Master Proposed Book FY2023

unemployment rates in the nation. As an organization, the City has a rich tradition of responsible budgeting policies that has created a strong financial foundation, which has helped the community weather both past and recent economic recessions while sustaining service delivery. In 2021, Moody’s Investors Service reaffirmed its highest quality bond rating (Aaa) for the City’s general obligation debt. Moody’s notes factors that could negatively impact the City’s bond rating include a substantial and sustained reduction in reserve funds or large growth in leverage. Iowa City’s bond rating is the product of prudent budgeting and long-range financial planning. Ultimately, our strong financial position lowers the cost of borrowing and ensures more of our community’s dollars are spent on service delivery and Strategic Plan priorities, rather than interest payments. “The rating further reflects a robust financial profile supported by very strong reserves and ample revenue raising ability… The stable outlook reflects our view that the city's financial performance will remain healthy, the city will continue to grow in size, and the strong management team will be able to offset any additional uncertainty regarding the coronavirus impact” - Source: Moody’s Investors Service, Iowa City 2021 GO Bond Rating Despite the stable financial position of the organization, the public should be aware of the economic trends shaping the community. Iowa City has many attributes that attract new residents to our city. A strong job market, good schools, and diverse cultural amenities all contribute to the desirability of our area for families, retirees, and young professionals to make their permanent homes. New residents, including students, bring a social and economic vibrancy that helps define Iowa City. The City Council has adopted several policies and initiatives in recent years to maintain and enhance our positive attributes, considering this population growth. However, population growth has a profound effect on service delivery, land use, and housing affordability and creates additional service demands, stresses transportation and utility infrastructure, and impacts critical quality of life factors. Fortunately, growth in our tax base in recent years has allowed the City to weather implementation of state property tax reforms while devoting significant resources to new programs and maintaining top notch service delivery. However, we have simultaneously seen both a plateau in development and a minor decrease in taxable property valuations. As previously discussed, this stagnation in taxable value will be compounded in coming years by a more dramatic drop in multi- family taxability through the final year of property tax reform implementation and the new five-year phaseout of commercial/industrial property tax backfill payments. Additionally, in Fiscal Year 2023, a drop in the residential rollback rate will reduce taxable value by 2.27% which equates to a loss of roughly $1.6 million in direct revenue to the City. Thus, Iowa City must continue to move forward with cautious budgeting and strong reserves to help soften the blow of these changes and any additional unanticipated circumstances. With this approach, I am confident Iowa City can navigate the impacts of tax reform and the pandemic and retain a strong position that will allow us to continue to invest in services and projects that make our community one of the most desirable places to grow up, raise a family, and retire.

15