Boom times for city budgets

Property taxes were due on March 31, so for many people, property taxes may be top of mind right now. It’s always a good idea to turn the bill over and look at which local governments receive what share of the total bill, and how much each the tax collected by each local government grew compared with last year.

Meanwhile, local municipalities have finalized their budgets for the upcoming year, which begins July 1, 2016. The first payment by taxpayers for that budget will come due next September.

Last month’s blog wondered whether cities would capture this year’s large increases in property values in their budgets for the year that starts July 1, or whether they would allow property owners to keep some of it in the form of lower rates. When property valuations on existing residences and businesses grow substantially, as they have this year, property taxes also grow substantially, even with a constant rate.

City budgets have now been finalized. They show that just three of 15 area cities are reducing their property tax rate for the upcoming year:Ankeny, Bondurant, and Johnston. Congratulations to these three cities!

But in all other cases, as shown below, the property tax rate is either staying the same or increasing. As a result, a lot of revenue will be generated and a lot of property taxes will be paid!

Certainly there are situations that may necessitate a substantial increase in revenue, but it’s hard to see why city property taxes in the metro area need to grow an average of 6.8 percent over last year. And why is general fund spending increasing an average of 7.4 percent when inflation is around one percent? These growth rates are truly extraordinary.


Changes in Property Tax Rate, Revenue and Spending
Fiscal Year 2016 – Fiscal Year 2017
  FY 2016
Rate
FY 2017
Rate
 Rate
Reduced?
% Growth in Property TaxRevenue* % Growth in General FundSpending
Altoona 9.9437 9.9437 8.2% 12.0%
Ankeny 11.8500 11.7500 x 10.8% 9.4%
Bondurant 13.9363 13.8862 x 9.4% 6.4%
Carlisle 14.6408 14.6519 3.4% 8.8%
Clive 9.9895 10.1450 7.3% -1.9%
Des Moines 16.9200 16.9200 5.1% 5.1%
Grimes 12.9138 12.9147 12.7% 19.1%
Indianola 12.7000 12.7000 1.6% 13.1%
Johnston 11.5005 11.4000 x 4.9% 7.1%
Norwalk 15.6938 15.6950 5.7% 7.0%
Pleasant Hill 11.6500 11.6500 2.6% -8.5%
Urbandale 9.8200 9.9200 6.7% 6.5%
Waukee 13.5000 13.5000 8.8% 12.1%
West Des Moines 12.0000 12.0000 6.9% 4.9%
Windsor Heights 15.0759 15.0759 7.4% 10.1%
Average     6.8% 7.4%
* Does not include utility replacement revenue, nor state backfill.
Source: Iowa Department of Management

Over time, local budgets tend to grow much faster than inflation and population. One of the reasons is that it sounds good to be able to say there is no increase in the tax rate in a given year (though there may be lots of growth in the property tax base). And there are unlimited opportunities to do good things when more funds become available with so little political effort. But residents and businesses need to be asking the follow-up questions.

How much growth in actual revenue will this rate generate? Why is it needed? Is it sustainable? Or is it being spent just because it’s there?

Our local officials are very accessible, and they like to engage with citizens in substantive discussions. It’s easy, and this year’s budgets provide an excellent starting point for discussion. You can find contact information for your city’s elected officials at one the League of Women Voters website to learn what’s happening – and why − in your community.

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