There are a number of ways a city can work through the budget process before final approval. City council members and city employees need to work together to develop a process that allows for a thorough review of the city’s finances while looking toward the future as future budget needs are considered. The information below provides an overview of how the budget process can work.
Who is Involved
It is the council’s responsibility to approve the budget. The preparation of the budget, however, is different from city to city. In some communities, the city clerk or finance officer compiles the budget from many different sources. In other cities, a city manager or city administrator may lead the budget process and make recommendations to the council for final approval. In any case, information must be gathered from many sources and compiled into a format the council uses to conduct a hearing and approve the budget.
Cities must also follow Section 384.16 of the Code of Iowa, which requires that at least one public hearing be conducted to solicit public input regarding the proposed budget. Many communities have adopted a policy to get public input earlier in the process to ensure that the budget reflects the goals of the community. This is typically done through a variety of council meetings and work sessions, town hall meetings or other public gatherings depending on the needs of a community. Other boards, departments and staff who are responsible for the delivery of city services may also be very influential in framing the budget.
Budget Information and Resources
Technical instructions on how to file the budget forms are provided by the Iowa Department of Management (IDOM), which also maintains data on city budgets and property tax rates.
For current trends and estimates, the Budget Special Report summarizes many of the key issues facing cities as they begin preparation of the budget. A copy of this document is sent to every city clerk during November.
Goal Setting and Long Term Planning Options
By understanding the goals of the community, the city can set priorities and focus resources in areas important to achieve its goals. Prioritizing community goals also gives city staff direction on which services and service levels to include in the Capital Improvement Plan (CIP) and in preparation of the next budget.
A CIP typically reflects 3-5 years of capital equipment, construction and infrastructure maintenance and improvements that the council plans to undertake. All CIP activity for the current and upcoming budget year must be incorporated into the proposed budget. Code Section 384.15 (3) requires that a public hearing be conducted prior to adopting the CIP. The CIP should reflect the goals adopted by the council.
Accounting
In order to operate effectively, most cities will use a greater level of detail than is required by the state budget forms. This detail is based on a chart of accounts, which varies depending on the complexity of the programs provided by the city. Grants and other specialized programs may dictate additional details to comply with reporting requirements. The detail of the operating budget also enables the city to more effectively project revenues and expenditures and to monitor and verify operating efficiencies.
The Governmental Accounting Standards Board (GASB) has established that governments, such as cities in Iowa, use fund and program accounting. Each fund has a set of revenues and expenditures which are classified by type to provide city services on the next page.
Filing the Budget
The budget must be filed by March 15 and is preceded by the publication of the public hearing notice. Code Section 384.16(3) requires that the public hearing notice is published (or posted for those cities 200 or less in population) not fewer than 10 days before and not more than 20 days before the public hearing. Additionally, a copy of the detailed budget must be available at least 20 days before it is certified but not fewer than 10 days before the public hearing (384.16(2) of the Code).
If the budget is filed after March 15, the property tax levy will be limited to the prior year’s budget amount unless the penalty is waived by the director of IDOM. This will only be granted if the deadline was due to circumstances beyond the control of the city. Additionally, Code Section 384.16(7) states that all state funds will be withheld until a budget is in compliance and filed with the county auditor and IDOM.
While March 15 is the cutoff date for filing the city budget, other actions could occur after that date that city officials should be aware of:
- A budget protest against the budget or a portion of it may be filed up to 10 days after the budget is certified. A hearing is then scheduled by the State Appeal Board to hear arguments and make a decision with respect to the protest.
- IDOM will verify the tax levies to the city by June 15. The city should check to ensure there have been no changes or make the necessary adjustments for any changes.
- Beginning with the new fiscal year (July 1), the council will need to monitor the progress of revenues and expenditures against the projections that were used when preparing the budget. If changes are necessary, the budget amendment process should be followed before any expenditure exceeds the amounts published in the public hearing notice.
The budget process is very important in the planning and delivery of services in your city. Careful consideration in the allocation of resources will be necessary as the cost of and demand for services continues to challenge the fiscal stability and economic viability of our communities.
| Revenue Sources | Government Activities by Program |
|---|---|
| Taxes – includes property taxes, Local Option Sales Taxes, hotel/motel, sales and Tax Increment Financing | Public Safety – police, fire, ambulance, animal control and other public safety services |
| Licenses and Permits – includes building and other permits | Public Works– roads, bridges, engineering, airport, snow removal and other services not included as an enterprise |
| Use of Money and Property – includes interest earning and building rents and leases | Health & Social Services – welfare assistance, mosquito |
| Intergovernmental – funds received from other governments such as Road Use Tax and grants | Culture and Recreation – library, arts, park and recreation, and other cultural activities |
| Charges for Services – fees generated from users of a service such as utility fees | Community & Economic Development – community beautification, housing, planning and zoning and economic development activities |
| Special Assessments – includes charges for city assessments such as street and sewer projects | General Government – mayor, council, clerk, attorney, city hall and other administrative |
| Miscellaneous Revenues – includes donations, refunds and internal service charges | Debt Service– principal and interest payments on bonds, notes and other debt obligations |
| Other Financing Sources – includes transfers and proceeds from sale of city assets or bond proceeds | Capital Projects – general government or Tax Increment Financing capital projects |
| | Business Type/Proprietary Activities – water, sewer and other utilities include all associated debt and capital projects |
