As pandemic-era chickens come home to roost, the Dyersville City Council is now looking at either raising taxes and fees or trimming back city services in order to make a new fiscal reality work.
With the budget season now in full swing, the council set its proposed maximum property tax levy for the coming fiscal year Monday night, but unlike many recent years, the council isn’t looking at a surplus of revenue.
From fiscal year 2022-23 to 2023-24, Dyersville’s regular taxable valuation fell from $264,212,929 to $261,213,138.
City Administrator Mick Michel said there were several forces at play, with one being the timeline with which taxable valuation is calculated.
For the figures the city is required to use when setting its levy rate, there is an 18-month lag in taxable valuation, which in this case, would fall squarely in the pandemic era.
“There was some stagnant growth during that timeframe,” Michel said.
Another factor, Michel said, was a miscalculation that occurred at the state level, which was not been corrected within the figures the city was using.
And finally, some tax increment financing (TIF) projects and development grants have also hurt the taxable value during this cycle.
Councilman Mike English asked if the council needs to reexamine its TIF policy again, noting he believed some of the agreements the council is providing projects are too long. Some have 15-year lifespans, compared to some other cities which use a 10-to-12-year timeframe.
“It isn’t tax rebates that are completely contributing to that — 80% goes back to business and 20% to the city coffers,” Michel said.
In several cases, tax development grants, which were used in the second phase of the industrial park and the downtown redevelopment, don’t result in the city immediately seeing the benefits of the investment and, in order to provide those grants, money was taken from the general fund.
“But overall, in the long run, the city does reap the rewards (from those grants),” Michel said. “And we have shown that statistically.”
Michel said to look no further than the industrial park, which is entering its third phase of development.
“For a community of 4,500, that’s pretty good,” Michel said. “That process is working.”
With that in mind, the council is now looking at how to navigate its tax levy for the coming fiscal year.
For the current fiscal year, the property tax levy is set at $7.93, which translates to $2,095,228 in revenue collected. But, with the decrease in valuation, to maintain that $2,095,228 of tax revenue, the levy would need to be raised to $8.02.
Should the council decide to leave the levy at $7.93, that would result in a roughly $117,000 deficit, meaning the council would need to scale back services or find other ways to tighten its belt.
Because the council is required by the state to publicly set its proposed maximum levy before it is finished with the budgeting process, Dyersville, like many other cities, sets it at the highest allowed amount, which is $8.10, to avoid holding additional hearings on the matter again in the future.
Even if the council elected to increase to the $8.10 limit, which represents $2,115,827 in tax revenue, it would still only represent a roughly 2% increase. However, just because the council set the max limit at $8.10 does not mean that will be the final figure — that number does not need to be solidified until April 30.
Given the council does have until the end of April to decide on what the final levy rate should be, there is time to explore the path forward.
“There are several options being discussed right now that will be presented to the city council,” Michel said. One is to raise the rate to $8.02 to maintain the status quo, another to scale back services and expenditures to the tune of $117,000 and the third, which Michel is still developing, is to find a middle-ground between the first two options.
Should the city want to keep providing its current level of service, it would require more people to contribute, either through fees or taxes, to accomplish this. The easy way out, Michel said, but that is a political decision the council needs to make.
“But, right now, expenses are exceeding the revenue, if all things remain equal,” Michel said.
Getting this information out to the public now also presents an opportunity for council members to discuss potential options with constituents.
“This is everyone’s government and everyone should be involved in this type of process,” Michel said. “I do believe that transparency is the best way to cast sunlight onto this issue.”
“The council is also going to have to make some decisions on service delivery versus the amount of revenue it raises to do that,” Michel added.