Property tax reforms mandated by State of Iowa lawmakers this year will complicate the City of Dubuque’s annual budgeting process, officials warn.
Jenny Larson, Dubuque’s finance and budget director, is set to address City Council members at 6 p.m. Monday. Her presentation will show expected impacts from the law, which has potential to restrict municipal leaders’ ability to adjust tax levies.
The law requires city leaders to adopt a resolution setting the total maximum property tax dollars that can be levied for the next fiscal year. That must be adopted before the city can file its proposed budget.
Larson said this could leave the city navigating budget season blind to possible needs or increased costs.
“Depending on where the City Council approves the maximum tax levy, it could have an impact on the actual budget, if it’s lower than what we need,” she said. “Then we have expenses that aren’t under our control — IPERs and (police and fire personnel pension) rates set by the state. We’re also self-insured for health insurance. If we see increased costs there, we could have problems.”
Council Member Ric Jones said the new law “puts the cart before the horse quite a bit” with its requirement that the maximum levy be set before the budget proposal.
However, Council Member Luis del Toro said he agreed with the intent of the change. Still, he admitted it could impact some capital improvement projects. He said it will just require some creative thinking on the part of the council.
“I have always been a big advocate for cities living within their means,” he said. “If we have a strategy in place and know where we would like to be, we should already be planning around that. I know different things can arrive that will include some modifications of those plans. But we should have a general road map. (The new provision) is going to force communities to stay within their allowable or acceptable taxing.”
Council members agree that Dubuque already has a policy to head into budget planning with a tax rate in mind, so this isn’t as big a change for the city as it might be for others.
“That doesn’t seem like too great of a change just by how they typically structure it,” said Council Member Brett Shaw.
Jones said the city starts with a tax rate estimate, but that there had been some flexibility.
“You could go over, but you would have some work and some explaining to do,” he said. “As you work toward that ending budget, you can slide $1,000 in here or $1,000 here for projects that council thought warranted it, but the (city) manager hadn’t recommended.”
This year, for instance, council members pushed for funding for a new metal detection system for the Five Flags Center.
“The manager and Jenny’s staff were able to provide calculations so they didn’t upset the apple cart,” Jones said. “It’s going to get a little harder to do that, but we’ll follow the rules and get it done.”
Per the law, if city officials want to increase the tax levy by 2% over the previous year, passage requires support from two-thirds of council members. That would mean five of seven members would need to vote in favor.
However, with the extra steps, the law also gives the city more time to finalize budgets before submitting them to the state. The deadline has been pushed from March 15 to March 30.
“If it adds a layer or not, they’re giving us more time,” del Toro said. “The process is still going to provide for the same time and opportunity to review.”
Jones, though, insisted the law sacrifices the interests of urban areas like Dubuque for more rural, less-populated areas.
“This leadership in Des Moines has managed to pit rural versus urban interests in almost everything, and sometimes it leads to nonsense like this,” he said. “I don’t think any of the cities in Iowa are trying to hide anything when it comes to serious taxation and services. It doesn’t need to get harder every year. This law was written by people who don’t live in or represent cities. Most people in Iowa live in cities.”
The original bill, before it was amended and passed, would have allowed residents to petition for a referendum before any increase greater than 2%. Larson is relieved that version won’t impact Dubuque.
“It was much worse when they first came out with the bill because it would require a referendum,” she said.