Adel City Council hears analysis of tax abatement program
The Adel City Council held a special meeting on Tuesday, April 25 in the community room at the Adel Public Library to discuss, with community members present, some issues pertaining to the future of growth in the City of Adel.
One of the issues that was discussed was the residential tax abatement program and how the city would be affected if they were to repeal the plan early. The plan is currently scheduled through the year 2025 and allows new homes built in the city and improvements on homes in the city to be tax free for seven years.
The plan is currently scheduled through the year 2025, which would allow homes to be tax abated through 2032.
Jocelyn Doerfler from Public Financial Management (PFM) in Des Moines talked through the results of the analysis, which used the City of Carlisle as a comparison. The analysis only showed the impact on revenues and did not take any of the costs of managing the growth in Adel into account.
“The reason that I chose Carlisle as the comparison city is that their population is similar to the size of Adel,” she said “They are also similarly located to the metro area as Adel, and also they don’t have a tax abatement program.”
From 2004 to 2011, the City of Carlisle grew from 13 total homes to 115 total homes while Adel grew from 22 total homes to 82 total homes. Carlisle outgrew Adel during that time period.
After the tax abatement was enacted in Adel, however, from 2011 to 2016, Adel grew from 108 total homes to 480, while Carlisle grew from 126 total homes to 187 total homes.
The analysis showed three revenue scenarios through the year 2033, the year in which all homes would be paying their full amount of taxes. One scenario showed the projected revenue if the plan stays in effect through 2025, one showed if they were to cut the abatement off after 2019, as has been discussed previously, and one if there had not been an abatement in the first place.
Based on the projections, Doerfler stated that the City could lose out on up to $6.36 million in revenues by 2033 if they were to cut the abatement off early. With the current plan, the City’s taxable valuation by 2033 would be $198,712,709, but it would drop to $147,659,079 by that time if they were to cut the plan off in 2019, a difference of $51,053,630.
A graph showed that property taxes would make up about 50 percent, or about $18 million of the City’s revenue, but other revenues come in, even now with the abatement, through other sources.
“Of the other 50 percent shown on this graph, a large amount of that is coming in through utilities,” she said.
The other sources of revenue include Local Option Sales Tax, permit fees, water connection fees, sewer connection fees, water sales and sewer sales. Cutting off the plan early could potentially result in the loss of $1.25 million in property tax and permit fees, $3.94 million in utility costs, $1.18 million in LOST revenue and $2.88 million in debt service charge by 2033.
Mayor Jim Peters pointed out growth numbers from before the Tax Abatement program was put in place. From 1990 to 2000, Adel grew by 131 people, and from 2000 to 2010, they grew by about 247 people.
“Over a two-decade timespan, we’d only grown one-and-a-half persons per month,” Peters said. “And I realize that Adel’s in the fifth-fastest growing county in the nation, but Adel really wasn’t contributing to that growth.”