FY2022

CITY OF IOWA CITY, IA

FY 2022

ADOPTED BUDGET FY2021-2023 FINANCIAL PLAN 2021-2025 CAPITAL IMPROVEMENT PLAN

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From cover image: Coexist mural, Washington St

Paint by the numbers

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Vibrant work from local artists and community members continues to spread across a unique canvas of buildings, alleyways, tables and benches. These new murals reflect and celebrate Iowa City’s rich history, culture, diversity and character. The Iowa City Mural Project, an initiative of the Iowa City Downtown District, plays a major role in connecting downtown area neighbors, property/business owners, non-profits, and private donors with talented muralists. One of these partnerships brought together artist Sayuri Sasaki Hemann with United Action for Youth. Led by Sayuri, a group of teens developed the concept for "Coexist" — now one of the largest murals in town and a focal point on Washington Street (pictured on cover). Neighborhood-centered projects such as the South District's "Our Children Spoke" mural are funded in part by PIN (Program for Improving Neighborhoods) grants administered by the City's Neighborhood Outreach office. Most recently, matching funds overseen by the Public Art Advisory Committee went towards a mural at the HACAP Childcare Facility on Bloomington Street.

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Coexist , Sayuri Sasaki Hemann and United Action for Youth, 2018 (on cover) Detail, Northside/Goosetown Community Mural , Thomas Agran, 2018 The Reciprocal of Humanity , Robert Moore and Dana Harrison, 2020 Our Children Spoke , Nick Meister and residents of the South District neighborhood, 2020 Brewery Square , Jan Duschen, 2021 Greetings from Downtown Iowa City , Thomas Agran, 2017 Bloomington Street Head Start HACAP Mural Project , Thomas Agran and Sayuri Sasaki Hemann, 2020 1. 2. 3. 4. 5. 6. 7.

City of Iowa City Adopted Budget for the Fiscal Year Ending June 30, 2022 & FY2021–2023 Financial Plan

Council:

Mazahir Salih Mayor Pro-Tem At-Large

Bruce Teague Mayor At-Large

Laura Bergus At-Large

Susan Mims District B

Janice Weiner At-Large

J John Thomas District C

Pauline Taylor District A

City Manager Geoff Fruin

Assistant City Manager Ashley Monroe

Finance Director Dennis Bockenstedt

Assistant Finance Director Nicole Davies Assistant to the City Manager Rachel Kilburg

Budget & Compliance Officer Jacklyn Fleagle

Risk & Finance Assistant Michelle Cook

D istingu ished Budget P resen tation Aw ard GOVERNMEN T FIN ANC E OFFIC ER S ASSOC IATION

PRESENTED TO

City of Iowa City

Iowa

July 1, 2020 For the Fiscal Year Beginning

Executive Director

CITY OF IOWA CITY, IOWA FY2022 Adopted Budget FY2021 – 2023 Financial Plan 2021 – 2025 Capital Improvement Plan TABLE OF CONTENTS

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Introduction City Manager Address…….......................................................................................................... 11 Strategic Plan .............................................................................................................................. 30 Other Planning Processes........................................................................................................... 33 General Information..................................................................................................................... 35 Economic Overview..................................................................................................................... 39 Organizational Chart ................................................................................................................... 43 Department Summaries .............................................................................................................. 44 Budgetary Fund Structure............................................................................................................ 71 Departments and Divisions by Fund............................................................................................ 74 Financial Summary Preparation of the Financial Plan ................................................................................................ 79 Financial and Fiscal Policies ....................................................................................................... 85 Long Range Financial Planning................................................................................................... 92 All Funds: Fund Summaries................................................................................................................... 96 Revenue Summary by Fund ................................................................................................. 101 Revenue Summary by Type.................................................................................................. 102 Expenditure Summary by Fund............................................................................................. 104 Expenditure Summary by Department .................................................................................. 105 Inter Fund Transfer Schedules ............................................................................................. 106 Personnel Full-Time Equivalents ................................................................................................ 109 General Fund General Fund Summary .............................................................................................................. 115 Assigned, Committed & Restricted Fund Balance ...................................................................... 126 General Fund Revenues ............................................................................................................. 127 General Fund Expenditures......................................................................................................... 128 City Council.................................................................................................................................. 129 City Clerk ..................................................................................................................................... 131 City Attorney ................................................................................................................................ 136 City Manager: City Manager’s Office............................................................................................................ 139 Communications Office......................................................................................................... 141 Human Resources ................................................................................................................ 147 Human Rights ....................................................................................................................... 151 Economic Development ........................................................................................................ 156 Climate Action and Outreach ................................................................................................ 162 Finance Department: Finance Administration ......................................................................................................... 166 Accounting ........................................................................................................................... 174 Purchasing ............................................................................................................................ 178 Revenue................................................................................................................................ 183 Police Department: Police Administration............................................................................................................. 186 Support Services................................................................................................................... 190 Field Operations.................................................................................................................... 195

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Fire Department: Fire Administration ................................................................................................................ 200 Emergency Operations ......................................................................................................... 205 Fire Prevention...................................................................................................................... 210 Fire Training .......................................................................................................................... 215 Parks & Recreation: Parks & Recreation Administration ....................................................................................... 219 Recreation............................................................................................................................. 224 Park Maintenance ................................................................................................................. 230 Cemetery Operations ............................................................................................................ 238 Library: Library Operations................................................................................................................. 241 Library Foundation Office…………………………………………………………………............ 250 Senior Center: Senior Center Operations ..................................................................................................... 252 Neighborhood & Development Services (NDS): NDS Administration............................................................................................................... 262 Neighborhood Services......................................................................................................... 266 Development Services .......................................................................................................... 279 Public Works: Public Works Administration ................................................................................................. 287 Engineering ........................................................................................................................... 290 Transportation Services: Transportation Administration ............................................................................................... 294 Special Revenue Funds Community Development Block Grant (CDBG) ......................................................................... 299 HOME Grant ................................................................................................................................ 302 Road Use Tax Fund (RUT) ........................................................................................................ 305 Road Use Tax Operations .................................................................................................... 309 Other Shared Revenues.............................................................................................................. 317 Metropolitan Planning Organization of Johnson County (MPOJC) ............................................. 319 Metropolitan Planning Organization of Johnson County Operations .................................... 321 Employee Benefits Fund ............................................................................................................. 328 Emergency Levy Fund................................................................................................................. 332 Affordable Housing Fund............................................................................................................. 334 Iowa City Property Management Fund ........................................................................................ 336 Tax Increment Financing (TIF) Districts ...................................................................................... 338 Self-Supporting Municipal Improvement District (SSMID) – Downtown ...................................... 344 Debt Service Fund Debt Service Fund Summary ...................................................................................................... 349 Debt Schedules ........................................................................................................................... 354 Enterprise Funds Parking: Parking Fund Summary ........................................................................................................ 369 Parking Operations ............................................................................................................... 374 Transit: Transit Fund Summary ......................................................................................................... 382 Transit Operations ................................................................................................................ 386 Wastewater: Wastewater Fund Summary ................................................................................................. 394 Wastewater Treatment Operations....................................................................................... 399 Wastewater Debt Service ..................................................................................................... 409 Water: Water Fund Summary........................................................................................................... 413 Water Operations.................................................................................................................. 418 Water Debt Service............................................................................................................... 427 6

Refuse Collection: Refuse Collection Fund Summary ........................................................................................ 432 Refuse Collection Operations ............................................................................................... 436 Landfill: Landfill Fund Summary ......................................................................................................... 444 Landfill Operations ................................................................................................................ .449 Airport: Airport Fund Summary.......................................................................................................... 457 Airport Operations ................................................................................................................. 460 Stormwater: Stormwater Fund Summary .................................................................................................. 464 Stormwater Operations ......................................................................................................... 468 Housing Authority: Housing Authority Fund Summary ........................................................................................ 472 Housing Authority Operations ............................................................................................... 475 Capital Projects Fund Fund Summary …….. .................................................................................................................. 483 Summary by Division ................................................................................................................... 486 Summary by Funding Source....................................................................................................... 493 Annual Recurring Projects ........................................................................................................... 501 Project Summary by Name .......................................................................................................... 507 Unfunded Projects ....................................................................................................................... 609 Internal Service Funds Equipment: Equipment Fund Summary ................................................................................................... 621 Equipment Operations .......................................................................................................... 624 Risk Management: Risk Management Fund Summary ....................................................................................... 629 Risk Management Operations: ............................................................................................. 631 Information Technology Services (ITS): ITS Fund Summary............................................................................................................... 634 ITS Operations ...................................................................................................................... 636 Central Services: Central Services Fund Summary .......................................................................................... 642 Central Services Operations ................................................................................................. 644 Health Insurance Reserve ........................................................................................................... 648 Dental Insurance Reserve ........................................................................................................... 650 Statistics U.S. Census Data ......................................................................................................................... 655 Revenue Comparisons: Property Tax ......................................................................................................................... 656 General Fund ........................................................................................................................ 656 Hotel/Motel Tax .................................................................................................................... 657 Utility Franchise Tax Rates ................................................................................................... 657 Utility Rates ........................................................................................................................... 65 8 Property Tax Levies ...................................................................................................................... 65 9 Property Tax Valuations................................................................................................................ 660 Principal: Taxpayers ............................................................................................................................. 662 Employers……… .................................................................................................................. 663 Sewer Customers ................................................................................................................. 664 Water Customers.................................................................................................................. 665 Operating Indicators...................................................................................................................... 666 Department Statistics: Police .................................................................................................................................... 667 7

Fire……… ............................................................................................................................. 671 Library ................................................................................................................................... 673 Senior Center ........................................................................................................................ 678 Transportation Services ........................................................................................................ 681 Neighborhood & Development Services ............................................................................... 683 Appendix Department Expenditure Comparison to State Forms…………………………………….………… 6 91 Budget Resolutions………………………………………………………………………………….…. 69 2 State Forms……………………………………………………………………………………….…….. 69 4 Changes from Proposed to Final Budget ................................................................................... 706 State Property Tax Reform Impact Summary ............................................................................. 70 7 Glossary………………………………………………………………………………………………….. 70 9

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INTRODUCTION

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Strategic Plan City Manager Address Other Planning Processes General Information Organizational Chart Department Summaries Departments and Divisions by Fund Economic Overview Budgetary Fund Structure

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To the Honorable Mayor and City Council Members, It is my pleasure to submit Iowa City's operating and capital budget for Fiscal Year 2022. Although Iowa State Code requires formal adoption of an annual budget, a three-year financial plan (FY 2021-2023) and five-year Capital Improvement Program (2021-2025) are also included for planning purposes. The budget is one of the most important documents the City prepares because it identifies the services to be provided and the mechanisms that finance those services. Although the COVID-19 pandemic presented challenges for seeking public input through the traditional avenues, this budget was developed based on feedback received throughout the year from regular planning and engagement efforts, City Council listening posts, the recommendations of City boards and commissions, and direct input to City Council and staff from stakeholders and residents. This budget incorporates diverse priorities while adhering to financial best practices and planning for long-term community needs. This document aims to provide resources to further the City Council’s Strategic Plan priorities, implement master plans adopted by Council, and continue Iowa City's tradition of providing a balanced budget while strengthening core municipal services that our residents value. The budget contains prudent contingency line items and reserve levels which enable the City to maintain service levels in the event of unexpected expenditures or revenue shortfalls -- as was the case with the COVID-19 pandemic which arose during Fiscal Year 2020 and continues to impact the community. Any future modifications of this budget will be fully disclosed to the City Council and general public through formal City Council actions at public meetings, in accordance with State of Iowa law. Throughout the budget compilation process, staff used the City Council’s Strategic Plan to help prioritize expenditure decisions. This approach was balanced with recognition that the full financial impacts of the COVID-19 pandemic are difficult to forecast but will likely continue into Fiscal Year 2022 and beyond. While we remain optimistic that revenue levels will slowly stabilize moving forward, the adopted budget remains largely status quo due to the broader fiscal uncertainties. Given the financial challenges many households and businesses are navigating, this budget approves no new rate increases and a modest reduction to the City’s property tax rate. Accordingly, this budget limits the addition of new staff. The adopted Fiscal Year 2021 budget marked the largest investment in new staff in many years, though many of these positions were frozen as a result of COVID-19 related budget cuts. Fiscal Year 2022 resources will be directed towards filling some of these critical vacancies as the City works towards meeting Fiscal Year 2021 authorized staffing levels. This budget includes a modest addition of 3.00 full-time equivalent (FTE) positions, which includes two position upgrades (+0.25 FTE Landfill Scalehouse Operator and +0.25 FTE Buyer I in the Equipment Division) and the addition of a 1.00 FTE full-time public safety communications specialist in the City Manager’s Office, a 1.00 FTE full-time civilian supervisor, and a .50 FTE half-time civilian community outreach assistant that will focus on the immigrant and refugee population, to support the City Council’s police restructuring plan. Overall, due in part to the City Council’s prudent budgeting over the last decade, Iowa City has been largely prepared to respond to the pandemic’s financial impacts. Despite no new revenue

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sources and a conservative outlook, this budget still manages to accomplish significant investments in City Council’s strategic priorities. This budget demonstrates a continued commitment to aggressive climate action. Through the emergency property tax levy (approximately $1 million) and departmental dollars, significant progress was made on the City’s Climate Action Plan during Fiscal Year 2021, including expanding the Climate Action & Outreach office, launching the Root for Trees program, the first annual Climate Fest, completing the Wastewater Treatment Plant and Landfill efficiency and methane study, launching new grant programs for continued energy efficiency improvements in private buildings and homes, and other year-round public education efforts. The Fiscal Year 2022 budget builds upon this climate action momentum to expand these initiatives and continue to invest in City LED lighting improvements and HVAC upgrades, solar energy, the Green Iowa AmeriCorps Program, Community Climate Action Grants, public engagement, and other opportunities to reduce climate emissions. Additionally, this budget dedicates resources to support the City Council’s preliminary plan to restructure the Police Department and invest in prevention, diversion, and co-response efforts with non-profit community partners, increases the annual Aid to Agencies allocation, raises the City’s minimum wage for temporary employees to $15.00 per hour, and invests in infrastructure improvements and a strong capital improvement program. Investment in Strategic Planning, Master Plans and Core Services The City Council’s Strategic Plan includes seven goals for a more inclusive, just and sustainable Iowa City by prioritizing the physical, mental, and economic well-being of all residents: • Advance Social Justice, Racial Equity, and Human Rights • Demonstrate Leadership in Climate Action • Strengthen Community Engagement and Intergovernmental Relations • Invest in Public Infrastructure, Facilities, and Fiscal Reserves • Foster Healthy Neighborhoods and Affordable Housing Throughout the City • Enhance Community Mobility for All Residents • Promote an Inclusive and Resilient Economy Throughout the City Significant resources are devoted to all Strategic Plan priorities, including the aforementioned climate action and adaptation projects, affordable housing, social justice and racial equity, complete streets, and healthy neighborhoods. Additionally, financial resources are provided to aggressively implement recently adopted plans that were crafted after robust public input efforts, including the Bicycle Master Plan, Parks Master Plan, and Climate Action and Adaptation Plan, alongside a working update to the Affordable Housing Action Plan and the new working plan to accelerate community policing. Finally, significant resources have been provided to bolster core service levels in critical areas such as community health and safety, roadways, and utility infrastructure. Substantial resources are once again devoted to affordable housing. $1 million is earmarked for the affordable housing fund, bringing the total for this line item to $4.4 million over five years. This is in addition to several other City housing rehabilitation grant and loan programs. The City has

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also successfully created supplemental affordable housing revenue streams through fees and Tax Increment Financing that will bolster our efforts in coming years. In recent years, the City Council has demonstrated a commitment to strengthening human and social services in our community, including a notable expansion of the annual Aid to Agencies program. In Fiscal Year 2020, the City Council doubled (+54%) the Aid to Agencies budget and again increased the amount in Fiscal Year 2021. This budget includes another 3% increase in local funds (+$20,250) to bring the total funding (federal and local) for the Aid to Agencies program to $725,250 in Fiscal Year 2022. This increase was included with the expectation that it will increase annually to keep pace with inflation and the City’s commitment to social justice and racial equity. Examples of other social justice initiatives found in this budget include: • An increase in the City’s minimum wage to $15.00 effective July 1, 2021 for hourly staff, which translates to an additional cost of approximately $416,000 in Fiscal Year 2022. • Continued funding for the Social Justice and Racial Equity grant program and community partnerships. • Accessibility improvements, including physical improvements to sidewalks and City parks and facilities, programming improvements, and funding for the annual community ADA Celebration. • Investment in accelerating the City’s community policing efforts, including a co-response model and prevention, diversion, and outreach initiatives and partnerships. • Continued expansion of translated City documents and operational resources for enhanced cultural outreach programming. • Funds to complete fair housing testing to ensure compliance with federal, state, and local discrimination laws. • Implicit bias training for City staff, boards and commissions, local landlords, and the business community. • Expanded arts, culture, and recreation opportunities related to social justice and racial equity, including a pilot Rec & Ride transportation program and a global multi-cultural celebration at Riverfront Crossing Park. Master Plans In addition to the Strategic Plan, the City Council’s adopted Master Plans also play an important role in the budgeting process. The Parks Master Plan, Natural Areas Plan, Bike Master Plan, and Climate Action and Adaptation Plan all receive significant funding for implementation in this budget and particularly in the five-year Capital Improvement Plan. Many of the City’s sustainability efforts are incorporated into each of these plans. Projects such as tree plantings, urban forest management (including the chemical treatment of healthy Ash trees), on street bike facilities, multi-modal roadway improvements, local foods efforts and community gardens, and waste reduction strategies all continue to be funded, if not expanded. Over $23 million in the five-year capital improvement plan is budgeted for parks and recreation projects, many implementing park and accessibility improvements recommended in the Master

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Plan. The Fiscal Year 2022 budget includes funding for improvements at Chadek Green Park, Court Hill Park shelter and playground, and an off-road bike trail. Bike Master Plan projects will continue in 2022. Projects completed in 2020 include bike lanes on Burlington Street, Dodge Street, and the McCollister Boulevard extension. Ongoing 2020 projects include bike lanes on Muscatine and Southgate and a lane conversion with bike lanes added on Keokuk. Projects expected to be completed in 2021 include a sidepath on HWY 6, bike lanes and sidepath in conjunction with the American Legion Road project, Benton Street bike lanes, a lane conversion and bike lanes on Gilbert Street, and eight bike boulevards. Core Services Significant funds are also devoted to artistic and cultural endeavors, fostering the vibrant community that makes Iowa City such an attractive place to live and visit. Operational support is provided for the Englert Theater, FilmScene, Summer of the Arts, City of Literature, Mission Creek Festival, and Riverside Theatre. Funds contributed to the Iowa City Downtown District are used for placemaking activities and art installations. The budget also includes continued funding for the Cyclocross World Cup, Bike to Work Month activities, Juneteenth Celebration, events in parks with the Neighborhood Centers of Johnson County and MLK Day Celebration, and a global multi- cultural celebration. Finally, this budget continues to maintain responsible funding levels for roadway repairs and equipment replacement. Several important road rehabilitation and reconstruction projects are

planned for 2021, including Melrose Avenue improvements, planning and design for Court Street reconstruction, Benton Street rehabilitation, Dodge Street and Orchard Street reconstructions, and an augmented annual pavement rehabilitation program. Various water, sewer, and landfill projects are also planned in accordance with replacement and maintenance schedules. To address the increasingly evident reality that many City facilities are substandard and fail to adequately provide for service expansion needs, this budget continues to fund our facility reserve account. This long-term financial planning strategy will help the City fund the next generation of public facilities without the need for undertaking significant long-term debt. Financial Goals The preparation of this budget document was guided by four primary financial goals that seek to establish a sound fiscal strategy for the upcoming year and beyond. First, as noted above, this budget continues to advance the City’s commitment to responding to the climate action crisis. The budget maintains the $.24 emergency property tax levy to

Financial Goals Maintain focus on the urgency of the climate crisis and implementing the Climate Action and Adaptation Plan. Continue to dedicate resources towards advancing City Council’s Strategic Plan priorities and adopted Master Plans. Seek fiscal stability through competing financial pressures of the COVID-19 pandemic and the final years of the phased 2013 tax reform. Support households and businesses through the pandemic’s impact with fixed rates, fees, and continued efforts to lower the City’s tax rate.

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support an annual dedication of $1 million entirely to initiatives identified in the Climate Action and Adaptation Plan. Building upon the Fiscal Year 2021 momentum of these initiatives, this budget expands these efforts while emphasizing the intersectionality of climate action and social equity. Second, despite new financial challenges, the budget aims to provide enough resources for making substantial progress on City Council’s Strategic Plan priorities and adopted Master Plans. The preceding pages of this letter outline several investments, which have been prioritized even amid the pandemic-related uncertainty, to advance each strategic plan objective. Third, this budget continues to respond to the State’s phased 2013 property tax reform while also grappling with new financial pressures brought on by the COVID-19 pandemic. As the taxable percentage of multi-residential rental property values continues to be reduced over the next few years, there will be increased pressure on the budget. In recent years, the adopted budgets have contained funding for new initiatives, maintained or improved service levels, and reduced the tax levy rate through a reduction in the debt service levy. The City’s ability to accomplish these objectives has been principally due to the robust growth in taxable valuations in recent years. This growth has offset the losses associated with the property tax reform phased implementation. However, the sharp drawback in development during the first year of the COVID-19 pandemic exacerbates concerns about our community’s ability to sustain the same level of valuation growth through the final years of property tax reform implementation. State property tax backfill payments currently total $1.5 million annually. This budget was crafted anticipating the increasingly real possibility that the state legislature will end or phase out backfill payments to cities and counties. Should the backfill not be funded, the City will be able to maintain status quo operational funding but will have difficulty meeting growing service demands and bolstering support for residents and businesses through the pandemic. Both past budgets and this budget include measures to financially prepare the City before the full impacts of the tax reform are realized. This not only enables us to shift resources and adjust operations gradually, avoiding abrupt service disruptions or steep tax rate increases, but also provides additional protection against a slower economic recovery from the pandemic than forecasted. An example of this preparation includes the aforementioned Emergency Reserve Fund, which was created after the tax reform legislation and now has a balance of approximately $5.2 million. However, while the City has taken such steps to manage the impacts of tax reform, maintaining service levels will require prudent decisions as the tax reform continues to be phased in through Fiscal Year 2024 and COVID-19 impacts continue. Finally, while special attention is given to the overall impact of tax and fee changes on our community during every budget cycle, this budget was particularly attentive to the financial struggles our households and businesses are facing amid the pandemic. Overall, the Fiscal Year 2022 impact to households is a 1.8% increase in City taxes and utility fees over Fiscal Year 2021. This includes a proposed $0.10 decrease in the City property tax rate, a previously approved 5% increase in water rates which was delayed due to the pandemic, and a state mandated increase

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in the taxable percentage of residential properties. No new utility fee increases or revenue sources are being recommended. Community Fiscal Health and Outlook Iowa City benefits from a strong local economy anchored by the presence of the University of Iowa and the University of Iowa Hospitals and Clinics. The local economy consists of a diverse set of successful industries that together help sustain one of the most consistent stretches of low unemployment rates in the nation. As an organization, the City has a rich tradition of responsible budgeting policies that has created a strong financial foundation, which has helped the community weather past economic recessions while sustaining service delivery and continues to serve as a cornerstone for current pandemic impacts and the community’s future. In 2020, Moody’s Investors Service reaffirmed its highest quality bond rating (Aaa) for the City’s general obligation debt with a stable outlook, citing “the city’s very strong liquidity and fund balance that is supported by ample revenue raising flexibility … reflects our expectations that the city’s financial position will remain sound. The city’s strong liquidity and budget management will help it mitigate the impacts of slowed economic activity because of the coronavirus outbreak. ” The Moody’s report notes factors that could potentially drop the City’s bond rating include significant and sustained reduction in operating reserves or liquidity or growth in pension or debt burdens. Our bond rating is the product of prudent budgeting and long-range financial planning. Ultimately, our strong financial position lowers the cost of borrowing and ensures more of our community’s dollars are spent on service delivery, infrastructure, and Council’s Strategic Plan priorities, rather than interest payments. Despite the stable financial position of the organization, the public should be aware of the trends, pressures and opportunities that are shaping Iowa City in various fashions. Our community has many attributes that attract new residents to our city. A strong job market, good schools that are benefitting from significant capital investments, and diverse cultural amenities all contribute to the desirability of our area for families, retirees, and young professionals to make their permanent homes. New residents, including students, bring a social and economic vibrancy that helps define Iowa City. The City Council has adopted several policies and initiatives in recent years to maintain and enhance our positive attributes, considering this population growth. However, population growth has a profound effect on service delivery, land use, and housing affordability and creates additional service demands, stresses transportation and utility infrastructure, and impacts critical quality of life factors. Fortunately, growth in our tax base in recent years has allowed the City to weather state property tax reforms implemented thus far and devote significant resources to new programs and grants while maintaining top notch service delivery. However, we have seen a significant decline in development due to the pandemic and it should not be assumed that we will quickly return to our strong, historical rate of growth. Looking ahead, it is anticipated the resulting stagnation or decrease in taxable value may align with what may be a more drastic multi-residential rollback percentage in the final year of property tax reform implementation. These compounding influences will challenge the City’s budget in upcoming years. For this reason, it is imperative that Iowa City continue to move forward with cautious budgeting and strong reserves that can help soften the blow of a drawn-out recovery or sudden revenue losses or expenditure jumps. With this approach, I am confident Iowa City can not only

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navigate the impacts of tax reform and the coronavirus but emerge from it in a strong position that will allow us to continue to invest in services and projects that make our community one of the most desirable places to grow up, raise a family, and retire. Fiscal Year 2022 Budget Overview In preparing this budget document, City staff accounted for the previously-mentioned financial goals, the Strategic Plan, and adopted master plans. By adhering to these principles and priorities, the proposed budget balances both the short-term needs and the long-term health and stability of the community. The Fiscal Year 2022 City budget includes budgeted expenditures totaling $173,254,898. Of the total budget, $63,527,009 is for the General Fund, $24,803,470 is directed to Capital Projects and $56,585,518 is related to the operations of various enterprise or business funds. A breakdown of the budget by fund type follows:

Fiscal Year 2021 Expenditure Comparison by Fund Type excludes transfers

$10,000,000 $20,000,000 $30,000,000 $40,000,000 $50,000,000 $60,000,000 $70,000,000

General Capital Projects FY2022 $63,527,009 $56,585,518 $15,254,137 $13,084,764 $24,803,470 $- Enterprise Special Revenue Debt Service

Iowa City derives the majority of its revenues through property taxes and charges for services. The following table and pie chart detail Iowa City's revenue mix across all fund types. The increase in Other City Taxes reflects a one-time drop in hotel/motel tax revenue during Fiscal Year 2021 due to the pandemic and an increase in TIF revenue due largely to rebates beginning in Fiscal Year 2022 for Foster Road and Hieronymus Square. The increase in Use of Money and Property is due to revenue drops in Fiscal Year 2021 due to the pandemic and an estimated increase in interest income. The decrease in Intergovernmental is related to one-time federal COVID relief dollars in Fiscal Year 2021 and lower state rollback estimate in Fiscal Year 2022. The increases in both Charges for Services and Miscellaneous also result from COVID-related revenue shortfalls in Fiscal Year 2021 for decreased charges and fee collections for services such as recreation programs, parking fees, and code enforcement. Overall, the City’s revenue is projected to decrease 1.6%.

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All Funds Revenue Comparison of FY2021 versus FY2022

FY2021 Revised

Percent Change

FY2022 Adopted

1.6%

Property Taxes Other City Taxes Licenses & Permits Use of Money & Prop Intergovernmental Charges for Services

$ 65,849,136 $ 4,900,501 $ 2,571,490 $ 2,360,074 $ 48,148,908 $ 39,134,244 $ 7,127,017 $ 12,557,981

$ 66,911,637 $ 6,832,031 $ 2,575,470 $ 2,846,911 $ 36,375,527 $ 43,668,325 $ 7,971,658 $ 13,010,825

39.4%

0.2%

20.6% -24.5% 11.6% 11.9%

Misc.

3.6%

Other Financial Sources

-1.3%

Total

$182,649,351

$180,192,384

The same Fiscal Year 2022 information above is displayed in the following pie chart. The chart shows the heavy reliance on taxes and charges for service to support the various services and projects contained in this budget.

All Funds Revenue Sources

Misc. 4%

Charges for Services 24%

Other Financial Sources 7%

Intergovernmental 20%

Property Taxes 37%

Use of Money & Prop 2%

Licenses & Permits 2%

Other City Taxes 4%

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It is imperative to consider how the overall revenue and expenditure recommendations in this budget will impact local households and businesses. The proposed property tax rate is $15.67, the lowest Iowa City tax rate since Fiscal Year 2002. In Fiscal Year 2012, Iowa City's rate was one of the highest in the State of Iowa at $17.84. The Fiscal Year 2021 rate represents a 12.2% decrease over nine years. In recent years, tax levy rate reductions have been made possible predominantly through decreases in property taxes levied to repay debt. Based on a lower property tax rate and a previously approved 5% increase in the water rate, it is estimated that in Fiscal Year 2022 a household with $100,000 assessed home value will pay approximately $3 more per month, or $35 per year, in taxes and fees for basic City services compared to the previous year. The following bar chart illustrates the estimated overall financial impact of tax and fee changes to the average household in Iowa City . The table uses $100,000 in assessed home value so the reader may easily calculate tax payments based on their own home value.

$1,000 $1,500 $2,000 $2,500 Annual Financial Impact to Residential Households

$0 $500

FY2017

FY2018

FY2019

FY2020

FY2021

FY2022

Property Taxes

$922

$930

$900

$901

$869

$884

Stormwater

$54

$54

$54

$60

$60

$60

Refuse

$191 $433 $362

$205 $433 $362

$229 $433 $380

$229 $433 $399

$240 $433 $399

$240 $433 $419

Sewer - 800 cubic feet Water-- 800 cubic feet

*

Total

$1,962

$1,984

$1,996

$2,022

$2,001

$2,036

Percent Change

0.3%

1.1%

0.6%

1.3%

-1.1%

1.8%

*The FY2022 water rate includes a 5% increase which was originally approved in 2019 to take effect in FY2021 but was delayed to FY2022 due to the pandemic.

Perhaps the most significant property tax reform provision for Iowa City’s budget is the reclassification of multi-residential residential properties, none of which is subject to state backfill payments. Prior to assessment year 2013 (Fiscal Year 2015), multi-residential properties were classified as commercial and taxed at 100 percent of assessed value. The following graph illustrates the dropping taxable percentage of multi-residential properties in the coming assessment years.

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100.00% Taxable % of Multi-residential Residential Properties

90.00%

80.00%

70.00%

60.00%

50.00%

FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 Taxable % of Multi-Family 100.00% 95.00% 90.00% 86.25% 82.50% 78.75% 75.00% 71.25% 67.50% 63.75% 40.00%

Please note that after Fiscal Year 2023, the taxable percentage of multi-residential properties will drop to match the residential taxable percentage. This percentage has been as low as 44% in past years and has more recently been in the mid-fifties, which would mean the taxable percentage of multi-residential properties would see a drop that is nearly double the percentage decreases seen in recent years. The property tax reform legislation clearly has provided significant benefit to owners of multi-residential residential properties. However, it will place great strain on the City’s budget as it is fully implemented. The reduction in the taxable percentage of apartment building value reduced the City’s overall taxable valuation by over $123 million for Fiscal Year 2022. Property Tax Overview The taxable valuation of property subject to all levies in Iowa City increased 3.2% for Fiscal Year 2022, despite a reduction in the taxable proportion of multi-residential residential properties. New construction and higher property values have fortunately been sufficient in recent years to make up for the reduction in house and apartment taxability, though we do not anticipate that trend to continue in future years. The budget reflects a reduction of $0.10 in the property tax levy rate, all of which comes from a reduction in the debt service levy. The emergency levy remains unchanged from Fiscal Year 2021, which is a $0.24 levy generating approximately $1 million for climate action initiatives. This marks the tenth straight year of property tax rate decreases. We are unaware of any city in Iowa that has been able to implement tax rate decreases during each of the last ten years. The reduction in the debt service portion of the property tax levy was largely achieved through recent debt restructuring and early bond retirement strategies, in addition to the taxable valuation growth.

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It is important to remember that a property owner’s tax bill is a function of property value, the taxable percentage of the property as determined by the state, and local levy rates from all taxing bodies. Despite our reductions in the tax levy rate, many, if not most, property owners’ tax bills have likely increased. The following chart is provided for a greater historical perspective on Iowa City’s municipal tax rate and taxable property value. Tax levy rate reductions in recent years were made possible by prudent debt strategies, operational efficiencies, and valuation growth. The taxable percentage of residential properties increased incrementally in Fiscal Year 2022 after several years of decreases.

Property Tax Rate, Value, Receipts

17.5

$4,000

$3,500

17

$3,000

$2,500

16.5

$2,000

16

$1,500

Taxable Value (in millions)

$1,000

15.5

$500

FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 Tax Val (millions) $2,960 $3,036 $3,137 $3,183 $3,421 $3,543 $3,745 $3,923 $4,258 $4,394 Val % Change 3.93% 2.56% 3.32% 1.46% 7.50% 3.55% 5.72% 4.74% 8.54% 3.19% Ptax Rate 17.269 16.805 16.705 16.651 16.583 16.333 16.183 15.833 15.773 15.673 Rate % Change -3.21% -2.69% -0.60% -0.32% -0.41% -1.51% -0.92% -2.16% -0.38% -0.63% 15 $0

The following chart shows a detailed breakdown of the City’s property tax asking for Fiscal Year 2022 compared to the previous year. The debt service levy is reduced by $0.10 and both the employee benefits levy and emergency levy remained unchanged from Fiscal Year 2021. Property tax dollars increased approximately 1% over Fiscal Year 2021.

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