FY2023 Adopted Budget

CITY OF IOWA CITY, IOWA

FY2023 ADOPTED BUDGET

FY2022-2024 Financial Plan

2022-2026 Capital Improvement Plan

In June of 2021, Iowa City Mayor Bruce Teague proclaimed June 19 to be Juneteenth National Freedom Day , an official holiday in Iowa City.

2021 Juneteenth Block Party

Juneteenth National Freedom Day commemorates June 19, 1865, when Major General Gordon Granger led Union soldiers into Galveston, Texas, bringing news that the Civil War had ended and that the Emancipation Proclamation declared all slaves to be free. Since then, Juneteenth commemorations have consisted of prayer services, inspirational speeches, readings of the Emancipation Proclamation, food, games, and dances. Juneteenth celebrates the strength and resolve of African Americans throughout history, and is an opportunity to honor African-American culture, art, history, and achievement.

Cover: People gather on the lawn of Chauncey Swan Park for a free sunset screening of Miss Juneteenth at the 2021 Juneteenth Block Party (part of the Film Scene in the Park summer movie series).

"Juneteenth reflects our community's deep belief in liberty and equality for all individuals, as all benefit from a greater understanding and appreciation of the experiences of others."

Mayor Bruce Teague

In observation of the holiday, the City of Iowa City, Johnson County, and other sponsors hosted free public events throughout the month of June — including an education and resource fair, blood drive, meal drive-through, block party, and outdoor screening of the film Miss Juneteenth.

TO READ THE MAYOR'S PROCLAMATION, VISIT BIT.LY/JUNETEENTHIC.

City of Iowa City Adopted Budget for the Fiscal Year Ending June 30, 2023 & FY2022–2024 Financial Plan

Council:

Megan Alter Mayor Pro-Tem At-Large

Bruce Teague Mayor At-Large

Laura Bergus At-Large

Shawn Harmsen District B

Janice Weiner At-Large

J John Thomas District C

Pauline Taylor District A

City Manager Geoff Fruin

Deputy City Manager Redmon Jones II

Assistant City Manager Rachel Kilburg

Finance Director Nicole Davies

Assistant Finance Director Jacklyn Fleagle

Risk & Finance Assistant Michelle Cook

CITY OF IOWA CITY, IOWA FY2023 Proposed Budget FY2022 – 2024 Financial Plan 2022 – 2026 Capital Improvement Plan TABLE OF CONTENTS

PAGE

Introduction City Manager Address................................................................................................................. 10 Strategic Plan .............................................................................................................................. 28 Other Planning Processes........................................................................................................... 31 General Information..................................................................................................................... 33 Economic Overview..................................................................................................................... 37 Organizational Chart .................................................................................................................. 41 Department Summaries: City Clerk .............................................................................................................................. 42 City Attorney ......................................................................................................................... 49 City Manager......................................................................................................................... 55 Finance ................................................................................................................................. 83 Police Department ................................................................................................................ 112 Fire Department .................................................................................................................... 129 Parks & Recreation ............................................................................................................... 146 Library ................................................................................................................................... 171 Senior Center ........................................................................................................................ 181 Neighborhood & Development Services............................................................................... 190 Public Works ......................................................................................................................... 218 Transportation Services ........................................................................................................ 256 Airport ................................................................................................................................... 271 Budgetary Fund Structure ........................................................................................................... 277 Departments and Divisions by Fund ........................................................................................... 280 Financial Summary Preparation of the Financial Plan ................................................................................................ 284 Financial and Fiscal Policies ....................................................................................................... 290 Long Range Financial Planning .................................................................................................. 297 All Funds: Fund Summaries................................................................................................................... 302 Revenue Summary by Fund ................................................................................................. 307 Revenue Summary by Type ................................................................................................. 308 Expenditure Summary by Fund ............................................................................................ 310 Expenditure Summary by Department.................................................................................. 311 Inter Fund Transfer Schedules ............................................................................................. 312 Personnel Full-Time Equivalents ................................................................................................ 315 General Fund General Fund Summary .............................................................................................................. 332 Assigned, Committed & Restricted Fund Balance ...................................................................... 333 General Fund Revenues ............................................................................................................. 334 General Fund Expenditures ........................................................................................................ 335 City Council ................................................................................................................................. 336 City Clerk ..................................................................................................................................... 337 City Attorney ................................................................................................................................ 338

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City Manager: City Manager’s Office............................................................................................................ 339 Communications Office......................................................................................................... 339 Human Resources ................................................................................................................ 341 Human Rights ....................................................................................................................... 342 Economic Development ........................................................................................................ 343 Climate Action and Outreach................................................................................................ 343 Finance Department: Finance Administration ......................................................................................................... 344 Accounting ........................................................................................................................... 347 Purchasing ............................................................................................................................ 348 Revenue................................................................................................................................ 349 Police Department: Police Administration ............................................................................................................ 350 Support Services................................................................................................................... 350 Field Operations.................................................................................................................... 354 Fire Department: Fire Administration ................................................................................................................ 356 Emergency Operations ......................................................................................................... 357 Fire Prevention...................................................................................................................... 358 Fire Training.......................................................................................................................... 358 Parks & Recreation: Parks & Recreation Administration ....................................................................................... 359 Government Buildings…………………………………………………………………………….. 360 Recreation............................................................................................................................. 361 Park Maintenance ................................................................................................................. 362 Cemetery Operations............................................................................................................ 365 Library: Library Operations ................................................................................................................ 366 Library Development Office…………………………………………………………………........ 369 Senior Center: Senior Center Operations ..................................................................................................... 370 Neighborhood & Development Services (NDS): NDS Administration............................................................................................................... 372 Neighborhood Services......................................................................................................... 373 Development Services .......................................................................................................... 376 Public Works: Public Works Administration ................................................................................................. 378 Engineering........................................................................................................................... 379 Transportation Services: Transportation Administration............................................................................................... 380 Special Revenue Funds Community Development Block Grant (CDBG) ......................................................................... 382 HOME Grant................................................................................................................................ 384 Road Use Tax Fund (RUT) ........................................................................................................ 386 Road Use Tax Operations .................................................................................................... 390 Other Shared Revenues.............................................................................................................. 393 Metropolitan Planning Organization of Johnson County (MPOJC) ............................................ 395 Metropolitan Planning Organization of Johnson County Operations.................................... 396 Employee Benefits Fund ............................................................................................................. 398 Emergency Levy Fund ................................................................................................................ 402 Affordable Housing Fund............................................................................................................. 404 Iowa City Property Management Fund........................................................................................ 406 Tax Increment Financing (TIF) Districts ...................................................................................... 409 Self-Supporting Municipal Improvement District (SSMID) – Downtown ..................................... 415

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Debt Service Fund Debt Service Fund Summary ...................................................................................................... 420 Debt Schedules ........................................................................................................................... 425 Enterprise Funds Parking: Parking Fund Summary ........................................................................................................ 438 Parking Operations ............................................................................................................... 443 Transit: Transit Fund Summary ......................................................................................................... 446 Transit Operations ................................................................................................................ 452 Wastewater: Wastewater Fund Summary ................................................................................................. 455 Wastewater Treatment Operations....................................................................................... 460 Wastewater Debt Service ..................................................................................................... 464 Water: Water Fund Summary........................................................................................................... 468 Water Operations.................................................................................................................. 473 Water Debt Service............................................................................................................... 478 Refuse Collection: Refuse Collection Fund Summary ........................................................................................ 483 Refuse Collection Operations ............................................................................................... 488 Landfill: Landfill Fund Summary ......................................................................................................... 490 Landfill Operations ................................................................................................................ .496 Airport: Airport Fund Summary.......................................................................................................... 498 Airport Operations................................................................................................................. 501 Stormwater: Stormwater Fund Summary .................................................................................................. 502 Stormwater Operations ......................................................................................................... 506 Housing Authority: Housing Authority Fund Summary........................................................................................ 507 Housing Authority Operations............................................................................................... 510 Capital Projects Fund Fund Summary …….. .................................................................................................................. 514 Summary by Division ................................................................................................................... 517 Summary by Funding Source ...................................................................................................... 523 Annual Recurring Projects ........................................................................................................... 531 Project Summary by Name.......................................................................................................... 537 Unfunded Projects ....................................................................................................................... 644 Internal Service Funds Equipment: Equipment Fund Summary ................................................................................................... 654 Equipment Operations .......................................................................................................... 656 Risk Management: Risk Management Fund Summary ....................................................................................... 659 Risk Management Operations: ............................................................................................. 660 Information Technology Services (ITS): ITS Fund Summary............................................................................................................... 662 ITS Operations...................................................................................................................... 663 Central Services: Central Services Fund Summary.......................................................................................... 666 Central Services Operations................................................................................................. 667 7

Health Insurance Reserve........................................................................................................... 669 Dental Insurance Reserve........................................................................................................... 671 Statistics U.S. Census Data ......................................................................................................................... 674 Revenue Comparisons: Property Tax ........................................................................................................................ 675 General Fund ........................................................................................................................ 675 Hotel/Motel Tax .................................................................................................................... 676 Utility Franchise Tax Rates ................................................................................................... 676 Utility Rates........................................................................................................................... 677 Property Tax Valuations............................................................................................................... 678 Property Tax Levies .................................................................................................................... 680 Principal: Taxpayers ............................................................................................................................. 681 Employers……… .................................................................................................................. 682 Sewer Customers ................................................................................................................. 683 Water Customers .................................................................................................................. 684 Operating Indicators...................................................................................................................... 685 Department Statistics: Police .................................................................................................................................... 686 Fire………............................................................................................................................. 690 Library ................................................................................................................................... 692 Senior Center ........................................................................................................................ 697 Transportation Services ........................................................................................................ 700 Neighborhood & Development Services............................................................................... 702 Appendix Department Expenditure Comparison to State Forms……………………………………………… 706 Budget Resolutions……………………………………………………………………………………. 707 State Forms…………………………………………………………………………………………….. 710 Changes from Proposed to Final Budget…………………………………………………………….. 7 22 State Property Tax Reform Impact Summary ............................................................................ 72 5 Glossary ...................................................................................................................................... 72 7

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INTRODUCTION

F Y 2 0 2 3

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

To the Honorable Mayor and City Council Members, It is my pleasure to submit Iowa City's operating and capital budget for Fiscal Year 2023. Although Iowa Code only requires formal adoption of an annual budget, we have included a three-year financial plan (FY 2022-2024) and five-year Capital Improvement Program (2022-2026) 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 to finance those services. City Council’s Strategic Plan, various City Master Plans, and input from the community informed the development of this budget. Thus, this document aims to provide resources to further strategic priorities, implement master plans, and continue Iowa City's tradition of providing a balanced budget while strengthening core municipal services that our residents value. The budget also 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. 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, allocating funding for priorities was balanced with recognition that the financial impacts of the pandemic continue, taxable property values have plateaued, and significant financial pressures associated with state property tax reforms will be felt in the coming fiscal years. While we remain confident in the City’s financial foundation, the adopted budget keeps expenditure growth to a minimum due to these broader pressures. This budget includes a modest addition of 3.74 full-time equivalent (FTE) positions: • Position expansion: +0.37 FTE Communications Creative Assistant • Position expansion: +0.37 FTE Community Development Program Assistant • New position: 1.00 FTE Traffic Engineering Electrician • New position: 1.00 FTE Transportation Services Program Assistant • New position: 1.00 FTE Refuse Maintenance Worker I Additionally, this budget includes funding for a comprehensive Compensation Study to evaluate the competitiveness of City pay scales which will help the City attract and retain top talent. Overall, despite anticipated property tax revenue challenges, this budget still manages to accomplish significant investments in City Council’s strategic priorities. In recent years, strong taxable growth and good financial management has enabled major investments including converting several temporary positions to permanent, more than doubling funding for both the Aid to Agencies and Social Justice and Racial Equity Grant programs, raising the City’s minimum wage to $15 an hour, contributing $1 million annually to the Affordable Housing Fund, and setting aside $1 million to address systemic racism and the Black Lives Matter movement. However, the current economic climate and the final years of property tax reform place limits on flexibility to pursue such bold investments over the next several fiscal years. This budget demonstrates a balanced approach of fiscal prudence with continued commitment to major priorities including aggressive climate action, long-term affordable housing, support for social services and an increase to the Aid to Agencies program, resources to support public safety

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prevention, diversion, and co-response efforts, and investments in infrastructure and facility needs through a strong capital improvement program. Significant, one-time federal pandemic relief dollars will help to offset some of the anticipated losses in financial flexibility through Fiscal Year 2025. These funds are prioritized for strategic one-time investments in City Council priorities including transit service improvements, affordable housing, eviction prevention, home repair, childcare and workforce development, BIPOC business support, mental health and social services support, the arts, and hazard resilience. 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 each of these Strategic Plan priorities. Additionally, financial resources are provided to aggressively implement adopted master plans, including the Bicycle Master Plan, Parks Master Plan, Climate Action and Adaptation Plan, the forthcoming Affordable Housing Action Plan and a 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. Climate Action Plan: This budget again includes an emergency levy and departmental dollars to continue implementation of the City’s Climate Action Plan. This funding supported significant progress in Fiscal Year 2022, including training new Climate Ambassador cohorts, another round of Community Climate Grants and Root for Trees vouchers, development of a Teen Resilience Corps., bolstered food waste programs, planning for a Zero-Waste Farmer’s Market in 2022, the first annual Neighborhood Energy Blitz, and the launch of new energy efficiency incentive programs for commercial/industrial properties, small businesses, and households. Many of the City’s sustainability efforts are also incorporated into the Parks Master Plan, Natural Areas Plan, and Bike Master Plan. Each of these receive significant funding for implementation through this budget and the five-year Capital Improvement Plan for projects such as tree plantings, urban forest management (including addressing Emerald Ash Borer), on street bike facilities, multi modal roadway improvements, local foods efforts and community gardens, and waste reduction. Affordable Housing & Community Development: An update to the Affordable Housing Action Plan is underway. Substantial resources are again devoted to affordable housing with another $1 million earmarked for the affordable housing fund, bringing the total for this line item to $5.4 million over five years. This is in addition to several other City housing rehabilitation grant and loan

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programs. The City has also successfully created supplemental affordable housing revenue streams through fee-in-lieu and Tax Increment Financing strategies that will bolster our efforts in coming years. In 2021, the City purchased eight duplexes for affordable homeownership opportunities in the South District through these alternative revenue sources. The Fiscal Year 2023 budget includes rehabilitation funds for two of the duplex units. Other community development investments incorporated into this budget include funding for an overhaul of the City’s comprehensive plan and a 5% increase in the Historic Preservation Grant Program. Social Justice & Racial Equity: In recent years, City Council has demonstrated a commitment to strengthening social services in our community, including a notable expansion of the annual Aid to Agencies program. In Fiscal Year 2020, the Council doubled the Aid to Agencies budget, increased the amount again in Fiscal Year 2021, and applied a 3% increase in Fiscal Year 2022 with the expectation the Aid to Agencies program will receive this inflationary increase annually. Accordingly, this budget includes another 3% increase in local funds (+$84,808) to bring the total funding (federal and local) for the Aid to Agencies program to $800,058 in Fiscal Year 2023. Examples of other social justice initiatives found in this budget include: • Increased funding for the Social Justice and Racial Equity grant program by $25,000, bringing the total to $100,000 for Fiscal Year 2023. • Elimination of library fines for all patrons and increased bookmobile hours bringing library services to more geographic areas • Addition of an outreach budget for the Community Police Review Board • Accessibility improvements, including physical improvements to sidewalks and City parks and facilities and funding for the annual community ADA Celebration. • Bolstered funding for community partnerships and sponsored events, including Juneteenth and MLK Day celebrations • An additional $35,000 to expand the community’s crisis response efforts • Funds to complete fair housing testing to ensure compliance with federal, state, and local discrimination laws. • A new commitment of $25,000 in annual funding set aside to support BIPOC business growth and entrepreneurship. Parks & Recreation: Over $18 million in the five-year capital improvement plan is budgeted for parks and recreation projects, many implementing park and accessibility improvements recommended in the Parks Master Plan. The Fiscal Year 2023 CIP budget includes funding for playground and shelter improvements at Chadek Green Park and Court Hill Park, development of an off-road bike trail, and ecological restoration at Whispering Meadows. Funding is also earmarked to respond to recommendations from the Recreation Master Plan addressing major community interests, such as City aquatics facilities. Bike Master Plan: This budget also includes funding to continue implementation of the Bike Master Plan. In 2021, bike lanes were added on Muscatine Avenue between Burlington and Iowa and a series of bike boulevards in the eastside neighborhoods. Projects planned for 2022-2023 will significantly increase bike connectivity in the South District. Anticipated 2022 projects include

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a 4- to 3-lane conversion on Keokuk with bike lanes from Highway 6 to Sandusky; bike lanes along Southgate (Keokuk to Gilbert); S. Gilbert Street 4-lane to 3-lane conversion (Southgate to McCollister); Wetherby, Hollywood, and Lakeside bike boulevards, and extension of the Highway 6 Trail (Heinz Road and Fairmeadows). 2022-2023 road construction and resurfacing projects will result in bike lanes on W. Benton Street (Mormon Trek to Greenwood); Rochester Avenue (1 st to Montrose); buffered bike lanes and a sidepath in conjunction with the extension of American Legion Road; and a 4- to 3-lane conversion with bike lanes on Madison (Burlington to Iowa). Existing bike lanes of Jefferson and Market Streets will also be upgraded to buffered bike lanes. Anticipated 2023 projects include bike lanes along Sunset (Benton to Highway 1) and establishing bike boulevards along Emerald, Arlington, and Oakcrest. 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, EntreFest, 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 and additional funding has been budgeted to support placemaking in the proposed South District Self-Supporting Municipal District. The budget also includes continued funding for the Cyclocross World Cup, Bike to Work Month activities, Juneteenth Celebration, MLK Day Celebration, and partnership events. Finally, this budget continues to maintain responsible funding levels for roadway repairs and equipment replacement. In addition to annual pavement rehabilitation program funding, several important road rehabilitation and reconstruction projects are planned for 2022 including reconstructions of Rochester Avenue (First Ave. to Ralston Creek) and Fairchild Street. Various water, sewer, and landfill projects are also planned in accordance with replacement and maintenance schedules. As the need for replacement of many City facilities grows, this budget continues to fund and refine the schedule for use of the facility reserve fund to address major needs such as the Senior Center, Transit and Equipment Maintenance facilities, aquatic facilities, and additional fire stations. 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. Budget Impacts and Financial Goals This budget was developed within the context of several significant financial impacts: • The final years of the phased 2013 state property tax reform, including an estimated $146 million loss in multi-residential taxable value in Fiscal Year 2023 and an anticipated loss of well over $200 million in Fiscal Year 2024. • Beginning in 2023, commercial and industrial property tax backfill payments (which have historically totaled $1.5 million annually) will be phased out over a five-year period. • Despite an increase in assessed value, the City anticipates zero growth in taxable valuations in the coming fiscal year, driven by the continued drop in multi-family rollback and a 2.27% drop in the residential rollback rate, the lowest rate since Fiscal Year 2014. • Ongoing financial impacts caused by COVID-19 include continued lags in revenue for some City services and higher cost of goods.

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In light of these impacts, the preparation of this budget was guided by three primary financial goals that seek to establish a sound fiscal strategy for the upcoming year and beyond. First, within the context of heightened financial challenges, the budget aims to prioritize adequate resources for making substantial progress on City Council’s Strategic Plan priorities and adopted Master Plans. The preceding pages of this letter outline several of such investments. Second, this budget continues to respond to phased State property tax reforms while also confronting a plateau in taxable property value and continued financial impacts caused by the COVID-19 pandemic. In recent years, robust growth in taxable valuations has offset the losses associated with the property tax

Financial Goals Continue to dedicate resources towards advancing City Council’s Strategic Plan priorities and adopted Master Plans. Seek fiscal stability and maintenance of service levels through competing financial pressures of the COVID-19 pandemic, the phase out of the property tax backfill, and the final years of the phased 2013 tax reform. Support households and businesses through the pandemic’s impact with stable utility rates, fees, and continued efforts to lower the City’s tax rate.

reform and enabled the City to fund new initiatives, improve service levels, and reduce the tax levy rate. However, while development has rebounded slightly from 2020 levels (which was significantly impacted by the pandemic) assessed growth has slowed from the strong levels in development over the previous decade and is expected to level off in the coming years. This is compounded by the phased loss of commercial/industrial property tax reimbursement payments (“backfill”), which the City had been anticipating for several years. Thus, like past budgets, this budget includes measures to financially prepare the City before the full impacts of these tax reforms are realized. This enables us to shift resources and adjust operations gradually, avoiding abrupt service disruptions or steep tax rate increases. An example of this preparation includes the aforementioned Emergency Reserve Fund, which was created after the 2013 tax reform legislation and carries a balance of approximately $5.1 million. However, while the City has taken such steps to manage the impacts of tax reform, maintaining service levels will require prudent budget decisions as the next two years will be the most difficult to navigate since the state reform efforts were approved in 2013. Finally, while the overall impact of tax and fee changes on our community is carefully evaluated each budget cycle, this budget remains especially mindful that many households and businesses continue to experience pandemic-related financial pressures. Overall, the Fiscal Year 2023 impact to households is a 0.1% decrease in City taxes and utility fees over Fiscal Year 2022. This includes a proposed $0.04 decrease in the City property tax rate and a $3 per month increase in refuse fees (reflecting increases of $1.50 in Yard Waste, $.50 in Recycling, and $1 in Refuse) to support recently expanded service offerings and balance growing expenses in that fund. 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

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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 both past and recent economic recessions while sustaining service delivery. In 2021, Moody’s Investors Service reaffirmed its highest quality bond rating (Aaa) for the City’s general obligation debt. Moody’s notes factors that could negatively impact the City’s bond rating include a substantial and sustained reduction in reserve funds or large growth in leverage. Iowa City’s 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 and Strategic Plan priorities, rather than interest payments. “The rating further reflects a robust financial profile supported by very strong reserves and ample revenue raising ability… The stable outlook reflects our view that the city's financial performance will remain healthy, the city will continue to grow in size, and the strong management team will be able to offset any additional uncertainty regarding the coronavirus impact” - Source: Moody’s Investors Service, Iowa City 2021 GO Bond Rating Despite the stable financial position of the organization, the public should be aware of the economic trends shaping the community. Iowa City has many attributes that attract new residents to our city. A strong job market, good schools, 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 implementation of state property tax reforms while devoting significant resources to new programs and maintaining top notch service delivery. However, we have simultaneously seen both a plateau in development and a minor decrease in taxable property valuations. As previously discussed, this stagnation in taxable value will be compounded in coming years by a more dramatic drop in multi family taxability through the final year of property tax reform implementation and the new five-year phaseout of commercial/industrial property tax backfill payments. Additionally, in Fiscal Year 2023, a drop in the residential rollback rate will reduce taxable value by 2.27% which equates to a loss of roughly $1.6 million in direct revenue to the City. Thus, Iowa City must continue to move forward with cautious budgeting and strong reserves to help soften the blow of these changes and any additional unanticipated circumstances. With this approach, I am confident Iowa City can navigate the impacts of tax reform and the pandemic and retain 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.

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Fiscal Year 2023 Budget Overview The proposed Fiscal Year 2023 budget includes budgeted expenditures totaling $194,494,456. Of the total budget, $64,980,913 is for the General Fund, $47,356,220 is directed to Capital Projects and $53,925,114 is related to the operations of enterprise funds. A breakdown of the budget by fund type follows:

Fiscal Year 2023 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

Special Revenue

Debt Service Capital Projects

General

Enterprise

FY2023 $64,980,913

$53,925,114

$15,384,432

$12,952,813

$47,356,220

Property taxes and charges for services account for the majority of City revenues. The following table depicts a year-over-year comparison of Iowa City's revenue mix across all funds. The decrease in Property Taxes is a result of property tax rollback percentages set by the State. The increase in Other City Taxes is due to anticipated higher TIF revenues. The decrease in Use of Money and Property is due to reduced interest revenue. The decrease in Intergovernmental is related to one-time federal relief dollars in Fiscal Year 2022 and a decrease in State rollback payments beginning in Fiscal Year 2023. The increase in Charges for Services represents recovery from COVID-19 shortfalls and includes the Refuse fee increase. The decrease in Miscellaneous includes the recommended elimination of library fines for overdue materials and a decrease in contributions/donations. The increase in Other Financial Sources is due largely to issuance of a sewer revenue bond. Overall, the City’s revenue is projected to decrease 6.4%.

All Funds Revenue Comparison of FY2022 versus FY2023 FY2022 Revised FY2023 Budget

Percent Change -0.65% 4.54% 0.68% -3.92% -48.38% 1.39% -2.00% 146.89%

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

$ 66,911,637 $ 6,689,842 $ 2,575,470 $ 2,857,310 $ 62,667,825 $ 43,668,325 $ 8,172,659 $ 11,499,325 $ 205,042,393

$ 66,474,472 $ 6,993,578 $ 2,593,050 $ 2,745,188 $ 32,347,546 $ 44,276,643 $ 8,009,115 $ 28,390,663 $ 191,830,255

Miscellaneous

Other Financial Sources

Total

-6.44%

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The following pie chart displays revenue across all funds for Fiscal Year 2023 only. The chart shows the heavy reliance on taxes and charges for services to support the various projects and services contained in this budget.

All Funds Revenue Sources

Misc. 4%

Charges for Services 23%

Other Financial Sources 15%

Intergovernmental 17%

Property Taxes 35%

Use of Money & Prop, 1%

Licenses & Permits, 1%

Other City Taxes, 4%

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 $15.63, the lowest tax rate in Iowa City since Fiscal Year 2002. Just a decade ago, Iowa City’s tax rate was one of the highest in the state at $17.84 and since then we have reduced our tax rate by over 12%. 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 minor rate increase for expanded recycling, yard waste, and refuse services, it is estimated in Fiscal Year 2023 a household with a $200,000 assessed home value will pay approximately $4 less 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. The Fiscal Year 2023 Refuse Rate includes a $3 monthly fee increase encompassing $1.50 in Yard Waste, $.50 in Recycling, and $1 in Refuse, supporting the heightened demand and cost increases for these curbside services.

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

-$500 $0 $500

FY2018

FY2019

FY2020

FY2021

FY2022

FY2023

Property Taxes

$930

$900

$901

$869

$884

$846

Stormwater

$54

$54

$60

$60

$60

$60

Refuse

$205 $433 $362

$229 $433 $380

$229 $433 $399

$240 $433 $399

$240 $433 $419

$276 $433 $419

Sewer - 800 cubic feet Water-- 800 cubic feet

Total

$1,984

$1,996

$2,022

$2,001

$2,036

$2,034

Percent Change

1.1%

0.6%

1.3% -1.1% 1.8% -0.1%

Property Tax Overview The taxable valuation of property subject to all levies in Iowa City decreased 0.46% for Fiscal Year 2023, despite assessed growth increasing 3.26%. This suggests the residential and multi residential tax rollbacks imposed by the State are the primary cause of the reduction in taxable value and the reduction in the taxable proportion of multi-residential residential properties is the most notable property tax reform provision for Iowa City’s budget. Prior to assessment year 2013 (Fiscal Year 2015), multi-residential properties were classified as commercial and taxed at 100 percent of assessed value. Since then, the taxable percentage of multi-residential properties has dropped 3-4% annually, as depicted in the following graph.

Taxable % of Multi-Family Residential Properties

40.00% 50.00% 60.00% 70.00% 80.00% 90.00% 100.00%

FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 Proj. FY2024 Taxable % of Multi-Family 100.00% 95.00% 90.00% 86.25% 82.50% 78.75% 75.00% 71.25% 67.50% 63.75% 54.13%

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In Fiscal Year 2024, the taxable percentage of multi-family properties will drop to match the residential taxable percentage. This has been as low as 44% in past years and has more recently been in the mid-fifties. If the residential rollback rate were to remain the same, the taxable percentage of multi-family properties could drop by as much as 9% in Fiscal Year 2024. While the property tax reform legislation has clearly provided significant benefit to multi-residential property owners, it places additional strain on the City’s budget. For context, the multi-family rollback will result in Iowa City losing over $146 million in taxable value in Fiscal Year 2023 alone and that number will likely double in Fiscal Year 2024. Compounding the decline in multi residential taxability, in Fiscal Year 2023 the residential rollback rate will decrease by 2.27%, which equates to a loss of roughly $1.6 million in direct revenue to the City. This drop is the largest percentage drop in the residential rollback rate since Fiscal Year 2014. While new construction and higher property values in recent years have fortunately been sufficient to make up for the reduction in the taxability of residential and multi-residential properties, the Fiscal Year 2023 budget marks a juncture in this trend with rollback rates outpacing the assessed growth. We project similar circumstances through the next few fiscal years. In light of these financial impacts, the proposed Fiscal Year 2023 budget reflects a minor reduction of $0.04 in the property tax levy rate, marking the eleventh straight year of property tax rate decreases. 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. Thus, despite the City’s tax levy rate reductions, many (if not most) property owners’ tax bills will increase. Nonetheless, we are unaware of any city in Iowa that has been able to implement tax rate decreases during each of the last eleven years. In recent budgets, a reduction in the debt service portion of the property tax levy has been largely achieved through recent debt restructuring and early bond retirement strategies, fueled by strong taxable valuation growth. The debt service levy remains unchanged from Fiscal Year 2022. The Emergency Levy has been modestly reduced from $.24 in Fiscal Year 2022 to $.20 in Fiscal Year 2023, which will generate approximately $850,000 for climate action activities. This allocation will provide resources to execute climate action strategies but will also begin to create new capacity in the Emergency Levy, which the state caps at $0.27. 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. Typically, the City experiences a larger boost in taxable valuable in valuation years (odd years). However, it should be noted Fiscal Year 2023 deviates from that trend and the taxable valuation actually decreases – again due largely to a reduction in the taxable percentage of residential properties (including multi-family) in Fiscal Year 2023. It is also important to recognize that 2022 is not a re-valuation year and thus we anticipate similarly flat taxable growth in Fiscal Year 2024.

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