FY26 Proposed Budget

CITY OF IOWA CITY, IOWA

FY2026

PROPOSED BUDGET

FY2025-2027 Financial Plan

2025-2029 Capital Improvement Plan

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Terrell Mill Park 1201 N. Dubuque Street Open dawn to dusk, year-round

ICE HOUSE SINGLE TRACK TRAIL

The Ice House Single Track Trail opened in August 2024 and features over a mile of natural surface trail designed for mountain and cross style cycling. The trail passes along the Iowa River, over bridges and boardwalks, through lowland forest and prairie, over massive windfallen trees, and through the historic Ice House foundation. The trail includes a skills section for intermediate level cyclists while mostly catering to riders looking to enjoy engaging and diverse entry level tracks.

The new trail was built by Parks staff utilizing urban lumber from the Iowa City Area. Amenities at the entrance were funded through a generous memorial donation from the family of Carl Baker through the Iowa Bicycle Coalition.

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City of Iowa City Proposed Budget for the Fiscal Year Ending June 30, 2026 & FY2025–2027 Financial Plan

Council:

Bruce Teague Mayor At-Large

Mazahir Salih Mayor Pro-Tem At-Large

Vacant District C

Laura Bergus District A

Shawn Harmsen District B

Megan Alter At-Large

Joshua Moe At-large

City Manager Geoff Fruin

Deputy City Manager Chris O’Brien

Assistant City Manager Kirk Lehman

Finance Director

Assistant Finance Director

Nicole Davies

Jacklyn Fleagle

Budget Management Analyst

Risk & Finance Assistant

Angie Ogden

Michelle Cook

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GOVERNMENT FINANCE OFFICERS ASSOCIATION Distinguished Budget Presentation Award

PRESENTED TO

City of Iowa City

For the Fiscal Year Beginning July 01, 2024

Executive Director

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CITY OF IOWA CITY, IOWA

FY2026 Proposed Budget

FY2025 – 2027 Financial Plan 2025 – 2029 Capital Improvement Plan

TABLE OF CONTENTS

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Introduction City Manager Address….....................................................................................................…......................................................................................................... 10 Strategic Plan…..............................................................................................................................….............................................................................................. 28 Other Planning Processes…..............................................................................................................................….......................................................................... 30 General Information…..............................................................................................................................….................................................................................... 33 Economic Overview…..............................................................................................................................….................................................................................... 37 Organizational Chart …..............................................................................................................................….................................................................................. 41 Department Summaries…..............................................................................................................................….............................................................................. 42 Budgetary Fund Structure…..............................................................................................................................…........................................................................... 273 Departments and Divisions by Fund…..............................................................................................................................…........................................................... 276 Financial Summary Preparation of the Financial Plan…..............................................................................................................................…............................................................... 280 Financial and Fiscal Policies…..............................................................................................................................…...................................................................... 286 Long Range Financial Planning…..............................................................................................................................…................................................................. 293 All Funds: Fund Summaries…..............................................................................................................................….................................................................................. 298 Revenue Summary by Fund…..............................................................................................................................…................................................................ 303 Revenue Summary by Type…..............................................................................................................................…................................................................ 304 Expenditure Summary by Fund…..............................................................................................................................…........................................................... 306 Expenditure Summary by Department…..............................................................................................................................…................................................ 307 Inter Fund Transfer Schedules…..............................................................................................................................…............................................................ 308 Personnel Full-Time Equivalents …..............................................................................................................................…............................................................... 311 General Fund General Fund Summary…..............................................................................................................................….............................................................................. 326 Assigned, Committed & Restricted Fund Balance…..............................................................................................................................…..................................... 327 General Fund Revenues…..............................................................................................................................…............................................................................. 328 General Fund Expenditures…..............................................................................................................................…........................................................................ 329 City Council…..............................................................................................................................…................................................................................................. 330 City Clerk…..............................................................................................................................…..................................................................................................... 331 City Attorney…..............................................................................................................................…................................................................................................ 332 City Manager: City Manager’s Office…..............................................................................................................................…........................................................................... 333 Communications Office…..............................................................................................................................…........................................................................ 333 Human Resources…..............................................................................................................................…............................................................................... 335 Human Rights…..............................................................................................................................…...................................................................................... 336 Economic Development…..............................................................................................................................…....................................................................... 337 Climate Action and Outreach…..............................................................................................................................…............................................................... 338 Finance Department: Finance Administration…..............................................................................................................................…........................................................................ 339 Accounting …..............................................................................................................................….......................................................................................... 341 Purchasing…..............................................................................................................................…........................................................................................... 342 Revenue…..............................................................................................................................…............................................................................................... 343 Police Department: Police Administration…..............................................................................................................................…........................................................................... 344 Support Services…..............................................................................................................................….................................................................................. 345 Field Operations…..............................................................................................................................…................................................................................... 348

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Fire Department: Fire Administration…..............................................................................................................................…............................................................................... 350 Emergency Operations…..............................................................................................................................…........................................................................ 351 Fire Prevention…..............................................................................................................................…..................................................................................... 352 Fire Training…..............................................................................................................................…......................................................................................... 352 Parks & Recreation: Parks & Recreation Administration…..............................................................................................................................…...................................................... 353 Recreation…..............................................................................................................................…............................................................................................ 355 Park Maintenance…..............................................................................................................................…................................................................................ 356 Cemetery Operations…..............................................................................................................................…........................................................................... 359 Library: Library Operations…..............................................................................................................................…............................................................................... 360 Library Foundation Office…..............................................................................................................................….................................................................... 363 Senior Center: Senior Center Operations…..............................................................................................................................….................................................................... 364 Neighborhood & Development Services (NDS): NDS Administration…..............................................................................................................................….............................................................................. 365 Neighborhood Services…..............................................................................................................................…....................................................................... 366 Development Services…..............................................................................................................................…......................................................................... 369 Public Works: Public Works Administration…..............................................................................................................................…................................................................ 371 Engineering…..............................................................................................................................….......................................................................................... 372 Transportation Services: Transportation Administration…..............................................................................................................................….............................................................. 373 Special Revenue Funds Community Development Block Grant (CDBG) …..............................................................................................................................…........................................ 375 HOME Grant…..............................................................................................................................…............................................................................................... 377 Road Use Tax Fund (RUT) …..............................................................................................................................…........................................................................ 379 Road Use Tax Operations…..............................................................................................................................…................................................................... 382 Other Shared Revenues…..............................................................................................................................…............................................................................. 386 Metropolitan Planning Organization of Johnson County (MPOJC) …..............................................................................................................................….......... 388 Metropolitan Planning Organization of Johnson County Operations…..............................................................................................................................….. 389 Employee Benefits Fund…..............................................................................................................................…............................................................................. 391 Emergency Levy Fund…..............................................................................................................................…................................................................................ 395 Affordable Housing Fund…..............................................................................................................................…............................................................................ 397 Iowa City Property Management Fund…..............................................................................................................................…....................................................... 400 Tax Increment Financing (TIF) Districts…..............................................................................................................................…..................................................... 405 Self-Supporting Municipal Improvement District (SSMID)…..............................................................................................................................…......................... 411 Debt Service Fund Debt Service Fund Summary…..............................................................................................................................…...................................................................... 415 Debt Schedules…..............................................................................................................................…........................................................................................... 420 Parking Fund Summary…......................................................................................................................................................................................................... 433 Parking Operations…..............................................................................................................................….............................................................................. 438 Transit: Transit Fund Summary…..............................................................................................................................…........................................................................ 439 Transit Operations…..............................................................................................................................…............................................................................... 444 Wastewater: Wastewater Fund Summary…..............................................................................................................................…................................................................ 445 Wastewater Treatment Operations…..............................................................................................................................…..................................................... 450 Wastewater Debt Service…..............................................................................................................................….................................................................... 451 Water: Water Fund Summary…..............................................................................................................................….......................................................................... 453 Water Operations…..............................................................................................................................…................................................................................. 457 Water Debt Service…..............................................................................................................................….............................................................................. 462 Enterprise Funds Parking:

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Refuse Collection: Refuse Collection Fund Summary…..............................................................................................................................…....................................................... 466 Refuse Collection Operations…..............................................................................................................................….............................................................. 471 Landfill: Landfill Fund Summary…..............................................................................................................................…........................................................................ 473 Landfill Operations…..............................................................................................................................…............................................................................... 478 Airport: Airport Fund Summary…..............................................................................................................................…......................................................................... 479 Airport Operations…..............................................................................................................................…................................................................................ 482 Stormwater: Stormwater Fund Summary…..............................................................................................................................…................................................................. 483 Stormwater Operations…..............................................................................................................................…........................................................................ 487 Housing Authority: Housing Authority Fund Summary…..............................................................................................................................…....................................................... 488 Housing Authority Operations…..............................................................................................................................….............................................................. 490 Capital Projects Fund Fund Summary…..............................................................................................................................…............................................................................................ 494 .......…................................................................ Summary by Category (Division)….................................................................................................................... 497 Summary by Funding Source…..............................................................................................................................…..................................................................... 504 Project Summary by Name…..............................................................................................................................…......................................................................... 516 Unfunded Projects…..............................................................................................................................…...................................................................................... 638 Equipment Fund Summary…..............................................................................................................................….................................................................. 649 Equipment Operations…..............................................................................................................................…......................................................................... 652 Risk Management: Risk Management Fund Summary…..............................................................................................................................…...................................................... 654 Risk Management Operations:…..............................................................................................................................…............................................................ 655 Information Technology Services (ITS): ITS Fund Summary…..............................................................................................................................….............................................................................. 657 ITS Operations…..............................................................................................................................…..................................................................................... 658 Central Services: Central Services Fund Summary…..............................................................................................................................…......................................................... 661 Central Services Operations…..............................................................................................................................…................................................................ 662 Health Insurance Reserve….............................................................................................................................. 664 Dental Insurance Reserve….............................................................................................................................. 666 Statistics U.S. Census Data…..............................................................................................................................…....................................................................................... 669 Revenue Comparisons: Property Tax …..............................................................................................................................…........................................................................................ 670 General Fund…..............................................................................................................................…....................................................................................... 670 Hotel/Motel Tax …..............................................................................................................................…................................................................................... 671 Utility Franchise Tax Rates…..............................................................................................................................….................................................................. 671 Utility Rates…..............................................................................................................................….......................................................................................... 671 Property Tax Levies…..............................................................................................................................….................................................................................... 672 Property Tax Valuations…..............................................................................................................................….............................................................................. 674 Principal: Taxpayers…..............................................................................................................................…............................................................................................. 676 Employers…..............................................................................................................................…............................................................................................ 677 Sewer Customers…..............................................................................................................................…................................................................................ 678 Water Customers…..............................................................................................................................…................................................................................. 679 Internal Service Funds Equipment:

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Operating Indicators…..............................................................................................................................….................................................................................... 680 Department Statistics: Police…..............................................................................................................................….................................................................................................... 681 Fire…..............................................................................................................................…....................................................................................................... 685 Library…..............................................................................................................................….................................................................................................. 687 Senior Center…..............................................................................................................................…....................................................................................... 692 Transportation Services…..............................................................................................................................…....................................................................... 695 Neighborhood & Development Services…..............................................................................................................................…............................................. 697 Appendix Department Expenditure Comparison to State Forms…..............................................................................................................................…........................ X Budget Resolutions…..............................................................................................................................….............................................................................. X State Forms…...................................................................................................................................…..................................................................................... X Changes from Proposed to Final Budget…...........................................................................................…............................................................................... X Transfer Resolution…............................................................................................................................................................................................................... X State Property Tax Reform Impact Summary…..............................................................................................................................…...................................... 700 Glossary…..............................................................................................................................…............................................................................................... 702

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INTRODUCTION

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

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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 the fiscal year ending in 2026 (i.e. FY 2026). Although Iowa Code only requires formal adoption of an annual budget, we have included a three-year financial plan (FY 2025-2027) and five-year Capital Improvement Program (2025-2029) for planning purposes. The budget is one of the most important documents the City prepares because it identifies the services provided and the mechanisms to finance those services. Any future modifications to this budget will be fully disclosed through formal City Council action at public meetings, in accordance with State of Iowa law. This budget aims to provide resources to deliver reliable and efficient municipal services, invest in critical infrastructure, further strategic plan priorities, and implement adopted master plans rooted in public input. The budget also contains prudent contingency line items and reserves which aid the City in weathering both unexpected expenditures and revenue shortfalls. The FY 2026 budget faces a challenging economic climate due to several compounding factors. Additionally, forecasts for the FY 2027-29 budgets indicate compounding financial challenges that make prudent budgeting decisions in FY 2026 even more important. Although I remain confident in the City’s financial foundation, the budget keeps discretionary expenditure growth to a minimum. Resources are prioritized to support core service levels in critical areas such as public safety, transportation infrastructure, and public utility operations, while continuing to advance the City Council’s Strategic Plan and implement adopted master plans. The current fiscal environment facing Iowa City is the most challenging since the 2008 Great Recession. State property tax reform laws passed in 2013 and 2023 have stressed the City’s ability to continue delivery of core services to a growing community while maintaining investment in value-add activities and external partner organizations. At the same time, the City’s growth in taxable valuation is not keeping pace with inflationary impacts on our services and infrastructure maintenance efforts. While the City’s past prudent financial strategies have provided the City some flexibility in navigating the recent challenging environment, the effects are expected to continue to compound over the next few years. It is critical to understand these pressures and how the FY 2026 budget responds to short-term needs and positions for long-term fiscal stability. The largest impacts to the Iowa City’s financial position are fueled by significant property tax reforms enacted by the State. These reforms affect the City’s ability to continue providing critical public services. In 2013, the legislature adopted a major reform to reduce the taxability of multi family properties over 11 years from 100% of the assessed property value to the annual residential rollback rate, which is 47.4% for FY 2026. As a result, the taxability of multi-family property more than halved with a cumulative loss of more than $30 million in revenue to Iowa City. The change also means that around 82% of the City’s total assessed valuation is now subject to annual volatility of the residential rollback rate. That rollback rate reached a near record low in FY 2025 and will remain at a historically low rate of 47.4% in FY 2026. Fiscal Environment

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The 2013 legislation also introduced a rollback for commercial and industrial properties which reduced the taxability of that property class from 100% to 90% of assessed value. Unlike multi family properties, the State “backfilled” this loss by providing approximately $1.5 million in revenue to the City each year. However, the State passed legislation in 2021 to phase out backfill payments over the following five years. For FY 2026, Iowa City expects to receive approximately $308,000 before backfill payments are fully eliminated in FY 2027. In 2022, Iowa passed another property tax law which converted the Business Property Tax Credit to a partial property tax exemption. To help local governments adjust to this change, the State budgeted for additional local government backfill payments equal to approximately $700,000 annually through FY 2029. However, the State’s Legislative Services Agency projects that available funding for this backfill will fall short and incrementally reduce local government revenues. Another round of significant property tax reform was adopted during the 2023 legislative session. These changes consolidated several property tax levies into a Combined General Fund Levy and phases them out by FY 2029, if not sooner based on annual taxable valuation growth caps. In Iowa City, this affected the Library and Emergency property tax levies, which provided nearly $2 million in operating revenue as of FY 2024. Unless a reduction in service is desired, this loss in annual revenue must be absorbed into the General Fund. The 2023 reforms also expanded the Senior Homestead Tax Credit and created a new Military Service Exemption, which are estimated to reduce the City’s total taxable valuation by over $27 million in FY 2026. Despite overall assessed value growth, the City’s taxable valuation declined in consecutive years in fiscal years 2023 and 2024 as impacts from legislative reforms and state-mandated valuation rollbacks outpaced taxable growth. Even modest positive growth experienced in fiscal years 2025 and 2026 are insufficient to sustain current service levels in the long-term. The financial strain from these challenges is exacerbated by macroeconomic forces including inflationary and labor supply pressures that are increasing operating and capital expenditures and diminishing the City’s purchasing power. Further budgetary pressures, such as additional property tax reform measures or an economic recession, could accelerate what is likely to be unavoidable impacts to service levels in the coming years. This risk of diminishment of public service levels is only heightened by increasing demands for service as our population continues to grow. The cumulative impact of the past property tax reforms will not be realized until FY 2029. Even so, property tax reform remains a stated top priority of the State Legislature. Impacts of said efforts are expected to be most pronounced on the General Fund, which provides for critical services such as Police, Fire, Parks and Recreation, Senior Center, and Library. Overall, property taxes make up around two thirds of General Fund revenue. It will be critical to keep a close eye on the General Fund over the next several fiscal years and consider expenditure reduction measures before the full impact of reform is realized. This budget maintains a flat overall property tax rate and adopts several rate and fee increases to ensure fiscal health and stability. The “Fiscal Year 2026 Budget Overview” section of this letter details the City’s tax and fee rates and debt service strategy. The FY 2026 strategy highlights the need to continue building capacity in the debt service fund to maintain and expand critical

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infrastructure in the face of diminishing purchasing power resulting from inflationary impacts on capital projects. Unfortunately, the strategic plan goal to increase the Emergency Fund balance by 5% annually is not met with the FY 2026 budget for the third year in a row. The Emergency Fund balance is currently around $5.4 million. Similarly, there is no budgeted transfer to bolster the Facility Reserve, another strategic plan goal. This fund is expected to be depleted in FY 2026, which means the City will have to more heavily rely on debt to fund critical facility projects going forward. The primary focus of this budget is to ensure the City can maintain core service levels and responsibly fund infrastructure and equipment repairs and replacement. This year’s budget focuses on providing the resources to support the City’s current level of service provided while keeping up with increasing demands. Given the aforementioned financial pressures, only two new positions are being proposed to the City Council for the first time including a maintenance worker in the Water division and a mechanic in the Equipment division. These two positions are not solely dependent on property taxes and are critically needed to maintain existing service levels. The Capital Improvement Program (CIP) outlines routine improvements in addition to larger projects. More than $4 million is planned each year for annual transportation system improvements such as pavement rehabilitation, bridge repair, bicycle accommodations, traffic signals, traffic calming, parking ramp restoration, and curb ramp enhancements. Another $800,000 in annual funding is planned for regular utility system improvements, including undergrounding utilities and sewer main replacement. The budget also includes several major projects for 2025-26 to maintain critical infrastructure, including the Court Street and N. Gilbert Street reconstruction projects, Bradford Drive Water Main Replacement, and Collector Well #1 reconstruction. Various water, sewer, stormwater, landfill, park, and public facilities projects are also scheduled in accordance with replacement and maintenance needs. Inflation and labor shortages continue to have significant impacts on operations, as well as project budgets and completion timelines. Rising insurance premiums continue to significantly impact the budget. Liability insurance is projected to increase 15% in FY 2026 after increasing nearly 16% in FY 2025. Similarly, Fire and Casualty insurance is projected to increase 35% in FY 2026 after increasing 23% in FY 2025. These significant market adjustments in the insurance industry have increased costs by more than $875,000 in fiscal years 2025 and 2026. As these essential costs consume more of the tightening available resources, investment in value-add programs and services must be adjusted accordingly. Prioritizing Core Services

Implementing City Council’s Strategic Plan

City Council’s Strategic Plan outlines the values, impact areas, and resources needed to execute the identified goals. Embodied in every element of the Strategic Plan, and within this budget, are three values that represent the lens through which we approach our work and the four areas of community impact in which the work will occur. The plan

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was reviewed and updated in December 2024 to reaffirm its vision and strategies, account for changing circumstances, and further focus desired action steps. The following section highlights major actions incorporated in this budget that helps implement this plan.

Fare-Free Transit

Fare-free transit has been a notable success with passenger trips increasing by more than 40% in the first year and continued robust growth in year two of the pilot offering. The public also indicates improved experiences with transit. In a representative survey of community residents in the fall of 2024, 76% rated the quality of transit service as good or excellent, an increase of 13% since the last community survey taken in 2017. This level of satisfaction is much higher than peer city comparisons. As a result, the FY 2026 budget continues to lay the financial foundation necessary for a zero-fare system after the current pilot project sets to expire in August of 2025. The first step, taken in FY 2025, included increasing several parking-related fees and citations, in addition to the hourly cost of parking decks and on-street meters. The combined impact is expected over time to bring in more than $2 million in new revenue annually, a significant portion of which is projected to support continuation of fare-free transit in the coming years. The next step this year is a 1% gas and electric franchise fee increase to 2% total. This will generate an estimated $1 million annually and will aid in the equipping and operation of the transit system. However, the utility tax revenue may not grow at the same rate as ongoing operational expenses, so additional sources of funding may be required in the future. The long-term commitment to fare free transit, combined with the planned construction of the new transit building, will ensure our community has one of the most robust and accessible transit systems in the country. Another key focus is addressing the housing affordability crisis, especially for low-income residents, as evidenced by substantial progress towards our Affordable Housing Action Plan. The FY 2026 budget includes an $800,000 General Fund transfer to the Affordable Housing Fund. Allocations from this fund support the Housing Trust Fund of Johnson County, CommUnity security deposit program, Healthy Homes program, landlord risk mitigation, the winter shelter, and emergent situations. This budget also allocates funds to continue support for the Shelter House Street Outreach partnership. The FY 2026 budget also helps implement the nearly $3.8 million Pathways to Removing Obstacles to Housing (PRO Housing) federal grant. Projects include a Comprehensive Plan update to promote housing choice, initiation of a housing counseling program, and an evaluation to help the Housing Authority establish a development arm. At the same time, the City will evaluate repositioning its Public Housing program to improve its financial sustainability while facilitating growth in the City’s publicly owned housing stock. The City will continue to explore the best way to support these efforts using previously generated funds for affordable housing totaling more than $7 million. These astutely created supplemental revenue streams such as fee-in-lieu payments, tax increment financing, and federal grants help further expand capacity for affordable housing investment despite tightening property tax revenues. Affordable Housing

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Public Facilities

The FY 2026 budget maintains an aggressive investment in public facilities to support short and long-term service delivery. New, expanded or renovated facilities that are funded in the plan include the Senior Center, transit building, equipment building, wastewater digester complex, landfill compost facility, Animal Shelter training annex, City Park pool and more. Public facilities projects are supported in part by the Facility Reserve Fund, which built up financial capacity over the last several years. However, no FY 2026 transfer is planned for the Facility Reserve Fund, which is now expected to completely draw its fund balance down to support the construction of City Park Pool. The goal is to replenish the Facility Reserve Fund in the future if that becomes possible due to unanticipated surpluses, though that seems unlikely in the short-term given current fiscal challenges. This will place more pressure on debt as the primary funding source for public facilities in the foreseeable future. In addition, this budget continues to address anticipated public facility needs as the community and demand for services grow. The City is evaluating possible sites outside of City Hall for the relocation of Fire Station #1. Similarly, there is close coordination with the Johnson County Sheriff’s Office on studying whether a joint facility will be an effective solution to meet the need for a new police station. Finally, the City is considering alternatives to accommodate employee space needs at City Hall. This may include purchasing or leasing space off-site as a stopgap measure to provide more suitable work environments for staff until a more comprehensive solution is achievable. The macroeconomic headwinds and continued State mandated property tax reform significantly limits the City’s ability to add personnel with the FY 2026 budget. However, this budget does introduce two new positions which support the quality provision of core services. This includes a new mechanic position in the Equipment division and new maintenance worker in the Water division to ensure the maintenance demands of our City equipment and infrastructure are met. These positions relate directly to the City’s Strategic Plan by keeping core services operating. However, many other operations are also in need of additional resources to support our growing community. The City must keep core staffing and resource needs in sight as those investments will be needed if and when budgetary resources allow. Additionally, we are fortunate to add additional positions which are only made possible due to the support of grant funding, including federal funding to our Housing Authority. These include the new housing program assistant added in the FY 2025 budget, and two positions funded through the PRO Housing grant awarded to the City in 2024: a senior housing developer and housing counselor. Both positions are necessary to further the City’s affordable housing goals in the Strategic Plan but will need to generate revenue to continue after grant funds are expended. Personnel

Supporting Master Plans

This budget provides funding to support continued implementation of various City Master Plans. Over $31 million in the five-year Capital Improvement Program is budgeted for parks and

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recreation projects, many of which implement the Parks & Recreation Gather Here Master Plan. The FY 2026 budget includes funding for shelter and restroom replacements at City Park, softball field renovations at Napolean Park, playground replacement at North Market Square Park, and new park amenities at Palisades Park. Funding is also provided in fiscal years 2025 and 2026 for the replacement of City Park Pool and for initial step towards establishing a new park west of Highway 218. This budget also continues implementation of the Bicycle Master Plan through annual multimodal investments in our transportation network. The Climate Action Plan also remains a priority, despite the State’s elimination of the Emergency Property Tax Levy which previously funded climate operations. This budget continues incorporating Climate Action activities in the General Fund to help achieve our Climate Action and Adaptation goals. Sustainability programs in the FY 2026 budget include over $300,000 for residential energy efficiency grants, HERS grants to homebuilders, community climate action grants, implementation of the resilience hub program, and additional programs, partnerships, and events. The City’s sustainability efforts are also incorporated into other various master plans and capital projects such as tree plantings, prairie management, fare-free transit, multi-modal roadway improvements, and waste reduction programs. While the FY 2026 budget invests in implementing Council’s Strategic Plan and supporting master plans, it also seeks to exercise appropriate caution by limiting service expansion plans, holding external organizational funding flat, and shifting expenses away from property taxes to other suitable options. This is in direct response to the pressures of the current fiscal environment and uncertainties created by continued property tax reform. These pressures are expected to compound over the next few fiscal years, so exercising restraint and caution today will help avoid what may be more significant cost reduction steps and negative service impacts in the future. Most notably, this budget delays the pursuit of Fire Station #5 as it is clear that the City cannot financially support the service expansion in this budget environment. To support future staffing needs, the fiscal year 2024 and 2025 budgets included the over-hiring of two firefighter positions in addition to $700,000 in contingency for future positions. While the FY 2026 budget maintains the two over-hire positions, the contingency for future positions is reduced to $300,000 to help shrink the annual General Fund deficit, which is projected at $2.6 million. The City will continue to evaluate the feasibility of a new fire station as the effects of property tax reform become clearer, but in the meantime, we will continue to provide exceptional fire protection and emergency medical services with a four-station foundation. The FY 2026 budget also makes changes to the funding source of several value-add investments. The budget proposes an $800,000 General Fund transfer to the Affordable Housing fund rather than the $1,030,000 provided in FY 2025. This reflects removal of the Low Income Housing Tax Credit (LIHTC) match from the distribution model. Removing this expense from the property tax dependent General Fund eases pressures on the deficit and forestalls municipal service reductions. The City intends to shift support of LIHTC projects by utilizing tax increment financing. Similarly, property tax support for the City’s Social Justice and Racial Equity grant program is projected to drop $25,000 to a total of $75,000. The reduction in property tax support can be Exercising Caution with Service Expansion and External Funding Support

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