Oskaloosa Council Searching For Revenue
Oskaloosa, Iowa – Last week the Oskaloosa City Council began the process of adopting an updated franchise fee for the City of Oskaloosa. The fee is being utilized to help fund some recent community requests before property tax reform cuts take hold.
A franchise fee is based upon consumed electricity and gas serviced by Mid-American Energy in the Oskaloosa community. This fee would be increasing by 2% for all entities and could generate approximately $300,000 a year in revenue for the city.
In July, the city council met in a work session to discuss how the city intended to move forward with a recent request by the Mahaska County YMCA for funding, as well as a request from Forest Cemetery. The reason for the work-session was to determine how the city would be able to continue its current budget.
Oskaloosa City Manager Michael Schrock told the council, in work session, that by 2015 they would be experiencing minimal impact from the recently passed property tax reform bill. (Senate File 295) . “Where we start seeing significant changes for our revenue is fiscal year ’17”, says Schrock. At that point, the back-fill from the state will begin to decrease.
The one that is impacting most cities across Iowa is the new designation of Multi-Residential. Multi-Residentials are classified as apartment buildings, assisted living facilities, and mobile home parks. Apartment areas in otherwise commercial structures will be “split out” to the new classification too. (Details are still being worked out.) The roll back on this classification will be reduced each of the next 10 years, until it is the same as residential.
“That’s a pretty significant impact,” says Schrock.
At the July meeting, Schrock said, “As you can see, it’s a significant change in revenue [tax reform] year over year, so we have to keep that in mind. Schrock, Oskaloosa City Manager, added, “I stressed in this budget development we really needed a prioritizing session about what services are essential in this community, and which aren’t. Something’s going to have to go, or you have to consider alternative revenue sources. It’s not my nature to raise revenue without looking at expenses.”
The City of Oskaloosa has signed an obligation to help Forest Cemetery to the tune of $100,000, but has no further obligation beyond that. “I think the council has shown an interest in continuing to fund it, as long as a plan is being developed to figure out how their operations can become more sustainable,” said Schrock. The potential of giving the Mahaska County YMCA $200,000 a year over the next three years is another request that the city is fielding.
In July, Schrock also offered up for consideration various cost saving ideas. Those included trimming back corridor projects which could put back $50,000 per year into the city’s general fund. Capital expenditures and not buying and replacing equipment are also options brought to the table.
Positions on the city staff are also being considered, especially those positions that have not been filled, and, for example, positions as they come open from a retirement . “Then we looked at current vacant positions which could either be frozen or eliminated. Code enforcement position, Mark [Neff] and I have already talked about this. The practice has been changed and we’re not filling that part-time position. That position cut would free up $22,000 in the city budget,” said Schrock.
The Oskaloosa Police Department was testing for an open position as reference as a potential savings to the general budget. Also open is the parks maintenance position, and the city has reviewed applications, and Schrock used it as an option that does exist. Also city staff retirements within the next 1-3 years would include a firefighter, two firefighter captain positions, “Then we have looked at across the board reduction, which I am not a fan of,” says Schrock. “Sometimes it seems politically more acceptable.” That potential reduction would be a 2.5% reduction or approximately $73,000 across the general fund, which includes departments like police, fire, administration, parks, pool, and library.
In an email to Oskaloosa News, Shrock spoke about a possible 2.5% or even 5% cut to the city budget. “I am not necessarily a fan of using a blunt instrument like across the board cuts when the city’s budget is, and should continue to be, representative of community/city council priorities. I have and will continue to facilitate conversations with the city council about their current and future priorities for service levels and tying budget allocations to those services. Nevertheless, I do think there are acceptable times for all services to “share the pain” when attempting to reduce expenses, and that is why I have asked staff to review possible 2.5% and 5.0% budget reductions within their departments using this year’s budget figures. At the same time, I also asked them for any ideas that could create new or enhanced revenues for the city. Staff and I are still reviewing and refining those various cuts and revenue enhancements and plan to do more work on them in the near future. Once we have refined the proposed expenditures and revenue enhancements, those will be discussed with the city council for their input prior to establishing the FY2016 budget.”
Schrock said all positions in the city are on the table, including those in city administration.
Currently, the total franchise fee goes towards road improvements. All capital improvements are happening through the franchise fee and there is no bonding taking place to finance those improvements. That could be re-purposed, but would then leave less for road repairs.
When asked what steps might be taken to reduce the franchise fee if the legislature changes the back-fill policy. Would that then mean the city would reverse course on the increase to the franchise fee? Schrock replied, “That is a question better answered by the voting members of the city council. I suspect if the legislature identifies a reliable and protected revenue back-fill to offset decreases for cities, we would have to have a conversation about the revenues being collected via the electric and natural gas franchise fees.”
The reversal in the franchise fee would be over at least a couple of years, as those agreements are only available for change every few years.
City Council-member Doug Yates, at the July work-session, expressed his thoughts about the increase of the franchise fee, “We’re going to need it for a long time, because our state legislature has decided to put it on our back, [in order] to help them get re-elected.” Yates explained that he wanted to talk about the merit of the cuts in detail.
During the most recent city council meting, a public hearing was held before the council voted on the proposed increase. Wayne Hook spoke to the council about the proposed fee increase. “One could conclude, by the amount of average people here to speak about this proposed increase in the franchise tax, that this is a hidden tax imposed upon the poor, because they frankly aren’t aware of it.”
During the discussion, council-member Jason Van Zetten spoke in opposition to the fee being increased. “This is just something I can’t support,” said Van Zetten, who expressed his concern that this increase was first initiated because of requests from the cemetery and the Y. “We have no plan at all for the Y right now,” said Van Zetten. “So for me to sit here and say we’re going to raise taxes without a plan, I can’t do that.”
Van Zetten said that Micheal Schrock did a good job of presenting the council with items that could potentially be cut. “We didn’t really get into having some really deep discussions about cutting.” Van Zetten used an example of the police budget, and if there could potentially be cuts made to that department. “Scale back some of these [budgets],” said Van Zetten.
Doug Yates said, “I agree we need to be doing both.” He added those discussions on cuts would be done at budget time. “I don’t go into this thinking this [franchise fee] is the entire answer.” Yates said. “I know we’re going to cut some things. I think this [franchise fee increase] is a necessary step as well.”
Council member Scotty Moore said that the fee increase isn’t there to fund the Y, it’s to generate discretionary funds to take care of the back-fill money the city looks to lose.
A roll call vote then took place with the council split 4-3. Those voting in favor of the increase were, Yates, Caligiuri, Jimenez and Moore. Those opposed to the measure are, Ver Steeg, Walling, and Van Zetten.
After the 4-3 vote, I asked Schrock if he was surprised by the vote after the July meeting. “A majority of city council still supports the measure as presented, if that changes, that is their prerogative as the policy making board for this community. The city council and staff continue to work hard to identify options that address a projected revenue shortfall by decreasing certain expenditures and increasing revenues. If the city council receives feedback that influences them to vote down this particular approach, I will engage them in further conversations and we will develop alternative solutions to the problem.”
This was only the first of three readings of the ordinance. This issue will be back on the table for discussion at the next city council meeting September 2nd at 6 p.m.