FY25 Proposed Budget

1. Property Taxes - Property tax revenue of $42.1 million is the primary funding source for General Fund operations, providing approximately 67.3% of total revenue, excluding transfers in, in fiscal year 2025. The fiscal year 2025 budget is an increase of 4.8% over the fiscal year 2024 revised budget of $40.2 million, and there is an average increase of 3.5% over the last five years. These totals do not include the transfer in of the Employee Benefits property tax levy from the Employee Benefits Fund. There are a number of factors which determine the City’s tax levy each year: property valuations by class, the state’s annual Assessment Limitation Order (rollback), TIF district reservations and rebates, statutory limits on individual tax levies, the City’s own Financial and Fiscal Policies, restrictions from external entities on other financing sources, and funding requirements for projected expenditures. Iowa House File 718 – In 2023 the State Legislature passed Iowa House File 718. With this legislation, it eliminated two property tax levies that City was utilizing, the Library Levy and Emergency Levy, and added them to the General Levy. With this change, in fiscal year 2025 the General Levy will move from $8.10 to $8.57. However, also with this legislation since our taxable valuation growth for fiscal year 2025 is greater than 3%, then the $8.57 is reduced to $8.40196. 100% Assessment - Property valuations are set by the City and County Assessor. State law requires that all real property be reassessed every two years, specifically in odd numbered years. Since 2003, valuations within the Iowa City corporate limits have increased an average of 8.1% in revaluation years and 2.4% in non-revaluation years. Valuations reported by the Johnson County Auditor’s office for January 1, 2023 served as the basis for determining property tax revenue in fiscal year 2025. Their report indicates an 18.2% increase in total assessed value in the last year, from $7.37 billion to $8.71 billion. Assessment Limitation Order / Rollback - The State of Iowa has a statutory growth limitation of three percent (3%) annually on taxable residential property valuations. Each year, the Department of Revenue’s Assessment Limitation Order sets a ‘rollback’ value by class which, when applied, determines taxable valuations. The growth restriction is applied to the residential valuations, limiting the growth percentage in taxable value to agricultural valuations. The impact is that the percentage growth in taxable valuations for urban residential property each year is limited to either three percent (3%) or the growth in agricultural property, whichever is lower. Property Tax growth restrictions and rollbacks were changed with State legislation in 2013 with Iowa Senate File 295. That legislation added the following changes to property taxation: 1. the annual growth limitation on residential property of three percent (3%) was decreased from four percent (4%) starting in fiscal year 2015; 2. a rollback of ninety-five percent (95%) was added to commercial, industrial, and railroad property classes starting in fiscal year 2015 and was lowered to ninety percent (90%) starting in fiscal year 2016;

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