WATERLOO — The city may have lost its ability to raise property taxes next year after failing to approve a budget Thursday.
But state officials said the Waterloo City Council and Mayor Quentin Hart must compromise on a spending plan if they expect to avoid a municipal government shutdown after June 30.
“Waterloo will still need to complete the adoption of a budget by resolution of the council,” said Ted Nellesen of the Iowa Department of Management. “Without a budget adopted by resolution, the city would not be allowed to tax or expend cash on hand during (fiscal year 2018-19).”
About 16 of the state’s 947 incorporated cities have been penalized on average annually over the past five years for failing to submit a budget by the March 15 deadline.
That penalty prevents the city from adopting a tax rate that would cause non-debt service property taxes to be higher than the current year, Nellesen said. The council still could adopt a budget that lowers tax collection below this year’s level.
Hart was holding a series of meetings looking at budget options with his department heads Friday, the morning after a majority of council members rejected his proposed budget and Hart vetoed the budget they proposed in its place.
Hart’s plan would have raised the tax rate from $17.60 to $17.76 per $1,000 of value but kept overall tax collection flat and cut residential tax bills by 1.4 percent.
A majority of council members objected to Hart’s proposal to offset increased operating costs by raising the current gas and electric utility franchise fee from 3 percent to 3.5 percent.
Waterloo adopted a 2 percent utility franchise fee in 2013 that grew to 3 percent in 2014. Most of the state’s major cities have adopted utility franchise fees, some using the maximum 5 percent rate.
Council members Margaret Klein, Steve Schmitt, Bruce Jacobs and Chris Shimp then voted to approve a budget cutting the tax rate to $17.17, which was two-fifths of the way to the city’s strategic goal of cutting the rate to $16.50 by 2022.
Their proposal also eliminated the franchise fee increase and cut the city’s expected state revenue by $450,000 to match bills pending in the Legislature.
Council members Pat Morrissey, Jerome Amos Jr. and Sharon Juon opposed that budget, while Hart exercised his first mayoral veto after saying it would lead to an unacceptable level of service cuts, including the layoff of police officers and firefighters.
For reference, $12.14 of Hart’s proposed $17.76 tax rate pays for police and fire services. Another $2.99 pays city debt obligations, while voter-approved levies for the library and Grout Museum are locked at 27 cents each.
Just $2.09 of the levy pays for parks, the library, general administration, culture and arts and all other property tax supported operations.
Pressed to identify budget cuts to match their tax rate, Jacobs and Klein both said during the hearing it was up to Hart and department heads to make those decisions.
“The council sets the direction of the levy rate, and we expect the administration and department heads to find ways to help us get there,” Jacobs said. “I don’t think it’s our job to find what we’re going to cut. I don’t think you want council doing that.”
Klein added, “We are simply the big picture organization. I will leave the development of that to the administrators.”
Hart rejected those assertions, noting council members were present during the budget process when department heads laid out the implications of cutting their tax support.
“We have to remember there’s a reality to the decisions we make,” Hart said. “There’s no way you as policy makers are going to be able to abstain from having the consequences … that go along with that.”
Police officials said a 5 percent cut would eliminate 11 to 15 officers, dismantle the Violent Crimes Apprehension Team, Safe Streets Task Force and other programs.
Waterloo Fire Rescue said such a cut would permanently close Station No. 6 and remove an ambulance from service. The Waterloo Public Library would close more hours and lose its accreditation.
Klein, Juon and Morrissey were the only council members submitting written budget ideas before the vote. Juon generally supported Hart’s proposal, Morrissey mostly added additional fees to boost revenue, and Klein proposed several cuts.
Klein’s proposal included closing and attempting to sell South Hills golf course; closing the most “under performing” swimming pool, which was identified during the budget process as Gates Park; boosting fees to the county or ending shared services provided to the county government; freezing overtime; using interns; and not filling any vacant positions.