FY26 Proposed Budget

Iowa City's internal fiscal policy also specifies that the debt service levy shall not exceed 30% of the total property tax levy. The debt service levy in the FY 2026 budget increases $0.083 from the prior year and accounts for approximately 17.0% of the City’s total levy. The following depicts outstanding G.O. and TIF revenue debt as a percentage of total valuations.

General Bonded Debt Outstanding and Percent of Total Valuation

0.00% 0.20% 0.40% 0.60% 0.80% 1.00% 1.20% 1.40%

0 10 20 30 40 50 60 70 80 Millions of Dollars ($)

FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24 *FY25 *FY26 *FY27 Debt (millions) 67 67 67 68 67 66 64 63 66 68 73 % of Val 1.25% 1.22% 1.14% 1.11% 0.97% 0.94% 0.88% 0.85% 0.75% 0.77% 0.81%

Internal Service Fund Highlights

Internal Service Funds serve needs that are internal to the City as an organization. These are non-budgetary funds and are an internal financing mechanism for operations such as vehicle replacement and information technology services. Expenditures made from these funds are charged back to departments. All funds are in good condition with healthy balances. Strong balances create reserves that can provide flexibility to deal with unexpected operational costs.

Looking Ahead

In summary, the FY 2026 budget is built on a strong foundation from past years of prudent financial decision-making. However, the City is facing down the most challenging budgetary years in the last two decades. State mandated property tax reforms including the latest elimination of both the Library and Emergency levies, new property tax exemptions for seniors and veterans, new growth limitations, the fully phased shift from commercial to residential taxability of multi family properties, stagnating taxable property values, inflationary impacts on operational inputs, and volatile expenses such as property and liability insurance are just several of the variables creating significant headwinds on City finances. Threats of new property tax reform measures in upcoming legislative sessions could worsen conditions, as could a return to heightened inflation and threat of economic recession if macroeconomic forces dictate. The pressure placed by these challenges on many core City services and critical infrastructure projects cannot be understated. Because the City budget necessarily relies heavily on property taxes as a revenue source, it is imperative for the City to focus on economic development and smart growth of the City’s tax base to ensure property taxes can support increased service demands and generally higher costs of providing services and maintaining critical public infrastructure. Diminished purchasing power due to inflation means a higher portion of operating revenues will be allocated towards existing services. Investments in new initiatives and

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