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Home My WebLink AboutFY26 Budget ProposalI r 1 � mk0 L - 4 CITY OF IOWA CITY UNESCO CITY OF LITERATURE CITY OF IOWA CITY FY2026 Budget Proposal January 13, 2025 Budget Document Areas of Focus Transmittal Letter (Executive Summary) Economic Trends Fund Structure and Description of Funds Financial and Fiscal Policies Long Range Financial Planning General Fund Summary WWW.ICGOV.ORG/BUDGET 10-27 37-40 273 - 278 286 - 292 293 - 296 315-329 Non -Budgetary Budgetary} FundsFunds General Fund Special Revenue Debt Service Fund Enterprise Funds Capital Projects Fund Internal Service Funds Funds General 7t7" { } CDBG 2;pp } Debt Service Parkin 71D` 11) 9 Capital Proects p 1 E ui ment 1310' p k ) (80„) HOME Grant (21 1(1) Trans& (715') Risk Management (132(10) Information Road Use Tax (22DO) Wastewater (72(l') Technakrgy Services 13 3fl'? OtherShared Wafer l0') Central Services Revenues(231313) (84Uflj Metro Planning DrganLz ti n of Refuse Collodion Health Insurance Johnson County (7401)} (86410) (235D Employee Benefrls Landfill (7ra0`: Dental Insurace n(BaUO) (240D) E mergency Levy Airport (7600 ) (245D) Starmwater [T7(10) Agency Funds Affordable Housing (2506) Iawa.CityProperty Housing Aulhantyr Project Green (9102} Management (2510) (79") Tax Increment Financing (213") Self Supporting M unicipal (1 } The Farl ng Fund dM r A qualrry an a ralor run.] r II•e I District Anr�al Report, but tt is Gdng presented as me Vr mprovernent maroge hal reasons. (282D) Major funds Iowa city Fund Structure Fiscal Year 2025Budget Review • Taxable valuation did not keep up with inflationary pressures • Rollback rate reached near record low of 46.3% • Significant increase to insurance premiums • Liability-16% • Fire and Casualty— 23% • Maintained property tax rate at 15.633 ( Znd straight year of no change ) • Continued progression toward Strategic Plan actions • Increased parking fees to help support fare -free transit, Block by Block downtown maintenance program and parking deck maintenance projects • Status quo department budgets with 3.75 FTE added • Z.00 funded from General Fund • 2.75 funded from enterprise funds 6121«16 State commercial and industrial backfill payment phasing out Historically low residential rollback rate 2023 State property tax reform Slower taxable property value growth Significant inflationary volatility in key expense lines State of Iowa Commercial & Industrial Backfill 2013 tax reform reduced commercial and industrial taxability from 100% to 90% The State "backfilled" this loss and the City had been receiving approximately $1.5 million in backfill payments annually (equivalent to about 1 t State Legislation passed during the 2021 Session ended backfill payments Iowa City's backfill payments have been phased out over 5 years, beginning in FY23 FY26 receipts are projected to be approximately $308,000 before being fully eliminated in FY27 Commercial and Industrial Backfill Payments from State of Iowa $i,800,000 $i,600,000 $1,400,000 $1, 200,000 $1,000,000 s800,000 s600,000 $400,000 $200,000 $0 0 - - - ell State of Iowa Business Property pax Credit Backfill H F 2552 passed during 2022 legislative session converts Business Property Tax Credit to a partial property tax exemption with the value reimbursed by the State to local governments. The City has already experienced this revenue source start to reduce and expects that by FY 2030 it may longer be provided by the State. BPTC Backfill Budget for FY 2026: General $370,900 Risk $12,600 Transit $41,100 Employee Benefits $144,800 Debt Service $107,300 Total $676,700 Residential Rolihn Trend Rollback dropped to 46.34% in FY25 (Assessment Year 2023); Largest single year drop since 1979 - FY26 saw slight increase to 47.4% A 1% change in the rollback figure represents approximately $1,100,000 in tax revenue 90% 81% 78% ao% _ 70% 60% 50% 40% 30% 20% 10% 0% 68% 64% Rollback by AssessmentYear 55% 53% 56% 44% 56% 54% 470/0 54% 46% 00 0) O ri N M I-t Ln l0 r� 00 0) O ri N M .t Ln tp I, 00 0) O ri N M .t Ln l0 r� 00 0) O ri N M I-t Ln l0 I, 00 0) O ri N M 't I- r- 00 00 00 00 00 00 00 00 00 00 M M M M M M M M M M O O O O O O O O O O H H H H H H H H H H N N N N N 0) 0) 0) 0) 0) 0) 0) 0) 0) 0) 0) 0) 0) 0) 0) 0) 0) 0) 0) 0) 0) 0) 0 O O O O O O O O O O O O O O O O O O O O O O O O H H H H H H H H H H H H H H H H H H H H H H N N N N N N N N N N N N N N N N N N N N N N N N N *Beginning in FY25; multi -residential transitioned to residential and became subject to rollback M 2024: Multi- Residentia " liff Prior to the 2013 State property tax reform, multi -residential properties were classified as commercial and taxed at 100% of value In FY 2024, multi -residential properties were combined into the residential classification The taxability of multi -family property has dropped 53.66% over the last 11 years. Cumulative loss in revenue to the City over the 11 years is estimated to be more than $20 million Multi -residential properties previously accounted for approximately 8% of Iowa City's total assessed valuation Now approximately 81 % of the City's total assessed valuation is subject to the annual volatility of the residential rollback rate Residential Multi -Residential Rollback Rollback FY14 52.82% 100.00% FY 15 54.407o 95.0070 FYI 6 55.737o 90.007 FYI 7 55.637o 86.257o FY 18 56.947o 82.507o FYI 9 55.627o 78.757o FY20 56.927 75.007o FY21 55.077o 71.257o FY22 5 6.4 1 % 67.50% FY23 54.13% 63.757o FY24 54.65% 54.65% FY25 46.347o 46.347o NP 0 W �o M Ln Building Permit Trends Building Permit Construction Value (calendar year) 400,000,000 350,000,000 300,000,000 250,000,000 2012-2015 average: $161.3M 200,000,000 150,000,000 100,000,000 50,000,000 2017-2019 average: $213.7M 2020-2022 average: $125.1M 2023 actual: $275.4M 2024 actual: $130.4M 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Changes in Taxable Valuate Pattern Total Property Tax VaIuations &Percent Changeover Prior Fiscal Year $ S, 000, 000, 000 $4, Soo, 000, 000 $4,000,000,000 — $3, Soo, 000, 000 a) $3,000,000,000 Z) m v$2,Soo,000,000 m M $2,000,000,000 $1, S00, 000, 000 $1, 000, 000, 000 $ S00, 000, 000 $0 FY17 FY18 FYi9 FY20 FY21 FY22 FY23 FY24 FY2S FY26 �TaxableValue $3,421,386,13 $3,S42,8S2,27 $3,74S,477,70 $3,923,114,21 $4,258,178,14 $4,396,149,6 $4,37S,9S6,4 $4,360,283,o $4,S17,497,1 $4,619,428,1 —Val%Change 7.50% 3.SS% S.72% 4.74% 8.54% 3.24% -0.46% -0.36% 3.61% 2.26% 2-yr. Val %growth: 11 .05% 10 46% 11.78% -0.82% 5.87% Property in Iowa is reassessed in odd numbered years 9.00% 8.00% 7.00% 6.00% S.00% 4.00% 3.00% 2.00% 1.00% 0.00% -1.00% State of Iowa Property Tax Reform 2013-202i Legislation: • 2013: Significant property tax reform passed and phased in through FY24 • 2020: Legislation passed to phase out Commercial/Industrial backfill payments by FY27 • 2021: Legislation creates new Business Property Tax Credit backfill which may cease by end of the decade (approximately s68o,000 in annual revenue expected to be lost) 2023 Legislation: • New military and senior homestead exemption (reduced taxable valuation by an estimated $27.7 million) • Phase out of multiple levies (Library and Emergency for Iowa City) • Estimated loss of $2.1 million annually when fully phased out • Fully eliminated by FY29 but could be sooner based on annual taxable valuation growth • FY26 saw no change from FY25 when approximately 17 cents from total 47 cent combined library and emergency levies was lost • Between FY27 and FY29 the City's General Fund rate must be reduced to s8.zo, which is an approximate loss of s1.5 million in annual revenue • Unless a reduction in service is desired, this loss must be absorbed in the General Fund Volatile Variable Costs Property & Liability Insurance The City experienced significant increases in property and liability insurance premiums as well as deductibles over the last 5 years. Property Insurance increased 23% in FY25 and is projected to increase another 35% in FY26 Liability Insurance increased 16% in FY25 and is projected to increase another 15% in FY26 Total projected added expense over two years in the General Fund is over $875,000 REVENUE FY26 All Funds Revenue Sources All Funds Revenue Sources (FY 2026) Charges for Services Misc. 5% Other Financial Sources 7% Intergovernmental PropertyTaxes *`7 Use of Money & Prop, 20/ Licenses & Permits, i% .SaWA Other City Taxes, 4% FY26 Revenue Sources - General Fund Only General Fund Revenue Sources (FY 2026) excludes transfers Property Taxes 65% Other City Taxes 7% Licenses & Permits 4% Use of Money & Property 2% Intergovernmental 6% Charges for Fees & Services 2% Miscellaneous 13% _Other Financing Sources 1% Proposed Levy Rate Overview � $36,792,773 8.402 $4,160,117 0.950 $1,578,392 0.360 $37,755,850 $4,269,011 $1,619,708 �• , III 8.402 0.950 0.360 General Fund Tax Levies: General Tran s it Tort Liability Subtotal: $42,531,282 9.712 $43,644,569 9.712 AglandLevy $3,861 3.004 $3,685 3.004 General Fund Property Taxes Special Revenue Levies: Employee Benefits $42,535,143 $14,644,268 3.344 $43,648,254 $14,653,761 3.261 Subtotal: $14,644,268 3.344 $14,653,761 3.261 Debt Service $11,636,020 2.577 $12,282,983 2.660 % Change from prior year 4.74% 0.00% 2.57% 0.00% SSMID Levy - Downtown $544,919 2.500 $543,274 2.500 SSMID Levy - South District $117,475 5.0001 $117,5971 5.000 Total Property Taxes $69,477,825 --- Property Tax Rate Trend $S,000 $4,Soo ~ $4,000 $3,Soo 0 E $3,000 c $2,Soo m $2,000 m m x m $1,Soo $1,000 $500 $0 FY16 Tax Value (millions) $3,183 Val%Change 1.46% --S--Ptax Rate 16.651 Rate %Change -0.32% Property Tax Rate vs. Valuations FY17 FY18 FYig FY20 FY21 FY22 FY23 FY24 FY25* FY26 $3,421 $3,S43 $3,74S $3,923 $4,2S8 $4,396 $4,376 $4,36o $4,S17 $4,619 7.SO% 3.SS% S.72% 4.74% 8.54% 3.24% -0.46% -o.36% 3.61% 2.26% 16.S83 16.333 1&183 i5.833 1S-773 15.673 15.633 15.633 15.633 15.633 -0.41% -1.Sl% -0.92% -2.16% -o.38% -1.01% -0.26% 0.00% 0.00% 0.00% 16.8 16.6 16.4 16.2 16 iS.8 iS.6 1S-4 1S.2 i5 ^x,re.rlapping Tax Rate • The City of Iowa City tax levy rate is one component of the total property tax rate property owners pay • The City's portion of the tax bill was as high as 43.5% in the last decade the City's Levy rate dropped every year from FYI - FY23 and remained stable in FY24 & FY25. the City rate accounts for less than half the total rate paid by property owners Consolidated Tax Rate: Percentage of Levy Share of all Taxing Bodies State of Iowa 0% Kirkwood 3% Johnson County* 16% City of Iowa City 39% ICCSD 42% The State of Iowa has a special levy of $0.0031/$1,000 of taxable value *Includes Johnson County, City Assessor, and Agriculture Extension Levies $45.00 $40.00 $35.00 $30.00 $25.00 $20.00 OVERLAPPING TAX RATE TREND FY12 FY13 FY14 FYi5 FY16 FY17 FY18 FYig FY20 FY21 FY22 FY23 =ICCSD Johnson County* Kirkwood State of Iowa City of Iowa City -0-lowa City Percentage of Total *Includes Johnson County, City Assessor, and Agriculture Extension Levies 44.50% 43.50% 42.50% 41.50% 40.50% 39.50% 38.5o% Property Tax Levy Comparison City Waterloo FY2025 Tax Rate $ 22.07 FY2015 Tax Rate $17.95 % Change FY15-FY25 22.95% Council Bluffs $ 17.85 $17.75 0.56% Davenport $ 16.61 $16.78 -1.01 % Des Moines $ 16.61 $16.92 -1.83% Sioux City $ 16.54 $16.36 1.10% Cedar Rapids Coralville $ 16.46 $ 14.55 $15.22 $13.53 8.15% -. . 7.54% North Liberty West Des Moines $ 11.37 $11.03 3.08% $ 10.85 $12.05 -9.96% Ames $ 10.09 $10.86 -7.09% Dubuque $ 9.93 $11.03 -9.97% * Proposed Iowa City tax rate for FY2026 is $15.63. Major Revenue Sources: Hotel / Motel $ z, 500, 000 $ z, 000, 000 $1,5oo,000 $1,000,000 $500,000 $o ■ Hotel Motel Tax FY 2oi6 FY 2017 $1,078,762 $1,136,712 Hotel Motel Tax FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 $1,045,686 $1,301,827 $1,134,864 $938,048 $1,708,182 FY 2023 FY 2024 $1,885,263 $2,043,000 Major Revenue Sources: Utility Franchise $1, 400, 000 $1, 200, 000 $1,000,000 $800,000 $600,000 $400,000 $200,000 $0 FY 2018 ■ Utility Franchise Tax $976,o6o FY 2019 FY 2020 FY 2021 $964,690 $883,652 $993,852 * Recommend increase to 2 % to support transit operations FY 2022 FY 2023 FY 2024 $1,148,998 $i,ii6,963 $983,000 Franchise Fees • - 0% Davenport West Des Moines 0% Ames 0% Coralville 1 % Iowa City 1 % Council Bluffs 2% North Liberty 3% Cedar Rapids 3% Waterloo 4% Dubuque 5% Sioux City 5% Des Moines 5% Cable TV Franchise Revenue levels have been steadily declining as alternate forms of media increase in popularity Decline has seemed to bottom out in past few years Projected to remain stable around $580k annually Cable Franchise Fee Revenue $773, O18 $750,167 $733,644 $685,659 $662,448 $581,904 ' $586,428 $581,420 $582,920 M = $540,221 M $540,200 °tip oy� oti10 °tit °tip oti°� °moo o�ti °�ti hey ��a Major Revenue Sources: Road Use Tax Road Use Tax Receipts $12,000,000 $10,000,000 $8,000,000 $6,000,000 $4,000,000 $2,000,000 $0 FY2013 FY2014 FY2015 FY2o16 FY2017 FY2o18 FY2019 FY2020 FY2021 FY2022 —Revenues $6,589,111 $6,744,663 $7,23o,663 $8,320,117 $8,672,279 $8,426,502 $8,820,138 sg,163,303 $10,076,97 $9,900,316 Major Revenue Sources: Road Use Tax $12,000 $6,000 w w $4,000 $0 +9.45% +5.13% +15.07% -2.83i ..75% 6% 4.50% 4% 2% 2.26% 0% -2% -4% FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 FY2021 FY2022 FY 2023 FY2024 RUT Revenues RUT YoY % Chg. Local Des Moines Cedar Rapids Davenport Sioux City West Des Moines Council Bluffs Waterloo Dubuque ption Sales Tax (LOST) 2019 None 2009 2034 1989 None •:: None None None 2025 None $48,456,182 $23,307,090 $20,026,236 $14,526,602 $4,073,188 $10,737,297 $1 1,078,429 $10,446,834 is ..- 50 % Property Tax Relief, 50% Street, Neighborhood and Public Safety Improvements 100% Street Repair 60% Property Tax Relief, 40% Capital Improvements and Equipment 60% Property Tax Relief, 20% Infrastructure Projects, 10% City Facilities, 10% EDX 50% Property Tax Relief, 50% Quality of Life Projects 100% Streets and Sewers 100% Street Repair 50% Property Tax Relief, 20% City Facilities Maintenance, 30% Special Assessment Relief Ames 1987 None $9,571,197 60% Property Tax Relief, 40% Community Betterment *All cities have a LOST rate of 1 **Iowa City's LOST expired in FY 2013 and generated approximately $8.8 million annually for four years. EXPENDITURES All Funds Expenditures by Fund Type Total Budgetary Expenditures = $237,906,024 $80,000,000 $70,000,000 $60,000,000 $50,000,000 $40,000,000 $30,000,000 $20,000,000 $10,000,000 ■ FY2026 General $73,579,100 Fiscal Year 2026 Expenditure Comparison by Fund Type excludes transfers Enterprise $66,683,229 Special Revenue $17,312,450 Debt Service $14,390,900 Capital Projects $65,940,345 Slide 33 KLO Do we have a separate CIP presentation? Kirk Lehmann, 2025-01-10T16:54:37.239 GFO 0 Yes on 1122 work session Geoff Fruin, 2025-01-10T19:49:57.133 General Fund Expenditures (FY24) Comparison with Iowa communities In Iowa City, 39% of General Fund Expenditure is dedicated to Public Safety and 23% is Culture and Recreation On average, cities in Iowa spend 44% of General Fund Expenditures for Public Safety and 20% on Culture and Recreation For similar sized cities in Iowa, Public Safety as a percentage of General Fund Expenditures is 5o% and Culture and Recreation is 3.6% Iowa City provides exceptionally high public safety services with lean budgets while also investing a considerably higher percentage of General Fund resources in culture and recreation than our peer communities. Graph G -Iowa Ciky_ Iowa Total Transfers Out 0 General Government Public Safety 0 Total Debt Service Public Works 0 Capital Projects Health & Social Services Culture & Recreat1on Community& Economic Development Slide 34 KLO Do we rely on dept presentations to talk about YoY changes in dept budgets? Kirk Lehmann, 2025-01-10T16:54:23.913 General Fund Expenditures General Fund Expenditures by Category (FY 2026) excludes transfers ARr Services 19% Personnel 75% Contingency 1% Supplies 3% AllpCapital Outlay 2% KL1 General Fund Expenditures Personnel Services Contingency Supplies Capital Outlay *Excludes Transfers Out $ 53,009,800 $ 12,901,130 $ 1,400,200 $ 2,183,069 $ 1,598,700 $ 55,022,500 + 3.80% $ 13,763,000 + 6.68% $ 1,021,600 - 27.04% $ 2,230,900 + 2.19% $ 1,541,100 - 3. 60% Slide 36 KLO How many new positions are actually from the general fund? 0.5 attorney.... 1.0 mechanic? Kirk Lehmann, 2025-01-10T16:26:59.850 KL1 How do I find specific items? Kirk Lehmann, 2025-01-10T16:53:52.845 4,000,000 . 3,500,000 c �� 2,500,000 2,000,000 1,500,000 1,000,000 500,000 0 - FY16 FY17 FY18 FYi9 FY20 FY21 FY22 FY23* FY24** ■Amount 2,555,490 2,655,816 2,710,906 2,914,700 2,98o,688 3,055,943 3,199,142 3,615,201 3,705,836 ■ % Change 0.20% 3.93% 2.07% 7.52% 2.26% 2.52% 4.69% 13.01% 2.51% *Revised **Proposed DEBT SERVICE FIR State of Iowa limits debt service to no more than 5% of total assessed property value. Iowa City is currently projected to be 15.4% of the allowed debt limit for General Obligation and TIF Debt Iowa City policy specifies that debt service levy shall not exceed 30% of the total City levy in any fiscal year The projected debt service levy is approximately 17.0% of the total levy City goal is to meet Moody's Aaa benchmark of net direct debt outstanding of .75% of the city's total assessed value. Iowa City is projected to be at 0.771% of total valuations oody 7% ia Rafingo All I I c* Clues Distribution of Moody's General Obligation Ratings for All US Cities Iowa City 400 U 300 m E 200 Z 100 0 RA3 Aaa Aal Aa2 Aa3 Al A2 Baal Baa2 Baa3 ■# of Cities 269 340 626 506 312 151 56 21 22 16 % of Cities 11.56% 14.62% 26.91 % 21.75% 13.41 % 6.49% 1 2.41 % 1 0.90% 0.95% 0.69% oody 16 14 0 12 m 0 10 4- 0 L 8 V an Rewifinct- I nwr Distribution of Moody's General Obligation Bond Ratings for Cities Iowa m E 6 Z 4 2 0 Aaa Aa1 Aa2 Aa3 Al A2 A3 Baal Baa2 Baa3 ■# of Cities 3 7 14 14 16 10 8 0 0 0 % of Cities 4.17% 9.72% 19.44% 19.44% 22.22% 13.89% 11.11 % 0.00% 0.00% 0.00% FUND AND FEE ANALYSIS 3 3 S A A A A A y • +3% Water Rate rXaLc rcc%.iiaiiyC� • Approximately $1.12/month per home • Support general operations • Increase of 1 % in the Gas and Electric Franchise Fee • Provides approximately $1 million per year to support fare -free transit service • Increase in Housing Inspection Fees • +$1 1.00/ per unit (Typical 3-Bedroom Single Household) • +$5.42/per unit (Typical 12 Plex w/ 2 BR Dwellings) FY 2026 Other User Fee Changes These user fee changes impact only those who utilize these services: • $2.00 New Refuse Curbside Yard Waste Sticker Fee • For bag or bundle outside compost bin • Support Refuse Operations • $5.00 minimum Landfill Fee for Residential Yard Waste • Support Landfill Operations Estimated Property Tax Impact FY2025 II II F$7416 $724 AMI IN=. Assessed Valuation $100,000 $100,000 Taxable Valuation $46,343 $47,400 City Levy $15.633 $15.633 Property Taxes $724 $741 Difference N/A $17 $100k used to allow for easy adjustment to an individual's home value. Annual Financial Household Impact Annual Financial Impact to Residential Households $2, 500 $2, 000 $1,500 $1.000 $500 $0 $500 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 FY2025 FY2026 ■ Property Taxes $900 $901 $869 $884 $848 $854 $724 $742 ■ Stormwater $54 $60 $60 $60 $60 $66 $66 $66 ■ Refuse $229 $229 $240 $240 $276 $300 $312 $312 ■ Sewer - 800 cubic feet $433 $433 $433 $433 $433 $442 $463 $463 ■ Water-- 800 cubic feet $380 $399 $399 $419 $419 $436 $449 $462 Total $1,996 $2,022 $2,001 $2,036 $2,036 $2,098 $2,015 $2,045 Percent Change 0.6% 1.3% -1.1 % 1.8% 0.0% 3.0% -4.0% 1.5% Based on a residential customer with $100,000 property valuation. Does not include 1 % franchise utility tax INVESTMENT IN STRATEGIC PLAN... MASTER PLANS & CORE SERVICES American Rescue Plan Act (ARPA) Funds Program 2021 Est. Range Funded Expended Emergent Needs: Direct Payments to Eligible Adults $1-$1.5M $1,184,071.19 $1,184,071.19 Eviction Prevention $1 -$2M $1,137,710.00 $479,260.90 Housing Repair / Relocation $500k -$1.5M $1,071,500.00 $1,071,500.00 Emergency Non -Profit Assistance $500k - $1 M $485,000.00 $438,072.66 Strategic Investments: BIPOC Business Support Framework / $4 - $6M $3, 980, 000 $1,212, 980 Infrastructure Social Service Needs Assessment, Capital Planning & Seed Funding $3 -$6M $3,000,000 $1,135,896.56 Affordable Housing Initiatives $2.5 - $6M $1,713,909.37 $1,707,823.00 Mental Health Services $1.5 - $3M $939,082.00 $855,005.21 Workforce Development $1.5 - $3M $1,250,000 $724,260.59 Climate Resiliency and Hazard Assessment $500k - $3M Planning Small Business, Arts, Culture, and Tourism Tourism Recovery: $250,000 Investments SSM I D: $1 -$2M $500,000 $221,617.79 Skate Park: $500, 000 (committed) Utility Accounts: $676,146.49 Lead Reduction: $2,313,917.44 Government Services and City Revenue $1 -$3M $500,000 Replacement Retention Incentive: *$188,119.11 $1,137, 770.95 Admin. Cost: Actual STRATEGIC PLAN HIGHLIGHT S Extending Fare -Free Transit • More than 40% growth in ridership in year 1 of the pilot. Year two continues to see significant ridership gains month over month. 1 1� • August + 2.4% _ • September + 18.3% • October + 25.6% • November + 9.2% • December +26% • 2024 Community Survey shows notable satisfaction increases related to our public FARE FREE transit system and indicates that we are performing better than survey benchmarks I O WA CITY and peer college communities • FY 2025 parking increase intended to help provide resources for fare -free transit in future years. To date, revenue increases are trailing FY 2025 projections. • A 1% Utility Franchise fee (2% total) is recommended to provide stable revenue to equip and operate our transit system. Careful monitoring will be needed in future years as this revenue source historically does not track with operational cost growth. • Looking ahead: 2025 launch of a comprehensive bus stop review and improvement plan Climate Action • Successful collaboration with the Home Builders Association to launch a HERS grant program that incentivizes the construction of more energy efficient homes. • Completed a fleet transition plan to help prepare a shift to electrification • Launched resilience hubs with Neighborhood Centers of Johnson County and the Bike Library • Secured grant funding to add e-bikes and a Ford Lighting EV into the Police Department fleet • Continued to grow the home insulation grant program for income -qualified residents • Celebrated the 1,000t" private tree planted through Root for Trees that compliments our expanding public tree planting efforts • Preparing for our first whole home energy efficient grant pilot project that will expand the pool of landlords accepting housing choice vouchers IOWA CITY CLIMATE ACTION fp �J MATTERS Neighborhoods & Housing Previous strategies to diversify affordable housing revenue sources are b, critical: • Tax increment financing • Remaining funds from the NEST project are assisting with South Di! rehabilitations • Foster Road affordable housing balance is projected to be $649k FY26 and available for use in accordance with State law • Riverfront Crossing Fee -Lieu balance is approximately $6.3 million • ARPA eviction prevention partnership has over $500k remaining $3.75 Million PRO -Housing grant award helping accelerate action (Iowa awards nationwide) • Comprehensive Plan renewal sets the stage for regulatory reform • Resources to build business plan for expanding publicly -owned housir efforts • Approximately $2.8 million in federal funds available for a public hour development project The City continues to partner with local non -profits to secure additional Federal funding ■ Neighborhoods & Housing Fiscal Year 2U26 Budget• • Moving LIHTC support out of the General Fund to relive budgetary pressures and shifting to alternative revenue sources for future LIHTC partnerships (TIF; RFC, abatement, etc.) • Affordable Housing Fund Distribution includes: • $500k to the Housing Trust Fund • $1 1 Ok for security deposit assistance and risk mitigation • $108k for the operation of the winter shelter • $40k for emergent matters (i.e. displacement) ' • $25k for the opportunity fund (discretionary use) • $17k for the Healthy Homes program • The City's Street Outreach partnership with the Shelter House continues to b funded outside of the affordable housing distribution model and is projecte, to be just over $38k in FY26 Investment in Next Generation of Public Facilities • Senior Center exterior phase 1 complete with phase 2 expected in 2025. Interior phases planned for 2026-2028. • Landfill equipment building replacement under construction • Fire Station 1 and City Hall third floor renovation project under contract • Wastewater digestor rehabilitation and renewable gas project to be bid in 2025 • City Park Pool replacement to be bid in 2025 • Transit and Equipment building replacement under design • Joint law enforcement facility study expected to be initiated and completed in 2025 • Library carpeting and furniture replacement planned in 2026 • Multiple smaller projects including roof replacements, generator replacements, HVAC, lighting and other smaller projects will benefit several city facilities • All of this work is projected to be completed with minimal G.O. debt and no significant changes to tax rates and utility charges CORE SERVICE AND INFRASTRUCTURE OUTLOOK Major Road Improvements � n n ice+ Significant Upcoming Road Projects 2025: In addition to the annual pavement rehab program and smaller improvements 2026: Court Street Reconstruction N. Gilbert Street Reconstruction Court Street (cont.) 2027: Dodge Street Reconstruction Taft Avenue Reconstruction 2028: Market & Jefferson Two -Way Conversion Iowa Avenue Improvements 2029: Burlington Street Bridge Replacement Park Master Plan Implementation Underway and Upcoming in 2025-2026 • City Park Pool Replacement • Establishing Adelaide Joy Rogers Park • College Park playground and basketball court renovation • Brookland Park playground and paths renovation • Terrell Mill Skate and Roller Park expansion • Mercer Park Baseball/Softball Field improvements • Calder Park trail connection to Monument Hills and ADA access • Single Track Bike trail extension at Foster Rd Park • Scott Park trail renovation - Scott to Beech • Iowa River trail renovation - Behind Dairy Queen and Kelly Auto • Moving Upper City Park playground to Lower City Park • Improvements to soft toss area surfacing at City Park Baseball • Ecological enhancements at Ryerson's Woods, Ashton House, Hickory Hill, Sand Prairie, Scott Park and the Sycamore Greenway • Future Challenge: Roadway expenses are requiring increasing use of G.O. Bonds. The City will need to build debt service capacity to avoid deferring park improvement and maintenance Core Operations FY 26 Budget Position additions • Three federally funded housing related positions (Housing Authority / PRO-Housi • Previously approved conversion of part-time Assistant City Attorney to full-time r • New maintenance worker in the Water Division • New mechanic in the Equipment Division Continued efforts to respond to the wage and compensation analysis • Recommended AFSCME and Confidential employee reclassifications completed • Labor market corrections with Police and Fire wages are being addressed in collective bargaining • Confidential wage scale changes currently being reviewed for future Council consideration Core Operations (cont.) Fire Station 5 delay • The City previously acquired two properties for the purpose of building f station 3 • The FY23-25 budgets began building capacity for staffing a fifth station, including two new hires and $700k in operational set aside funding. • The FY26 budget maintains the two additional positions but the set aside funding has been reduced to $300k. Use of the $300k to relieve service demand pressure in a four -station model will be evaluated in FYz7. • Based on tax reform impacts being phased in through FY29, staffing a new station does not appear feasible. Core service pressures • As the community continues to grow, many operations are stressed as resources needed to meet service demands and respond to inflationary pressures are not keeping pace • City administration is working intently to monitor and respond to staff burnout, increasing turnover rates and other expected impacts Tightening Resources Impact Ability tc Increase Support of External Partners and Discretionary Grant Programs • Aid to Agencies flat after significant increases in past several years (158% General Fund contribution increase from FYI 9 to FY25) • Arts and Culture partnership grants are help flat with no new additional organizations added. • Reduction in support for the Cedar Rapids based, EDC and flat support for Greater Iowa City and MDC Iowa • Minor reductions in historic preservation and public art grant programs • Return to FY23 funding level of the Racial Equity Social Justice grant program with an ability to supplement with unassigned Black Lives Matter funds • $50,000 reduction in the City's GRIP program FY 2019 $250,000 FY 2020 $466,282 FY 2021 $545,000 FY 2022 $595,250 FY 2023 $615,059 FY 2024 $640,775 FY 2025 $646,444 • Maintaining these funding levels in FY27-29 will be increasingly difficult without service level reductions FY 2026 $646,444 elsewhere in our operations. Financial Position • Emergency Reserve remains flat at $5.4 million • Emergency Reserve Disaster response and mitigation (including land acquisition) • Cover unexpected shortfalls in revenues or loss in State funding • Mitigate sharp spikes in volatile line items • Avoid any defaults in bonded debts • Rehabilitation / replacement of depreciated / outdated municipal buildings • Other financial emergencies declared by the Council • Facilities Reserve balance is projected to be drawn down completely without additional contributions planned in FY25 or FY26. This will place more pressure on the use of debt and potentially require voter referendums for future facility projects. • General Fund unrestricted balance as a percentage of revenues and transfers in is projected to decrease but remains in policy range at 34% at the end of FY26. As property tax reform tightens the General Fund budget, this reserve level will need to be carefully monitored. Further reductions could lead to downward pressure on the City's bond rating. Final Thoughts: The FY2026 Budget (1) The City is entering the most challenging budgeting environment in more than fifteen years with the most difficult years likely ahead in FY 2027-2029. Spending decisions in FY 2026 will influence staffing levels and budget decisions in coming years. (2) A $2.6 million budgeted deficit in the General Fund signals that it will be very difficult to maintain municipal service levels, grant programs and external organization funding the coming years. Service level reductions and interruptions should be expected. (3) Resources are provided to extend fare -free transit and make considerable investments in housing, both top strategic plan priorities. Includes a 1 % gas and utility franchise fee increase. (4) Debt service capacity is expanded to address inflationary impacts on capital projects and help maintain infrastructure investment levels. (5) Significant investment in public facilities, with no associated tax increases and limited utility fee increases, which will serve Iowa City for generations (City Park Pool, Senior Center, Equipment, Transit, Landfill, Wastewater, and more) Continued State property tax reform impacts Commercial and Industrial Backfill payment from the State no longer provided ($300k loss) Forced General Fund levy reduction ($1.5 million loss gradually realized through FY 2029) External partnerships and community grant programs will need to be held flat, if not reduced, to maintain current municipal services and staffing (through FY29) Continued need to increase the debt service levy unless a reduction in infrastructure and public parkland / open space and facilities is desired Modest public utility rate increases to keep pace with continued inflationary pressures Monitoring of General Fund reserve levels to ensure compliance with fiscal policies. General Fund heath will largely be dictated by property assessments and the residential rollback rate. Facility reserve balance will be exhausted, further limiting our ability to invest in public facilities without significant debt, voter referendums and -/or alternative revenue sources. Emergency levy may need to be utilized to support operations or facility investments unti structural challenges in the budget are resolved. Unknown: State Legislature has astated priority of further property tax reform that will undoubtedly have impact on future budgets and services I r 1 L - 4 IIP CITY OF IOWA CITY UNESCO CITY OF LITERATURE WWW.ICGOV.ORG/BUDGET