FY27 Proposed Budget

Property taxes and charges for services account for a majority of City revenues. Figure 2 shows year-over year changes in Iowa City's revenue across all funds. The 3.9% increase in property taxes is the result of growth in the property tax base, despite the State decreasing the residential property tax rollback percentage and a reduction in the property tax levy. The 160.7% growth in other City taxes

Figure 2: All Funds Revenue Comparison of FY2026 versus FY2027 FY2026 Revised FY2027 Percent Change

Property Taxes Other City Taxes Licenses & Permits Use of Money & Prop Intergovernmental Charges for Services

$70,609,000 $8,911,400 $2,652,800 $3,368,900 $79,168,400 $49,275,400 $12,569,600 $49,215,800

$73,366,000 $23,235,000 $2,558,900 $3,756,600 $61,280,000 $49,457,652 $11,925,900 $19,426,300

3.9%

160.7% -3.5% 11.5% -22.6%

0.4% -5.1%

Misc.

Other Financial Sources

-60.5%

Total

$275,771,300

$245,006,352 -11.2%

is due to the approval of a 1% Local Option Sales Tax. Most other revenue categories include moderate changes, apart from intergovernmental and other financial sources. However, larger swings are common in those two categories as they are influenced by the timing of state and federal grants and debt sales.

Figure 3: All Funds Revenue Sources (FY 2027)

Figure 3 displays revenue across all funds for the FY 2027 budget. It demonstrates the importance of property taxes and charges for services to support operations, even with additional funding from LOST. It is also imperative to consider how the overall revenues and expenditures in this budget will impact local households and businesses. Due to the property tax relief funded by the 1% Local Option Sales Tax (LOST), the

Misc. 5%

Other Financial Sources 8%

Property Taxes 30%

Charges for Services 20%

Other City Taxes, 9%

Intergovernmental 25%

Licenses & Permits, 1% Use of Money & Prop, 2%

property tax rate will decrease 20 cents to $15.43. This rate represents a 1.3% reduction in our property tax rate over the previous year and a 13.5% reduction since FY 2012. In addition to property tax relief, LOST will also support expanded investment in City Council’s Strategic Plan priorities, providing funding for affordable housing, community partnerships, and public infrastructure and facilities. Notably, the uses of LOST funds are designed to help mitigate the impact of the 1% sales tax on households with lower incomes. However, future levy reductions may not be possible given uncertainties regarding growth of the City’s tax base, looming property tax reform, and economic inflation or recession. In fact, property tax rates could be forced upwards in future years. City enterprises are especially pinched by reduced purchasing power from inflation, compounded by the significant and necessary investments in infrastructure required in the next several years. To help address these fiscal challenges, this budget includes two rate increases: a 3% water fee rate increase and a 5% sewer rate increase. Overall, the reduced property tax rate and anticipated utility rate increases balance out, with a household with a $100,000 assessed home value paying around $17 less per year (i.e. $1.43 less per month or -0.8%) in taxes and fees for basic City services in FY 2027 compared to FY 2026.

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