FY25 Proposed Budget

year 2013 (Fiscal Year 2015), multi-residential properties were classified as commercial and taxed at 100% of assessed value. Since then, the taxable percentage of multi-residential properties has dropped 3-4% annually and in Fiscal Year 2024, the taxable percentage dropped over 9%. Multi-residential properties are now permanently taxed at the same rate as residential properties. While the 2013 property tax reform legislation has clearly provided significant benefit to multi-residential property owners, it places additional strain on the City’s budget.

Taxable % of Residential Properties

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

FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 FY2025

Taxable % of Multi-Family Taxable % of Residential

95.00% 90.00% 86.25% 82.50% 78.75% 75.00% 71.25% 67.50% 63.75% 54.65% 46.34%

54.40% 55.73% 55.63% 56.94% 55.62% 56.92% 55.07% 56.41% 54.13% 54.65% 46.34%

With multi-residential properties now being collapsed into the residential tax rate, a higher percentage of the City’s tax base is subject to the residential rollback rate set annually by the State. The Fiscal Year 2025 residential rollback rate dropped 8.3% to 46.34% causing a significant reduction in taxable valuation in the residential sector. The 2023 State of Iowa tax reform eliminated both the Emergency and Library levies and added them to the General Fund levy taking it from $8.10 to $8.57. However, State mandated growth limitations will force this levy back down to $8.40 in Fiscal Year 2025 and the levy will be mandated to again be no higher than $8.10 by Fiscal Year 2029 (although State growth limitations may drop it lower than $8.10 during this period). This change, along with added property exemptions for seniors and military veterans will further strain our primary revenue source going forward and place additional pressure on other property tax levies and alternative revenue sources. For Fiscal Year 2025, the taxable valuation of property subject to all levies in Iowa City increased slightly by 3.606% while total assessed values grew robustly by 18.173%. While new construction and higher property values pre-pandemic were sufficient to make up for the reduction in the taxability of residential and multi-residential properties, the Fiscal Year 2023 and 2024 budget years marked a juncture in this trend with rollback rates outpacing the assessed growth. It is important to remember that tax valuations occur in a two-year cycle. Typically, the City experiences a larger boost in taxable value in valuation years (odd years). However, Fiscal Year 2023 deviated from that trend and the taxable valuation decreased , again due largely to a reduction in the taxable percentage of residential properties (including multi-family). These rollback impacts, combined with stagnant valuations and inflation reducing buying power, led to another decrease in taxable valuations for Fiscal Year 2024. While the 3.606% taxable growth in

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