MUSCATINE — Muscatine leaders breathed a sigh of relief last week when the Iowa Legislature adjourned without passing a ban on traffic cameras or plans to roll back tax-replacement funds the state gives municipalities.
Over the past few months, city council members and staff have voiced concerns regarding potential legislative actions that could result in the loss of hundreds of thousands of dollars in revenue. But lawmakers adjourned last weekend without passing any regulations on automated traffic enforcement cameras. The General Assembly also failed to pass a bill that would have gradually phased out $152 million in state payments made to cities, counties and school districts.
“We’re appreciative of that. It was really just the unknowns that were difficult,” Muscatine Finance Director Nancy Lueck said. “In the future, if the state is going to phase that out, it would be nice to know in advance rather than after the budget’s been approved.”
City leaders approved the fiscal year budget without knowing whether the General Assembly would eventually discontinue the backfill payments, which is the money paid to local municipalities to make up for sweeping cuts in commercial property taxes approved in 2013. Lueck said the city council passed the new budget based on the facts known at the time, assuming the backfill revenue would still be in place.
In the past fiscal year, the state backfill provided the city of Muscatine more than $630,000. Muscatine County received more than $503,000 and Muscatine Schools received nearly $744,000, according to the Department of Management.
“It’s actually kind of made the city whole, with the rollbacks in those property valuations,” Lueck said. “So without those moneys, we probably would have had to look at potentially service level reductions and that type of thing. It’s really allowed us to kind of hold our own.”
If the backfill would have been fully eliminated, the city would have lost $634,752 in revenue this fiscal year, according to budget documents, with $529,698 impacting the general fund. Now with the revenue secure, Lueck said the city has time before considering potential service reductions or a property tax increase.
The city is also pleased to know revenue from automated traffic enforcement cameras (ATEs) are secure for another year. Lawmakers considered a full ban or regulations on traffic cams, but no decisions were made at the session’s end. If the ATEs would have been prohibited, the city would lose an additional $350,000 in revenue, according to budget documents.
One of Muscatine’s five traffic cameras, at University Drive and Highway 61, was required to be turned off by the Iowa Department of Transportation and a Polk County judge last year. Lueck said the lone camera brings in roughly $300,000 in revenue. To make up for the loss, city leaders approved a raise in the Utility Franchise Fee this year.
Council members approved raising the fee from 1 percent to the maximum rate allowed of 5 percent, which is projected to generate around $325,000 in annual revenue. But last month, the Iowa Supreme Court ruled the city may turn the traffic camera back on, which Lueck expects to happen in a few weeks.
“One of my goals was to get rid of the franchise fee we instituted to cover the loss of revenue from traffic cameras. I was hoping since we will likely be able to turn the one at University and 61 back on, we’d be able to get rid of the franchise fee,” Councilman Kelcey Brackett said in a previous interview. “But that’s probably not going to be the case if the Legislature strips away the backfill.”
Unlike property taxes, the Utility Franchise Fee may be adjusted with a 90-day notice to Alliant Energy. But with the city concerned state lawmakers may push to roll back or eliminate the backfill payments again next year, Lueck said the increased fee needs to be looked at “in the whole context of the budget.”
If the payments are rolled back next year, she said a raise in some of the city’s tax levy rates could be possible. For now, Lueck is pleased to have more time to plan for the next fiscal year budget, but still worries this week’s relief is only temporary.