Final FY25 Adopted Budget

To the Honorable Mayor and City Council Members, It is my pleasure to submit Iowa City's operating and capital budget for Fiscal Year 2025. Although Iowa Code only requires formal adoption of an annual budget, we have included a three-year financial plan (FY 2024-2026) and five-year Capital Improvement Program (2024-2028) for planning purposes. The budget is one of the most important documents the City prepares as it identifies the services to be provided and the mechanisms to finance those services. Any future modifications of this budget will be fully disclosed through formal City Council actions 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. However, the current challenging economic climate and both the 2013 and 2023 State of Iowa property tax reform laws have resulted in significant and still emerging budgetary strains. In Fiscal Years 2023 and 2024, the City’s taxable valuation declined in consecutive years for the first time in recent history as impacts from legislative reforms and state-mandated valuation rollbacks outpaced taxable growth. The financial strain from the State of Iowa tax reform and gradual recovery of the local economy from the pandemic is compounded by macroeconomic challenges including inflationary and labor supply pressures that are increasing operating and capital expenditures and diminishing the City’s overall purchasing power. Any further budgetary pressures, such as additional State of Iowa mandated property tax reform measures or an economic recession, could drive impacts to service levels in the coming years. This risk is only heightened by growing demands for service as our population continues to expand. Additionally, the City’s flexibility to pursue bold investments in new initiatives with traditional local revenue streams will be extremely limited. Although I remain confident in the City’s financial foundation, the budget keeps discretionary expenditure growth to a minimum due to these lingering pressures. Resources were prioritized to advance the City Council’s Strategic Plan, implement various adopted master plans, and support core service levels in critical areas such as public safety, transportation infrastructure, and our public utility operations. Investment in the City Council’s Strategic Plan The following section highlights examples of investments this budget makes in the values, strategies, action items, and resources prioritized in the City Council’s Strategic Plan. Strategic Values Social Justice, Racial Equity, and Human Rights : For the third consecutive year, $100,000 is provided for the Social Justice and Racial Equity Grant Program. Approximately $600,000 in Black Lives Matter funding remains unallocated and is available for the City to invest in supportive programming. Sponsorship funds are included for community commemorations such as Martin Luther King Jr. Day, Indigenous Peoples’ Day and Juneteenth. Programming and outreach

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