After several years of little or no change to county property tax levy rates, the Pottawattamie County Board of Supervisors recently approved a budget for the 2015 fiscal year that included substantial levy increases – the largest one-year increase ever, or at least in modern times.
The increases were designed to generate an additional $6.5 million in county tax revenues.
The new levy rates are expected to take the current fiscal year’s estimated tax revenues of $34.8 million to $41.3 million in the 2015 fiscal year – an increase of nearly 19 percent.
The big question taxpayers are asking is why. In fact, they’re asking several big “why” questions.
Why does the county need an additional $6.5 million in tax revenue?
Why are the levies going up either 12 or 16 percent, depending on where one lives?
Why didn’t the supervisors raise taxes a little at a time over a period of several years instead of dropping such a big increase on taxpayers all at once?
The short answer is simple: The county will need the extra money to operate next year.
The long answer as to why the county needs so much more money next year is a bit more complex.
But, to begin with, several members of the Board of Supervisors have privately admitted two things to The Daily Nonpareil:
First, they – the supervisors – allowed the county’s year-end cash reserve to “slip away,” as one supervisor put it, or at least to be reduced over a period of time to a level below what the county actually needs to operate.
Second, and somewhat sheepishly, a number of supervisors concede they should have probably raised the tax levies sooner; but then, raising taxes is never a politically popular thing to do.
Now, there appear to be no other options.
According to County Auditor Marilyn Jo Drake, the county needs to end each fiscal year on June 30 with enough money in the bank to operate from July 1, the first day of the new fiscal year, until the first of September, when new tax revenues begin coming into the county coffers.
If the cash reserve is less than what’s needed to operate those two months, the county could be forced to borrow outside money; or, as it has done in the past, the county will find itself needing to move money from one or more special funding accounts to the general fund in order to pay operating expenses the first two months of the fiscal year.
The transferred monies are always reimbursed to the appropriate special funding accounts as soon as the county begins receiving new tax dollars in September, Drake said.
In order to avoid the need for such maneuvering going forward, Drake says $3 million of the additional $6.5 million in tax revenue will be used to increase the cash reserve in the general fund at the end of the 2015 fiscal year.
Another $2.7 million will be used to pay for increased expenses in fiscal 2015. A general breakdown of the $2.7 million is as follows:
• Providing increased security in the courthouse will cost the county $500,000 in 2015. A half-million dollars will be used to buy and install the necessary equipment, and to pay for additional staffing – sheriff’s deputies – to man the security entrances. The initial expense will go away once the equipment is purchased and installed, but the new salary and benefit expenses will be ongoing.
• Another $400,000 will be used to cover the cost of the 2014 fall general election, an expense that occurs every two years.
• The county’s contribution to the Emergency Management Agency will increase by approximately $92,000; and, with some areas of spending declining in 2015 while others are budgeted to increase, a little more than $200,000 will be used to fund the net increase in non-personnel operating expenses.
• The final budgeted expenditure increase is $1.5 million to cover wage and benefit increases.
The remaining $800,000 of the $6.5 million will be used to offset lost revenue due to the 5 percent rollback in taxable valuations for commercial properties as mandated by the state, which occurs in fiscal 2015.
Unlike residential properties, for the past several years, commercial property owners have paid county tax based on 100 percent of their properties’ assessed valuation. Residential properties have paid tax on less than 100% of the assessed value due to state-directed rollbacks. In fiscal 2015, as directed by the state, commercial property owners will pay tax based on 95 percent of the assessed value, not 100 percent.
Although the state has pledged to reimburse counties for revenues lost due to the 5 percent commercial rollback – an estimated $800,000 for Pottawattamie County – the state has yet to tell the county how or when the reimbursement will be paid. The state hasn’t even acknowledged the $800,000 estimate to be correct.
Thus, Drake said, the county could not budget to receive the reimbursement funds in 2015. If the state pays the reimbursement in 2015, the county’s year-end cash reserve should further increase by an amount equal to the state payment, Drake said.
The county’s revenue plight continues to be further challenged due to ongoing revenue losses stemming from the 2011 flood.
Prior to 2011, the federal government housed up to 75 federal prisoners at the Pottawattamie County Jail, and the county received approximately $750,000 annually from the federal government as payment for services provided. When the 2011 flood waters continued to rise, federal officials decided to move their inmates to different facilities. The removal of the federal prisoners reduced county revenue by the $750,000 in annual federal payments.
Although the flood waters have long since receded, nearly three years after the federal prisoners were removed from the county jail, none have been returned.
One reason for the absence of federal prisoners is related to a change in philosophy at the federal level regarding incarceration – the feds are simply locking up fewer people, and for shorter periods of time.
Another reason is a lack of space in the county jail.
According to Jail Administrator Stu DeLaCastro, the county no longer has room to house federal prisoners. He told The Nonpareil that the county jail is now filled to capacity with local inmates.
But, since the higher population of local prisoners requires staffing levels and other expenses at the jail to be the same or higher as when federal prisoners filled the cells, the county finds itself unable to cut jail expenses to offset the lost federal funding.
The county also continues to struggles with another flood-related cash issue.
According to Drake, the county is still waiting for approximately $350,000 in reimbursement from the Federal Emergency Management Agency related to a variety of costs incurred during the 2011 flood. No one knows when the county will receive those dollars.
According to Drake’s assistant, Becky Belt – the county auditor’s budget guru – in preparation of the budget, the heads of all the various county departments met numerous times with the board of supervisors to develop what Belt described as the best budget possible.
When the final expense numbers were determined, the revenue number had to be increased by upping the tax levy rates enough to supply the monies needed to meet the budgeted expense. The result was the need for a $6.5 million increase in property tax revenue.
In order to generate the additional property tax dollars, property owners in Council Bluffs, Carter Lake and the county’s other incorporated cities will see their county tax levy go from $7.67 per $1,000 of taxable valuation to $8.93, approximately a 16 percent increase. Other county residents – those living in unincorporated areas – will see their property tax levy increase from $10.87 per $1,000 of taxable valuation to $12.25, a 12.7 percent increase.
Where tax levy rates go after 2015 is anyone’s guess. Decisions about future levy rates will be based upon expense costs, state rollback demands and how the county’s overall valuation changes – whether it increases or decreases.