M-8 - Budget Special Report - FY 2024-2025

• As permitted under administrative rules adopted by the City Finance Committee, cities may levy for the city’s contribution to certain employee benefits. The definition of employee benefits includes workers’ compensation costs or insurance premiums, unemployment benefits, employer’s share of employee benefits plans, employee wellness and assistance programs, regularly-scheduled, city-required post-employment physicals for employees, police reserves and volunteer firefighters, and more. Utility Replacement Tax The Utility Replacement Excise Tax is collected on the generation, distribution and delivery of electricity and natural gas. This tax replaced the taxation on utility property in 1999. Cities are required to calculate their property tax revenues with and without utility property valuations. The difference that is calculated is necessary to establish the General Property Tax Equivalents, the basis for determining the distribution of the excise tax. The Iowa Department of Revenue calculates the amount of revenue that a city will receive and includes this information with the budget information cities receive from the Iowa Department of Management. Franchise Fee Legislation Cities are able to collect gas and electric franchise fees not to exceed five percent of the franchisee’s gross revenues “without regard to the city’s cost of inspecting, supervising, and otherwise regulating the franchise.” Revenue from franchise fees can only be used for certain purposes outlined in the state code, but does include such items as public improvements, property tax relief, public safety, energy conservation and economic development activities. A bill approved during the 2015 legislative session requires cities to hold public hearings prior to increasing or amending a franchise fee. Road Use Tax Fund The Road Use Tax Fund (RUTF) is accumulated through motor vehicle registration fees, motor vehicle fuel taxes, an excise tax imposed on the rental of automobiles and a use tax on trailers. The state legislature approved a League-supported gas tax increase in 2015 to bring additional funding to the system for critical road infrastructure needs. The per gallon tax increase of 10 cents adds an estimated $215 million annually to the fund, from which cities receive per capita distributions to pay for the construction, repair and maintenance of road infrastructure. Results from the 2020 Census were certified in 2021, which directly impacted the statewide distribution formula and each city’s per capita amount. The Iowa Department of Transportation (IDOT) released calculations that showed cities with more than 4.78 percent growth in population were expected to see an increase in RUTF allocations, while cities less than 4.78 percent growth in population were likely to have a reduction.