City Council to Meet Jan. 18, 2022, to Discuss FY23 Budget

From City Administrator Ryan Heiar:

At Tuesday’s budget work session, I will present the proposed operating budget for FY23. The session will begin at 5:30 P.M. and our management team will be in attendance to address questions and provide additional information respective to their department’s proposed budget. A second work session is planned, in conjunction with the January 25 City Council meeting, where we will discuss capital projects for FY23 and review the proposed CIP for fiscal years 24-27.

North Liberty’s taxable value grew by 6% this year, which was better than anticipated given the 2%+ reduction in the residential rollback. Construction growth coupled with a decreasing reliance on TIF valuation accounted for the increase in overall tax value.

The 6% increase in taxable valuation will result in approximately $600K more in general fund property tax dollars being collected in FY23. In total, this budget includes general fund revenues of just over $16 million, approximately $1 million more than in FY22.

The following pages provide a detailed looked at the FY23 operating budget, a recap of the FY22 budget and the actual expenditures and revenues for FY21. We have not fine- tuned the FY24-27 estimates, so please disregard those columns at this time. In addition to the numbers, the following pages provide notes in areas where significant changes occur or further explanation is needed. These pages will be the basis of our conversation on Tuesday.

Below are a few highlights of the proposed FY23 budget for your reference:

Staffing

• There is one position, the Outreach and Equity Coordinator, that was funded at 50% (mid-year start) in FY 22 and is funded at 100% in
• The next phase in the Fire Department staffing plan includes adding a full time Fire Fighter position and covering Friday evenings and Sunday days with part time The proposed FY23 budget includes funding for these positions. In the alternative, Chief Platz and his team are applying for a SAFER grant to fund three full time positions at 100% for three years. If the grant is successful, the budgeted funds for the full-time position will be saved and the City will have three years to financially plan for adding the three full time positions.
• It was noted in last year’s budget memo that two full time positions were requested but not funded in the FY22 budget and that they would be requested again in Those positions include an Administrative Lieutenant in the Police Department and a Laborer in the Parks Department. Both positions are included in the FY23 budget.

Insurance

In preparation for the FY23 budget our team met with our insurance agent in late December. It was noted that the recent storms and natural disasters were causing insurance rates across markets to increase drastically. The FY23 budget includes a 15% increase in property and casualty insurance premiums. Further, the City’s health insurance premiums will increase by 7.7% in FY 23. While this rate is still below the trend for our group size, which is 9%, 7.7% is still higher than what we have experienced the last few years.

Equity & Outreach

• For the second year in a row, the PD budget includes funding for the contract with Barnum to analyze public contact by our police department. Calendar year 2021 data has been provided to Dr. Barnum and the subsequent report should be available later this year.
• An additional $15k is proposed in the social services line item, bumping total contributions to $150k. It should be noted that the proposed budget transfers $150k from the City’s ARPA funds for this line item.
• Funding is included in the Communications budget to continue to enhance the Neighborhood Ambassadors program and for the City’s new Outreach and Equity Coordinator to develop programming. This new position will be assessing the potential barriers to access, participation and belonging at the Community Center in an effort to identify opportunities to make the Community Center a more accessible, welcoming and inclusive space for all members of our community. In addition, the Outreach and Equity Director is planning to launch the Youth Council program this fall to coincide with the start of 2022-23 school
• All-city equity training is identified as part of the city’s training funds in the General Government

Utilities

• The Road Use Tax fund performed very well in FY21, outpacing projected revenues by $500k. The new census, 20,479, has been added to the model along with the most recent per capita revenue projections from the IDOT.
• For the third year in a row, the wastewater utility will not require a rate increase. While the next few annual operating deficits appear alarming, these were planned for knowing that the debt from the upgraded plant would be coming
• There are two Water Fund models included in the packet. The first shows rate increases of 2% in FY23 and 24, which have been projected in previous models. The second model eliminates the rate increases. The Water Fund can survive the next couple of fiscal years without a rate increase; however, later in the model the fund balance falls At this point, a decision on rates is not needed and, as in years past, staff will make a recommendation in April or May. We will continue to evaluate this enterprise fund and look for ways to use ARPA to offset any potential rate increases.
• The Storm Water Fund will need attention this calendar year. Staff anticipates proposing a new rate structure to the City Council this summer. This new structure will be more in line with best practices for storm water utilities across the If a new rate structure is not adopted this year, the proposed projects included in the budget will need to be delayed so not to send the fund into a deficit.

Franchise Fees

A new sheet has been added to the model this year entitled Franchise Fees. This document projects franchise fee revenue over the next five years as well and includes a list of park projects that are prioritized in the CIP. Staff will seek direction from Council at the second budget work session on capital projects.

Tax Rate & Reserve Funds

• The audited FY21 budget surplus is an impressive $1.4 million. This is a result of our leadership team’s management of their respective budgets, conservative budgeting practices and unexpected COVID relief funding through FEMA and the Unfortunately, the proposed FY23 general fund budget has a significant deficit and that will require $840k of the FY21 surplus to be used to cover those costs. Despite better than expected valuation growth, the FY23 General Fund deficit is a result of increased insurance costs, inflation on materials and supplies and the addition of three, much needed fulltime employees.
• The tax rate is proposed to decrease by $0.20, from $11.52 to $11.32/$1,000 in In combination with using the $200,000 plus interest held over from FY22 and an additional $275,000 of cash on hand, the debt service levy can be lowered.
• The phase out of the state backfill credits start in FY23 with the City receiving 80% of the credits. The credits will reduce by 20% annually until FY27 at which point backfill credits will be eliminated.

As state support dwindles and the state legislature makes it more difficult for urban cities to operate, presenting a responsible and effective budget becomes more difficult.

Fortunately, and you have heard me say before, we have a superior management team at the City along with a very dedicated and talented group of employees that we ask to deliver services. Working with such a gifted and selfless group makes the challenging budget preparation process a little easier to handle.

Please do not hesitate to contact me prior to our work session on Tuesday with questions or requests for additional information.