefighters hired in anticipation of the opening of a new fire station in northeast Iowa City in summer 2011. A commitment for six more police officers also was made. Not all of those positions have been filled, but they will be by July 1, Helling said, meaning the full effect of paying for them will be felt in the upcoming budget.

Also factoring into the proposed tax rate is the city's contribution to the Municipal Police and Fire Retirement System of Iowa. The rate municipalities must pay has been increasing sharply and that is expected to continue. The Iowa League of Cities is advocating for changes to the system, something the Iowa City Council endorses.

The other piece of the tax rate increase is the city's growing use of debt to pay for capital purchases like equipment. Helling said a cap on the levy that supports the general fund and the residential rollback has led many cities, including Iowa City, to turn to debt for those purchases.

He and Markus say that trend is not sustainable over the long run and the city needs to find alternative sources of revenue and look at ways of streamlining operations to provide more with less.