Iowa City proposes modest water/wastewater rate increases and small levy adjustment amid property-tax uncertainty
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Summary
Staff proposed a 3% water rate increase, a 5% wastewater increase and a modest levy-rate change (15.63 to 15.43) tied into LOST planning; staff warned enterprise funds will still face pressure from inflation and capital needs and urged monitoring of insurance and debt-service pressures.
City staff outlined multiple revenue adjustments in the FY2027 proposal intended to balance capital demands and ongoing service costs while using LOST to take some pressure off the general fund.
Assistant City Manager Kirk Laman described a proposed modest decrease in the overall levy rate from 15.63 to 15.43, accomplished in part by applying LOST to reduce the general-fund drawdown and decrease the debt-service levy by 20¢. "What we're proposing is a modest decrease ... reducing our rate down to 15.43," he said.
On utilities, finance staff proposed a 3% increase to the city water rate and a 5% increase to wastewater rates to meet capital and debt-service needs. Chris (finance staff) framed gradual increases as preferable to a single large hike to avoid a future 15% shock on users.
Staff also reviewed other revenue tools: the utility franchise fee currently at 2% (cap generally 5% except for special cases) that was increased recently to support fare-free transit, and road-use tax, which has been essentially flat even as road-construction costs have risen about 50% since 2016.
Enterprise funds were flagged as an ongoing concern. While the general-fund deficit is projected to narrow from $2.9M to $1.5M under staff recommendations that include LOST, staff said enterprise funds (water, wastewater, parking, transit) will need continued rate adjustments and close monitoring of insurance renewals and debt-service needs.
Staff asked the council to weigh rate and levy choices with the pending uncertainty of state property-tax reform and to consider the timing of LOST receipts when finalizing decisions ahead of the April adoption schedule.