With local elections now completed, city governments will begin working on their budgets for next year. The budget picture for many communities does not appear as dire as the state budget situation, but it’s not going to be an easy year. The executive director of the Iowa League of Cities, Alan Kemp, says property tax collections are stagnant while healthcare and pension costs are rising.
“There are many services that cities provide that they simply can’t say well I’m not going to do it. If it snows, you’re plowing snow, you really don’t have the ability to say well I guess will skip it because we don’t have the money this year. And there are all kinds of services like that there is an expectation that you’ll pick this up,” Kemp says. Cities rely primarily on property taxes for their funding. Kemp says property taxes don’t drop as quickly as sale taxes during a recession.
He says Iowa did not enjoy the sort of the big build up that you saw in other parts of the country where property valuations raised dramatically and so there wasn’t a precipitous drop in property taxes. “Having said that though, just because of the national recession you’re either seeing valuations begin to flatten or slightly decline,” Kemp says.
In the north-central Iowa town of Garner, city administrator Brent Hinson has been warning his department heads it’s going to be a tight budget year. He expects to avoid job losses, furloughs, or even deep cuts to city services. But Hinson says the community may have to delay some capital improvement projects. He says that’s preferable to asking Garner’s 3,000 residents to pay more.
“I don’t think there’s gonna be any appetite for property tax increases here if at all avoidable you know we’ve actually cut our property tax levy five years in a row, Hinson says. Des Moines projects an $11-million shortfall over the next two years. Since the recession, the city has issued fewer construction permits and earned millions less in interest payments. Des Moines city councilman Brian Meyer says couple that with the rising cost of healthcare and pension benefits, the city will have to eliminate some jobs.
“I expect job losses and furloughs or a renegotiation of the union contracts which is still being talked about. But you can’t close a six-million dollar gap by mowing the parks less,” Meyer says. Des Moines is holding a town hall meeting next week to gather citizen input on the budget.
Even cities that have seen business growth will still have to watch their budgets. Dubuque says I-B-M recently opened a new service center and that hopes to employee 13-hundred people by the end of next year. But Dubuque city manager Mike Van Milligan says the economic benefits won’t be realized soon enough to counter a $670,000 projected decline in sales and hotel/motel taxes.
He says the mayor and city council in last year’s budget process did anticipate the national economic downturn would be affecting the city of Dubuque and they added one million dollars to the city reserves to create a cushion. Van Milligan says they don’t think they’re going to be in any kind of a crisis situation — but that could change if the national economic downturn lasts too long.
Dubuque won’t be collecting meaningful property tax revenue from the new development for awhile.