Rising health care costs fuels Cedar Rapids tax levy topping new state cap

Feb. 18--CEDAR RAPIDS -- City Hall is not immune to the rising health care costs affecting many citizens and businesses.

The health insurance fund for Cedar Rapids city employees would increase 11 percent or $2.3 million to $23.8 million under the proposed fiscal 2021 city budget, which begins on July 1. The city has about 1,400 employees, and health insurance costs have grown about $5 million since fiscal 2016.

The latest increase is due to more claims, said Heidi Stiffler, assistant finance director.

Health fund costs are among the primary reasons the city budget is expected to exceed Iowa's new 2 percent soft cap intended to temper growth in local property taxes from year to year.

The Cedar Rapids levy is proposed to increase by 2.82 percent, which triggers a number of actions under the new state property tax law. The nine member City Council must approve exceeding the cap by a supermajority or two-thirds vote, state reasons for "significant increases," notify the public, and hold a public hearing in which residents and other taxpayers may present arguments for or against the levy.

The public hearing and vote are scheduled for the 4 p.m. City Council meeting Tuesday at City Hall, 101 First St. SE.

Council members voiced little resistance to the increase during a budget workshop earlier this month.

"With benefits like health insurance, you are beholden to trends and various other factors from one year to another," said Scott Overland, a City Council member and finance committee chairman. "There's not a whole lot we can do about it."

The new cap, which was signed into law by Gov. Kim Reynolds last May, applies to a subset of the overall municipal levy.

The overall municipal property tax levy in Cedar Rapids would increase from $15.44 to $15.66 per $1,000 in property value under the fiscal 2021 budget, which the council is expected to vote on separately in March. The Council had previously approved a 22 cent per year levy increase to pay for flood protection.

Money for flood protection would come from bonds paid back through the debt services levy, which is not covered by the state cap.

The municipal levy is made up of at least 13 levies. Affected by the cap are levies for general operations, FICA and IPERS, police and fire retirement, emergencies, the health insurance fund, other employee benefits, among others.

Those levies affected by the soft cap account for 80 percent of the overall municipal property tax levy. These funds would increase from $83.9 million to $86.3 million and a levy increase from $12.07 per $1,000 in property value to $12.41, or 2.82 percent, which has triggered the special procedures.

"Cities aren't much different from any other private or public employer," said Alan Kemp, executive director of Iowa League of Cities. "They are feeling the rising health care costs, so it is not a surprise that is driver in the levy increasing, and in particular it is not a surprise it is a driver in Cedar Rapids and other cities are exceeding the soft cap."

Ted Nellesen, senior policy analyst for the Iowa Department of Management, said if the law had been in place last year, 555 of Iowa's 942 cities would have exceeded the cap. The impact this year should be know after municipal budgets are due at the end of March, he said.

Cedar Rapids Mayor Brad Hart said he anticipated support for the budget, noting the levy would not have increased if not for flood protection costs. On health care costs, he said, the city has limited options and is unlikely to ask employees to pay more as a way to reduce costs.

The city's health insurance plan is "self-funded, and administered by Wellmark" Blue Cross and Blue Shield of Iowa, according to the website. The city does not yet know whether the trend of increasing costs will continue.

"Each year we set the budget for our health fund expenses and monitor costs throughout the year," Stiffler said in an email. "We will not look at our future projection for the FY 2022 budget until later this year as costs and factors can change that will impact what our fiscal year 2022 budget might look like."

___

(c)2020 The Gazette (Cedar Rapids, Iowa)

Visit The Gazette (Cedar Rapids, Iowa) at thegazette.com

Distributed by Tribune Content Agency, LLC.