Davenport finance chief presents balanced FY2026 operating budget, outlines tax and fund changes

Sasha Gerlach, Davenport’s chief financial officer, presented the proposed fiscal year 2026 operating budget and a property‑tax overview at a Feb. 4 City Council budget briefing, saying “the budget is balanced, and complies with all of our financial policies as well as liquidity targets.”

The presentation summarized how state legislative changes reduced allowable property‑tax revenue growth and how the city adjusted levies, internal transfers and department budgets to produce a balanced operating plan for FY2026. Gerlach said the city recommends keeping the total property‑tax levy at $16.61 (unchanged from FY2025). The consolidated general fund levy (CGFL) will fall from a prior baseline of $8.47 to a maximum of $8.39 for FY2026; the change translates to an estimated property‑tax revenue increase from about $44.1 million budgeted in FY2025 to roughly $45.4 million for FY2026, a 2.79% rise in property‑tax revenue after state caps are applied.

Why it matters: the state’s new levy limits use a four‑tier formula tied to non‑TIF taxable‑value growth. Davenport’s non‑TIF taxable value rose 3.82% in the period Gerlach reviewed, placing the city in tier 2 and reducing allowed revenue growth by roughly 1 percentage point relative to the measured valuation growth. Gerlach said that calculation produced about an 8‑cent decrease in the CGFL and that rounding and statutory formulas affect the final reported percentage differences.

Key numbers and budget posture

- City recommendation: total levy remain $16.61; proposed CGFL $8.39; tort levy proposed increase to $0.33 to cover rising insurance costs. - Operating budget: proposed increase of 3.1% (about $5.4 million), attributed largely to salary and contractual cost growth consistent with negotiated agreements. - Capital budget: up 42% (varies year to year with grants); debt service: down about 4.7%; overall budget: up about 12% driven mainly by capital projects. - General fund: projected deficit of about $577,000 (under 1% of the total budget); city still treats the budget as balanced due to conservative revenue assumptions and its unassigned fund balance target of 25%. - General‑fund salary totals cited: approximately $48.2 million in salaries and benefits, of which public safety accounts for about $33.7 million (roughly 70%).

Gerlach summarized the city’s budget process, department review policies and constraints on adding new full‑time positions: departments must justify increases over $10,000 with a business case; new ongoing FTEs are not added unless net neutral or tied to reliable dedicated revenue streams or strategic succession plans.

Sewer, user rates and enterprise funds

Gerlach reviewed a PFM‑commissioned sewer rate study adopted for presentation to the council and said the city proposes a sewer‑rate schedule that raises rates 2% in FY2026, 0% in FY2027 and 2% in FY2028. She said the sewer (water pollution control plant) fund is complex and governed by a multi‑city agreement that allocates operations, capital and debt among Davenport, Bettendorf, Riverdale and Panorama Park; the fund’s large cash balance was cited as permitting ongoing capital work.

Other enterprise funds discussed:

- Hotel/motel tax: FY2026 budgeted revenues increased to $3.2 million; the city continues a graduated funding agreement with Visit Quad Cities that will phase the city’s contribution up to 25% of hotel/motel revenues by FY2029. Gerlach noted the contract permits the contribution calculation to be satisfied from other discretionary funds if needed, though historically payments have come from the hotel/motel fund. - Solid waste: fund cash improved to roughly $3.2 million (about 40% of operating expenses); a routine 3% fee increase is proposed, adding about $0.45–$0.70 monthly depending on cart size. FY2026 adds one full‑time packer‑loader driver to reduce overtime. - Transit: after COVID‑era grant support the transit fund no longer needs general‑fund subsidies; its cash balance was cited as roughly $4.7 million (about 50% of operating expenses), but staff said they will continue enterprise planning to reduce subsidy risk. - Parking and airport funds: both face small projected deficits in FY2026 (parking about $300,000; airport roughly $17,000) and were flagged for continued enterprise planning.

Other program notes and policy points

- No‑fault sewer reimbursement program: adopted in 2013, provides up to $7,500 to homeowners for sewer backups after insurance; rate support for that program was reduced historically from $2.00 quarterly to $0.50 and the program balance was reported at about $676,000. - Collective bargaining: Gerlach said tentative agreements exist with AFSCME, AFSCME Library and transit units; the Teamsters contract remained outstanding at the briefing. - Ratings and transparency: S&P and Moody’s ratings were described as AA with positive outlooks; Moody’s assigned a governance score noted in the briefing.

Council questions and next steps

Elected members asked for comparative data on how other Iowa cities are faring under the new state growth limits and for clarity on how rollback and statewide residential 3% caps interact with local rollback calculations. Gerlach answered that the 3% residential cap is reflected in rollback calculations and that the recent statewide legislative change affects overall taxable value growth beyond the residential cap.

The council was reminded that the next budget milestones include a Capital Improvement Program workshop on Feb. 8 and a planned budget adoption on April 23, with submission to the state award process (as described in the briefing) later in the spring.

Ending

Gerlach closed by reiterating the city’s focus on conservative budgeting, aligning salaries and taxes, and continuing enterprise planning for funds with deficits or structural pressures. She said staff will return with liquidity‑target recommendations from financial advisers and more detail at upcoming workshops.