FY27 Proposed Budget

In 2025, Moody’s Investors Service reaffirmed its highest quality bond rating (Aaa) for the City’s general obligation debt. Factors that could negatively impact the City’s bond rating include a substantial and sustained reduction in reserve funds or large growth in debt leverage. This rating is the product of “exceptional budget management practices, policy credibility and effectiveness, and transparency and disclosure” (Moody’s Credit Opinion May 1, 2025). Ultimately, our strong financial position lowers the cost of borrowing and ensures more of our dollars go towards service delivery and Strategic Plan priorities, rather than interest payments. Iowa City was one of only 3 cities in Iowa and among 12% of cities nationwide to receive a Aaa Moody’s rating in 2025. Iowa City has many attributes that attract new residents to our city. A strong job market, good schools, world class healthcare, and diverse cultural amenities all contribute to the desirability of our area for families, retirees, and young professionals to make their homes. New residents, including students, bring social and economic vibrancy that defines Iowa City. However, population growth profoundly affects service delivery, land use, and housing affordability. Growth creates additional demands and on stresses transportation and infrastructure. These challenges must be acknowledged and managed for Iowa City to retain attractive and competitive. Prior to the pandemic, strong growth in our tax base allowed the City to absorb the expenditure increases that accompany population growth and address past property tax reforms while still devoting significant resources to new programs. This shifted in FY 2023 and 2024 when the City’s tax base shrank due to a plateau in development activity, large valuation rollbacks, and expansion of property tax exemptions. Taxable valuation penalties for growth of the tax base established in the 2023 property tax reform bill make it unlikely that the City will be able to achieve enough growth to offset State-mandated property tax levy reductions as it had in the past. Impacts will continue to compound as current tax reforms are fully phased into the budget and future property tax reforms are considered at the Statehouse. Rising operational costs tied to inflation and growing service demands create additional budgetary pressures While LOST provides some relief, it is not enough to offset years of cumulative impacts. Due to these factors, it is essential to maintain the discipline to proceed with cautious budgeting and strong reserves.

Fiscal Year 2027 Budget Overview

FY 2027 budgetary expenditures total $250,153,936. Of the total budget, $75,044,500 is for the General Fund and $62,630,600 is directed to Capital Projects. A breakdown of the budget by fund type is included in Figure 1.

Figure 1: Expenditure Comparison by Fund Type (FY 2027) excludes transfers

$75,044,500

$71,997,536

$80,000,000

$62,630,600

$60,000,000

$40,000,000

$21,926,200

$18,755,100

$20,000,000

$-

General

Enterprise Special Revenue Debt Service Capital Projects

21