Batavia City Council deciding between tax hike and dipping into reserves to cover deficit

Batavia residents may see an increase on the city portion of their tax bills this year unless the city decides to use more than $2.5 million in reserve funds to cover the projected 2025 deficit.

The Batavia City Council is in the process of approving the 2025 budget and this year’s property tax levy and council members had a lengthy discussion Nov. 12 to decide whether to raise property taxes or cover the deficit with reserve funds during a Committee of the Whole meeting before voting in favor of the proposed budget.

At the meeting, Finance Director Peggy Colby presented the proposed budget and estimated property tax levy.

The total proposed budget is $164,106,570, an increase of about 6.5% over the 2024 budget. According to the budget, the increase is needed to cover increased costs of wages and pensions, three new staff positions and capital projects, including a new roof for City Hall and street improvements.

The total estimated 2024 property tax levy is $11,310,000, a 21.49% increase over 2023, which equates to a $1 million increase to the property tax rate. This would amount to a 7-cent tax increase per $100 of equalized assessed value (EAV) or a tax increase of about $67 a year on the city portion of the tax bill for the owner of a $300,000 home.

The proposed levy would provide an additional $2.1 million in funding for the general fund between the $1 million tax increase and $1.1 million in captured EAV growth. Even so, the city still would need to use $2.5 million of reserve funds to cover the deficit.

Committee members debated whether they should increase the amount of reserve funds in order to avoid raising taxes or save the reserves for budgeted projects.

Colby laid out the city’s options for using different amounts of reserves and how they would affect residents’ tax rates. If the city were to use an additional $500,000 from reserve funds, the tax increase would drop to $500,000, which would increase the tax rate to about 76.3 cents per $100 of EAV or an increase of about $34 a year for the owner of a $300,000 home.

General fund reserves are at $18,842,755, which is enough to cover the city’s operating costs for 178 days.

Several members of the council argued against raising tax rates and were in favor of using reserves to cover the deficit. Those against the tax hike argued that those hit hardest by the increase would be the lower income tax brackets and raised concern they would be pricing people out of the community.

Those against using the reserves argued they should be saved for times of emergency. Those in favor of the tax increase pointed out that with several capital projects planned, a need for more staffing and rising costs expected to continue to increase the deficit in the coming years, not raising taxes now would delay the inevitable.

Mayor Jeff Schielke was on the side of lowering the levy amount, with the aspiration that EAV from new growth in business and construction in 2025 would help offset the deficit.

“I would just like to encourage the council to think about some minor reduction here, given the fact that right now we are in the process of building what may be the biggest record of new housing and businesses we’ve ever done in Batavia,” Schielke said. “That’s going to add some significant impact to the EAV and everything else. ... We’ve got one of the healthiest new revenue streams going here that we’ve ever had as long as I can remember.”

Alderman Alan Wolff, along with several others, was on the opposite side of the debate, arguing that the longer they put off raising tax rates, the more it will hurt residents when they eventually have to, especially if they wait until the event of a catastrophe, in which case residents would be struggling even more.

“I’ve always thought that we should take little steps to get to where we think we need to be in five or 10 years and we haven’t done that and that’s why this year we have to do what we’re doing if we want the stuff that’s in the budget,” Wolff said.

The last time Batavia residents saw an increase in their city property tax bill was in 2017 to fund stormsewer projects and several new staff positions.

According to the budget, increases to costs for wages and pensions were a major factor in the increase. This budget also funds three new positions while seven additional positions were put on hold.

After most than an hour of discussion, committee members in a split vote recommended approving the budget as presented. The budget came before the City Council for review Nov. 26 and could get final approval Dec. 2.