The secret to managing your city’s tax rates

By Brad Falteysek, CPA

No city wants to increase its tax rates. In recent years, however, many cities have been forced to raise rates by more than 10%. Consistently managing your city’s tax rates can help to avoid surprise hikes. For this, a long-range plan is critical.

Here’s what you should know about a long-range plan and how it can help you manage your city’s tax rates and more.

 

What is a long-range plan?

 

A long-range plan is a financial roadmap that shows how a city will be able to financially achieve the council’s goals and objectives over the next 5–10 years. Typically prepared by the finance director or department, it should be updated annually.

 

A well-prepared long-range plan provides consistency for a changing council and incorporates the following:

• City expenses
• Future projects
• Funding sources (e.g., grants, state aid, property taxes, bonding)
• Personnel salaries
• Staffing needs
• Changing market values within city
• An understanding of TIF districts

 

What are the benefits of having a long-range plan?

 

The financial clarity that comes from having a long-range plan is invaluable. With a clearer picture of future funding needs, you can focus on creating reserves within the city to support emergencies. Having a plan also gives you a process for reviewing and replacing equipment, the costs of which can be significant.

 

With a long-range plan in place, you’ll have a better grasp on how tax rates could be impacted by decisions you make today. You’ll have the ability to calculate tax levies along with estimated tax rates needed to sustain capital projects. Most important, you’ll know which projects can be accomplished based on council’s goals for reducing, maintaining, or managing tax rates.

 

 

What are the risks of not having a long-range plan?

 

Developing and maintaining a long-range plan requires time, which can be in short supply amid project demands and day-to-day operations. But operating without one can put your city in a difficult position.

 

One of the biggest risks of not having a long-range plan is a lack or reduction in reserves, which could lead to fluctuating tax rates and frustrated residents. If your city is unable to save money and needs to finance projects, this could mean greater interest costs. And if you don’t have a way to regularly address equipment needs, you could end up with higher-than-expected repair or replacement costs in one year. This could require you to issue a bond or secure financing, which, of course, affects tax rates.

 

Without a long-range plan, you may need to:

 

• Explain significant year-to-year tax rate changes to residents
• Secure additional financing
• Finance emergency equipment purchases
• Delay critical projects

 

How could a long-range plan benefit your city?

 

Giving you a way to manage your city’s tax rates is just one benefit of having a long-range plan. It is arguably, however, the most powerful. With a financial roadmap for achieving its long-term goals, your city can deliver both completed projects and more consistent rates to residents.

 

We understand developing a long-range plan can be next to impossible when you’re pulled in multiple directions. This is where the Abdo team can help. Our government advisors can come alongside your team to gain an understanding of council goals for projects and tax rates. By identifying funding gaps and projecting future funding and needs, we can establish a plan that shines a light on the path ahead.

 

To learn more about how we can empower your city, contact us today.