City officials warn $3 million shortfall if New Franklin fire levy fails; council briefed on cuts and tax alternatives

New Franklin officials told the City Council on Tuesday that an expiring fire levy set for the November ballot would generate about $3 million a year and that a failure would create a multi‑million dollar shortfall requiring either broad cuts across departments or new revenue. AJ of Davenport Financial said, “the city would be running about $3,000,000 annual deficit” in the fire district fund if the proposed 5.75 mills fails.

The levy in question is the ballot measure designed to replace a five‑year levy originally passed in 2019. Council members and municipal advisers said the current fire fund expenditures for fiscal 2025 are about $3.4 million, while the levy is projected to produce roughly $3.0 million a year, creating a growing gap as expenses have risen. Matt Staczynski of MS Financial cautioned, “we're not here to be an alarmist. We're not here to try to scare people. We're just trying to explain the consequences.”

Why it matters: advisers showed a projection in which city governmental cash balances fall from approximately $2 million at the end of 2025 to below zero by 2027 if the levy is not approved and no other measures are taken. They said state fiscal‑oversight authorities would intervene before ledger balances went negative, creating a fiscal‑emergency oversight process.

Options discussed included cutting expenditures across all city departments, which advisers said would have to be broad because isolating cuts to the fire department would require eliminating roughly 90% of its budget. “Eliminating 90% of the fire department's budget would essentially eliminate the fire department,” an adviser said, and city leaders indicated that is not an option.

Advisers and council members also discussed revenue alternatives. One option is converting the lost property‑tax revenue to an income‑tax change: advisers estimated an equivalent of about a 1% city income tax would produce similar recurring revenue. Another option is changing the local income‑tax credit that reduces taxes for residents who already pay municipal income tax elsewhere; advisers presented a scenario in which reducing the credit could generate an additional $3–4 million annually. The advisers noted changes to income‑tax mechanisms could take time to produce full revenue and, depending on ballot and filing deadlines, might not fully flow until 2027 or 2028.

Council members discussed the distributional effects: Mayor Paul Adams said many residents work outside the city and that either option would shift burdens differently between property‑owners and workers. Adams also said the city has been pursuing development and infrastructure projects meant to expand the tax base, and he expressed confidence residents would approve the levy: “I'm confident the people in the city are gonna pass this fire levy.”

Council and advisers emphasized timing constraints. The advisers said the city had missed the window to place an income‑tax increase on the November ballot and that a May ballot would be the earliest alternative if the levy fails in November. They also warned that revenue changes such as income‑tax credit reduction or an income‑tax increase would not immediately replace lost levied revenue, creating interim funding pressure.

The council received the presentation and said informational materials will be posted online for the public. No formal council action to change rates or adopt alternative revenue measures was taken at the meeting; advisers and staff described the presentation as a planning exercise to identify options if voters do not approve the levy.