City Mandates and Cost Drivers
Cities agree that commercial property taxes are too high. The League has long recognized the problem with the structure of Iowa’s property tax system, which has shifted the burden to commercial property tax payers. As partners with the business community in economic development, we understand the need to attract and retain businesses and jobs in our cities. The League has been an active participant in discussions over the years on reforming the existing system, and has advocated for reforms that help local governments have more revenue options at the local level to lessen city dependence on property taxes. With ongoing discussions on property tax reform, we wanted to present some information on city cost drivers and mandates, many of which the League has been or is attempting to ameliorate legislatively. We have not listed every cost driver or mandate here, but instead, we chose specific categories and issues that can be addressed by the legislature this session.
1. Pensions
a. Municipal Fire and Police Retirement System of Iowa (MFPRSI)--also commonly referred to as the “411 System.”
i. Cities in the system face skyrocketing contribution rates (See additional information on costs.)
ii. The state decided last year to completely phase out its contribution to the system by FY2013, so all costs over the 9.4% employee contribution rate fall on cities; yet, the state retains control as the system administrator to increase benefits.
iii. During the 2009 session, the legislature passed a benefits increase in the form of a cancer and infectious disease presumption, which automatically assumes when an active employee gets cancer or certain types of infectious diseases, this is due to conditions of the job. This requires cities to cover all medical costs for the employee associated with the cancer or infectious disease. Other non-rebuttable presumptions also exist within this chapter.
b. IPERS
i. Cities have employees in both the protected and regular classes. A contribution rate increase from 11.45 to 13.45 percent for the regular class will go into effect July 1, 2011.
ii. A cancer and infectious disease presumption was added during the 2010 session to IPERS.
2. Public Safety
a. Iowa Law Enforcement Academy (ILEA) Police Training is required by the state, no reimbursement money is provided, and cities must fill the empty shifts of the officer attending ILEA.
b. Townships are limited in the amount they can levy for fire protection. Cities must make up the cost or subsidize township fire protection, resulting in a shift of higher costs to city residents.
c. Code of Iowa Chapter 85.36 (9a) requires cities to compute worker compensation for injured volunteer firefighters at 140 percent of the average state-wide weekly salary or the employee’s own salary, whichever is greater.
3. Personnel Costs
a. Healthcare increases
b. Collective bargaining
c. Continuation of Group Health Insurance (Code of Iowa Chapter 509A.13) for early retirees. Cities are required to allow employees who retire before reaching age 65, to continue in the group health insurance plan until the employee reaches 65. (As a post-employment benefit cities must provide, this is one of the reasons the League is asking for GASB45 legislation this session.)
4. Infrastructure Costs
a. Shortfalls in road and bridge funding (RUTF and TIME21) combined with cost increases for construction, materials and fuel.
b. High costs (in the billions) for water infrastructure upgrades across the state.
5. EPA/DNR
a. Continually changing EPA and DNR requirements, for drinking water, wastewater and air quality force many cities into costly infrastructure upgrades, or administrative burdens.
b. Some federal or state positions or rules, have overstepped federal statutes and existing EPA rules, forcing or threatening to force cities to spend disproportionate amount of money for little to no environmental gain.
i. Wet weather issues
ii. Antidegradation
6. Mandatory Newspaper Publication Costs
a. Cities are required under many sections of the Iowa Code, to publish notices, minutes, ordinances and other information in the newspaper.
b. The per-line rate for publication in a newspaper is currently set in code and can be adjusted each June by the Department of Administrative Services. Each year is can go up by the CPI increase. (See additional information on publication costs.)
c. Cities are currently not allowed to meet these publication requirements by online or alternative means.
7. Commissions and Boards
a. Civil Service Commissions. Governed by Chapter 400 of the Iowa Code, cities of over 8,000 as of the 1980 census are required to follow stringent and complicated civil service hiring processes.
i. Iowa Code Section 400.11 states “Any person temporarily filling a vacancy in a position of higher grade for twenty days or more, shall receive the salary paid in such higher grade.”
ii. 400.8(3) requires civil service cities to provide a nine-month probationary period for law enforcement personnel.
b. City Civil Rights Commission. Cities over 29,000 are required to fund a local civil rights commission, despite the fact that the state has a civil rights commission with overlapping jurisdiction.
8. Tax-Exempt Properties
a. The state mandates that certain property is exempt from taxation. For some cities, such as Des Moines – this amounts to 40% of all properties in the city.
b. Costs for services provided to these properties are borne by the other property owners.