At their February 15 meeting, City Administrator Cami Rasmussen advised Solon Council members that they likely will have to revise their plans for next year’s city budget due to an error in the formula the Iowa Department of Revenue used to calculate the residential property tax rollback percentage. The rollback is the percentage of the value of residential property subject to the property tax levy. Rasmussen said Governor Reynolds is expected to sign a bill, Senate File 181, which corrects the rollback calculation formula.
A Fiscal Note of the Iowa Legislative Services Agency, dated February 1, calculates that the rollback percentage derived from the corrected formula will be approximately two percent lower than that which the Iowa Department of Revenue provided to local governments last October. As a consequence of this revision, the statewide total amount of property tax available to cities could be as much as $39 million less than had been previously expected. The Note goes on to state that because many cities have already done significant work on their Fiscal Year 2024 budgets, the timing of the enactment of Senate File 181 will create extra work for them as they now must adjust their budgets to account for lower revenue expectations. SF 181 extends the deadline for cities and counties to complete their budget work by one month, from March 31 to April 30, to allow them the extra time they may need to revise their budgets.
Rasmussen and City Finance Director Roman Meyer informed the Council they estimate that, when applied to Solon’s total residential property valuation, the lower rollback percentage will yield between $50 to $90 thousand less in FY ‘24 revenues than previously estimated for the preliminary budget proposal they had already worked out. They offered options for making the necessary adjustments for Council members to consider. One would be to reduce or eliminate proposed increases in Library or Recreation staff positions or staff hours, or to reduce the number of additional hours they had considered contracting for with the Johnson County Sheriff’s Office. In the alternative, they could consider cutting expenditures evenly across all the City funds. Finally, the Council could consider raising the levy by an amount that would offset the decrease in expected revenues.
Mayor Steve Stange and Councilman Steve Duncan disagreed as to whether to focus any cuts on new spending or to spread them across the board.
Stange said an across-the-board cut would not be an option for him. “We can’t cut the road fund before we cut a new position. If we have problems with streets, plowing, water or sewer, we will have to answer for that.” Stange added that he believes next year could be even worse for tax revenues.
Duncan said that during his forty years working in the public sector he had experienced across-the-board budget cuts and that they could be weathered. He told Stange “Many people don’t agree with you. We are a growing community and people expect services.”
Stange also expressed opposition to raising the levy and said people are already experiencing difficulties with the recent increases in the rate of inflation.
The Board also approved a resolution to set a Public Hearing on The Maximum Tax Levy for March 1 at 5:30 p.m.
Toward the end of the discussion, Rasmussen told members “Our goal tonight is to start you thinking.”
Editor’s note: Governor Reynolds signed SF-181, a bill that clarifies the rollback calculation for residential and multi-residential property and delivers $127 million in property tax relief to Iowa homeowners Monday, Feb. 20.