MASON CITY – The Mason City council held a budget workshop to hear bad news about the City’s finances and the looming prospect of property owners once again coming to the rescue.
The budget workshop was held in City Hall on the second floor on January 25, 2024, at 7 PM. Finance Director Brent Hinson claims the City is in “good financial position” yet real challenges are emerging due to state policies causing “metro areas … to … collect more money than the rural areas and the thrust of the policy was forcing an increase in property taxes.”
READ THE MINUTES OF COUNCIL WORK SESSION FOR DETAILS:
The City Council of the City of Mason City, Iowa, met in Worksession pursuant to law and rules of said Council, in the 2nd Floor Conference Room of City Hall at 7:00 P.M., on January 26, 2023. The meeting was called to order by the Mayor Pro tem and on roll being called, there were present, Mayor Pro tem Adams in the Chair and the following Council Members: Masson, Jaszewski, Latham, Adams. Absent: Mayor Schickel, Lee (arrived 7:14 p.m.) and Symonds.
Finance Director Hinson provided a power-point presentation regarding the following information.
1. FY 2025 Budget Overview: Administrator Burnett stated it had been a challenging year and fortunately the city was in good financial position.
Adams questioned the Fire and AFSCME contracts versus the proposed non-union cost-of-living increase with Burnett stating the total percentage was different and while their percentage was lower there were other modifications with more money built into the contract.
Hinson discussed an additional item that came up today and that was issues concerning the backfill to the new Business Property Tax Credit. He stated staff found out after the proposed budget was sent to Council that the $125 million cap for backfill in the legislation had been reached, and so the City would have a significant reduction in backfill versus what the formula calculated. The result of this was that the City would be getting $482,000 rather than the $680,000. He stated staff recommends using LOSST to make that up, explaining it was a lean budget because of the capital commitments and staff did not want to cut $200,000 from the General Fund which was only increasing by 1.2% which is way below inflation and reiterated the responsible thing to do would be to up the estimate on LOSST, advising staff had drafted the proposed budget with an assumption of $6.4 million in LOSST, while last year finished at $6.7 million and were on pace for $6.8 million with half of FY 24 completed. This change would increase the assumption to $6.6 million for the FY25 budget.
Latham asked if the State had given any indication of future cuts with Burnett stating essentially the metro areas could collect more money than the rural areas and the thrust of the policy was forcing an increase in property taxes.
Adams asked if this was the same issue as last year with Brent stating this was worse with HS718.
Lee entered Council Chambers at 7:14 p.m.
Hinson pointed out the General insurance had almost doubled, and it puts pressure on the levy, but staff was making it work for now and the changes were modest and stable. He also stated there was the Mayor/Council pay which was fully in place January 1, a new position of Electronic Records in the HR Department and a reduction of a position within the Youth Task Force, adding they did not get the grant needed to staff the position (staffing was contingent on getting the grant funds secured).
Hinson discussed Transit and explained why it should be split into its own fund and discussion followed regarding ridership, current revenue and how much of it was subsidized.
Adams asked about the Library Levy with Hinson stating it might be put back in place, but either way the city would hold the Library harmless. He stated this year the Library had approximately $0.79/$1,000 of the general levy of $8.10/$1,000 plus their voted levy of $0.14/$1,000. In the proposed budget, they were being allocated $0.93/$1,000 of the City’s $8.51/$1.000 Combined General Fund Levy.
Masson questioned that even though the City voted in the Library Levy it could be taken away with Hinson concurring, it was both a funding and local control issue; while we are able to keep the Library whole for now, the problem was the cliff at FY29 where the Combined General Fund Levy drops to $8.10/$1,000 and while Mason City had a variety of strategies available to cope with the changes, for poorer communities it will be catastrophic.
Lee asked what the alternative was if there was no transit levy with Hinson stating revenue would have to come out of the General Fund or the City would need to discontinue or greatly reduce the transit service.
Latham asked if it affected what they received from the County with Library Director Markwalter stating it did not.
GENERAL FUND BUDGET DETAIL BY DEPARTMENT: Hinson reviewed the information stating Police and Fire were the biggest commitments and the biggest change for any department was a position being added to HR and a reduction of one position in Youth Task Force.
GENERAL FUND OPERATING SUB-FUND DETAILS: Hinson stated the only two things to note were Airport because of the transfer out to Capital projects to cover finishing up the Terminal projects and that will bring the Airport fund balance back down.
Adams asked when it would be finished with Airport Manager Sims saying mid-summer.
Adams asked if there were plans for the old building with Sims stating there were not.
Hinson referred to the Transit fund advising for State and Federal reporting purposes some administrative salaries were being allocated there.
GENERAL REVENUES BY TYPE AND GENERAL FUND EXPENDITURE SHARE BY DEPARTMENT: Hinson stated property taxes were paying the bills at 51.41% and reviewed the funds, noting typically Police and Fire were at 50%, however it was lower this year because the Police vehicles had been moved to General Capital Projects Fund 015.
TAX RATE COMPARISON: CURRENT VS. PROPOSED: Hinson stated this year was different with the Combined General Fund Levy (CGFL) and there was also a slight reduction in the Trust and Agency and the Debt Services.
PROPERTY TAX VS. COMPARABLES: Hinson reviewed how Mason City compared with Clinton, Burlington, Marshalltown, Muscatine Ottumwa and Fort Dodge, emphasizing Mason City did very well with our Consolidated Rate being the lowest. He stressed we would continue to hold level and stay competitive.
Burnett highlighted the Franchise Fee which was a tax on gas and electric that could go as high as 5% and was something the user paid, pointing out Clinton and Muscatine currently had the tax and Fort Dodge was proposing to implement it in FY25.
Latham asked if that was accounted for in the levy with Hinson stating it was not, it was an additional revenue stream which Mason City had been able to avoid having to implement but was unsure how long that could continue.
Latham asked based on assessed values going up how does that affected the rollback with Hinson stating for residential it cancelled itself out as the rollback decreased roughly by the average assessment increase percentage in Mason City.
OUTSIDE ENTITY FUNDING: Hinson stated this was funded from Hotel/Motel tax, advising the projected revenue this year was $800,000 and mentioned staff had moved the North Iowa Corridor out of this because it was now being funded by Unified TIF which helped with downtown funding. The change to North Iowa Corridor funding was done in part because of the limited revenue available in the Downtown TIF and the need to provide ongoing funding for the Downtown Revitalization Loan (DoRL) and Building Renovation/Life Safety (BuRLS) programs.
Discussion followed regarding AARPA funding and the success of BURLS and DoRL and CoRL and funding levels.
LOCAL OPTION SALES & SERVICE TAX: Hinson stated the City was on pace for $6.8 million but because of the lack of funding for the Business Property Tax Credit we would need to allocate more toward the General Fund in the coming year. Hinson also stated the Golf Course and Arena were not self-sustaining, but that some tax subsidy was appropriate for these functions on an ongoing basis as a service being provided to our residents.
Discussion followed regarding the benefits of the Arena.
EMPLOYEE HEALTH INSURANCE BUDGET: Hinson stressed there was a good robust balance and staff felt good about how it was going.
Adams asked if the premium split was at 80/20 and if that was where we wanted to be with Burnett concurring.
ROAD USE TAX FUND: Hinson stated there was not much going on here and it had been fairly stable, adding there had been significant drawdowns in the fund for capital projects such as 122 Mercy and the HOME grant infrastructure.
DEBT SERVICE FUND: Hinson stated the City had $9,000,000 in Debt Service payments for the year. He reviewed the three large items and how that was $12.8 million of Street and Water projects. In addition, he stated the City was projected to be at 64% of its legal debt limit and wanted to stay below 70%, emphasizing the goal was to stabilize the debt at about 50% of the legal limit. He stressed we wanted to be good stewards but not afraid to issue debt when necessary.
WATER FUND BUDGET: Hinson stated there would be more in here next year, but we were good and stable and in year three of a five-year rate plan 2.5% increase.
SEWER FUND BUDGET: Hinson stated there was a lot going on with this fund and the fund balance was taking a hit. He stated the City was putting the maximum draw advisable on the fund to limit the initial rate effect for the Nutrient Reduction and Lift Station Improvements and the proposed rate adjustments would restore this fund balance to an appropriate level while covering the cost of these improvements.
NUTRIENT REDUCTION & LIFT STATION PROJECTS: Hinson stated there were two major projects needing Sewer funding and they were the Water Reclamation Nutrient Reduction Project at $27 million and the 43rd Street SW Lift Station at $3.8 million. He stated the upside was that both could be funded through State Revolving Fund loans at a 2% interest rate over 20 years. He stated this would require rate adjustments of some significance, but the hope was to have an equitable rate structure and that appropriately distributed the cost while keeping the base rates as stable as possible and putting it on usage.
Lee asked what the City was getting for $27 million with Operation and Maintenance Manager Stangler stating it was a complete revision of Waste Water Treatment Plant, explaining the physical layout would change and there would be a significant upgrade of equipment.
Hinson stated the silver lining was the upgrades would make it more efficient for staff and reduce staffing demands.
Discussion followed regarding bidding and whether the project could be handled by a local general contractor or whether it would need a specialized contractor.
Adams questioned the lifecycle of the equipment with Stangler stating 15 to 20 years.
Lee referred to the start date and questioned whether we were comparable to other cities with Stangler stating we were on the front end of it, but on the low end of it financially because some cities would be spending $50 million.
SEWER FUND RATE ADJUSTMENTS: Hinson stated Mason City’s overall Water and Sewer was the 5th lowest in the State for communities of 10,000 or larger and staff would recommend keeping the base rate adjustments for sewer at the same rate currently in the Ordinance, however that would mean a significant percentage increase for usage beyond the base rate and presented the schedule, noting there were two big increases in FY25 and FY26.
Adams asked how much a person would get at the base rate with Hinson stating 0 gallons.
Lee asked what the average homeowner would see with Hinson stating a 3.5% increase (4 to 5 person household) and stressed Mason City was still below the average when it came to Water and Sewer rates and Burnett emphasizing Mason city was on the front end of this while some communities were still paying for improvements from 20 years ago that were obsolete.
STORM SEWER FUND BUDGET: Hinson stated currently residents pay $3.00 a month for storm sewer while something as big as Walmart paid $7.00 a month so staff was working on the implementation of a new equivalent residential unit (ERU) based system. This plan would hold residential increases at a level currently in the Ordinance, but would provide funding for initiatives to be identified in the North-Central Storm Sewer Study and other drainage/flood reduction initiatives.
Jaszewski asked when the ERU information would be brought forward with Hinson stating by late spring, with an effective date of July 1.
SANITATION BUDGET: Hinson reviewed what was proposed in the CIP and stated this fund was in good shape.
AMBULANCE BUDGET: Hinson stated staff continued to work on this and would expect to need some bond funds in future years for purchases of replacement ambulances.
GOLF & ARENA BUDGET: Hinson stated LOSST was being used to keep the funds level and are supporting activities.
DISCUSSION: Adams referred to Outside Entity Funding and questioned if there was any dollar amount submitted for the Northern Lights Homeless Shelter with Hinson stating no amount was submitted.
Adams pointed out the YMCA was not on the list however, he knew they had made a formal request to the County with Burnett stating they had not submitted an application to the City.
Adams inquired what the asking amount could be with Burnett stating north of $150,000 per year from just the city, advising they were in need of funding, which was not dire this year, but projecting the organization would have to receive funding or modify services.
Jaszewski asked if the City felt an obligation to fund them with Burnett Aaron stating that was the Council’s decision, stressing we had a finite amount of money, and he would not recommend funding them.
Masson stated the problem was that anything less would not help them and Latham pointing out this had been ongoing with the YMCA for years and it had just come to a head.
Adams requested more information on the YMCA.
Latham asked how many times Police referred people to the homeless shelter with Police Chief Brinkley stating 18 to 24 times a year (a couple a month).
Latham stated he would like to look at funding the Northern Lights Homeless Shelter.
Discussion followed regarding how a one-time initial funding ends up becoming a yearly funding.
Lee stated the only way he would be interested would be if there was balance left over in the fund at the end of the year and stressed, he was not interested in providing money upfront to the homeless shelter or the YMCA.
Adams requested staff not reach out to the Northern Lights Homeless Shelter and to obtain more information from the YMCA.
2. FY 2025 – FY 2029 CAPITAL IMPROVEMENTS: It was the consensus of the Council to proceed with what was presented. Hinson talked about the next steps in the process and the timeline.
The Mayor Pro tem adjourned the meeting at 9:07 p.m.
Hey, maybe we could build a hotel in the Southbridge Mall parking lot! That should be a real money maker! There’s already a skywalk from a mismanaged money losing event center! Should be great!
The answer is easy. Quit spending money you don’t have.
Maybe they need printing presses like the feds