FY27 Proposed Budget

Conclusion

The FY 2027 budget reflects Iowa City’s focus on providing high quality municipal services in a fiscally responsible manner. It was crafted with guidance provided by the City Council through the 2023-2028 Strategic Plan and adopted master plans. We are fortunate to have a strong foundation from past years of prudent decision-making and are heartened by opportunities provided by the voter approval of a 1% Local Option Sales Tax. However, the City is facing down significant uncertainty. State mandated property tax reforms including the phase out of the Library and Emergency levies and new taxable growth penalties, the significant portion of property valuation subject to the residential rollback, muted taxable property valuation growth, inflationary impacts on operational inputs, and federal funding volatility are just a few of the variables creating unease. Further property tax reform appears almost certain in 2026 and could exacerbate challenges, as could continued elevated inflation or economic recession. These forces acutely impact the General Fund, even with some relief provided by LOST, and it is reflected by the forecasted $1.5 million General Fund decrease to its unassigned fund balance. At the same time, growth has placed pressure on core City services and critical infrastructure. Because the City relies heavily on property tax revenue, it is imperative for the City to focus on economic development and smart growth of the City’s tax base to support increased service demands and the higher costs of maintaining critical public infrastructure. Capital investments outlined in this budget continue to largely focus on addressing critical maintenance needs. Looking ahead, infrastructure expenses are outpacing growth in user fees and road use tax receipts. The City will need to adapt accordingly in order to avoid falling behind on the progress we made over the last decade in addressing deferred maintenance with our streets, utilities, and parks. LOST can be a significant tool to help address this issue, but it will require a steady allocation of sales tax funding for infrastructure purposes. LOST will also allow the City to invest additional funding in sustaining successful strategic initiatives while permitting new discretionary value-add partnerships and significant investment in affordable housing. The City Council should continue to ensure that such investments are rooted in our strategic plan goals. Although the City’s financial condition is stable, the current environment poses serious challenges, and financial discipline is undoubtedly necessary to protect our financial standing and ability to deliver core services. This is especially true as the challenges are expected to compound, but it is wise to make incremental changes now rather than dramatic changes in a few years. A strong financial foundation takes years to build, and Iowa City is fortunate to have such stability. However, it can be compromised in a very short period of time without careful stewardship and restraint. I am confident this FY 2027 budget continues to move Iowa City in the right direction.

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