Rollback rate could mean more painful cuts to city budget

Rollback rate could mean more painful cuts to city budget
 
Date November 01, 2005
Section(s) Local News
Brief  
 
By PETER HUSSMANN

Editor

“Ouch.”

That was Newton City Administrator Dave Schornack’s reaction to the residential “rollback” figure released by the Iowa Department of Revenue on Monday.

Each year, the director of the department orders the percentage at which various property classifications are to be assessed for property tax purposes. For the coming fiscal year, for residential properties across the state, the percentage was set at 45.99. That’s almost 2 percentage points below the current rate of 47.96. Five years ago the percentage stood at 56.26.

What all this means is a budget headache for Schornack.

“It’s certainly going to make our budgeting more difficult,” he said.

The city — like other local government entities — derives the majority of the revenues it uses to pay for services from residential property taxes. This year, Newton saw a 2.3 percent valuation growth rate.

Taking into account the $10.5 million worth of residential abatements in Newton and the value of residential properties stands at $530.1 million, a $11.3 million increase from the year before.

The problem Schornack faces in preparing next year’s budget is that the percentage decline in the rollback is greater than the increase in residential assessed valuations. While residential values grew 2.3 percent, the rollback is falling 4.1 percent. The gross taxable valuation of residential properties within the city will actually fall by more than $4 million next fiscal year.

To compound matters for the city, the state has also issued a rollback for commercial properties next fiscal year. Instead of being able to collect taxes on 100 percent of commercial values, the city will only be able to collect on 99.15 percent of the full assessment.

This small decrease will not pose as significant a problem for Newton in preparing its budget as the drop in the residential rollback. Including the $11.1 million worth of commercial abatement, the city will see about a $4 million gain in commercial values at about $124 million.

However, much of that increase in value does not make its way to the city’s general fund. Much of the new commercial value has occurred within the various urban renewal areas around the city. The increased values are earmarked to pay tax increment financing debt the city has incurred in assisting the developments.

State officials have not issued a rollback order for industrial properties. However, Maytag has received a $2.36 million reduction in its values, which means at current levy rates a loss of $38,000 in city revenues.

City officials have a meeting scheduled Nov. 21 to set budget guidelines for the coming fiscal year.

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