Reduced nonprofit contributions makes financial sense but council sees their value

In an effort to save money, Newton’s city administrator proposed significantly reduced partner contributions to a number of nonprofit agencies in town, all but two of which would be defunded of city dollars; the mayor has since presented a counter offer to council that would still save money, but support was mixed.

For more than an hour last week during a budget session, city officials debated over how much money should be given to partner agencies or whether the council should be giving them funds at all. While there was a general consensus that council was in favor of partner contributions, it can be a touchy subject.

According to state law, governments are prohibited from making direct donations and in-kind contributions to nonprofits. But there are two scenarios in which public funds may go towards a nonprofit organization: When the payment is for economic development purposes or for a contract for services.

Newton Finance Officer Lisa Frasier told council members the city is not breaking any laws with its agency contributions, but the practice does not bode well with the state auditor’s office. Frasier said the city has to jump through a lot of hoops and it is largely frowned upon by the auditor’s office to give money to nonprofits.

Still, another proposal for partner agency allotments was presented at the council meeting after much debating around the original proposal and the mayor’s amended proposal. The city staff will return to council at an upcoming budget session to determine how much funding and which funding streams are needed.

The changes to the funding include (from FY24 to FY25):

• Newton Development Corporation: $77,000 to $77,000

• Newton Housing Development Corporation: $40,000 to $40,000

• Newton Main Street: $31,500 to $40,000

• Heart of Iowa Regional Transit Agency: $35,251 to $35,251

• Newton YMCA: $22,000 to $18,000

• Retired & Senior Volunteer Program: $17,500 to $5,000

• United Way of Jasper County: $20,000 to $15,000

• Des Moines International Airport: $0 to $15,760

• Indy Car: $33,000 to $33,000

In total, these proposed contributions equate to $249,311, which is $26,940 less than the FY24 allotment of $276,251. The mayor’s proposal totaled $224,011, which is $25,300 less than this new proposal brainstormed by council members. The city administrator’s original proposal made $160,000 in cuts.

BACKGROUND ON REDUCTIONS TO PARTNER AGENCIES

Newton City Administrator Matt Muckler stated in a memo the city has more than doubled its partner contributions from FY16 to FY24, reaching unsustainable levels. In response, he proposed all contributions be reduced to zero, with the except of Newton Main Street and Newton Housing Development Corporation.

In addition to those agency contributions, past council action requires the city to provide $33,000 to the Hy-Vee IndyCar Race Weekend using Speedway TIF dollars and the first of five payments of $15,760 to the Des Moines International Airport using general fund dollars in FY25.

However, this proposal was not popular with Newton Mayor Evelyn George, who worked with Muckler to devise a second proposal to council that would not deplete any agency of funds, but it would be a total reduction of more than $52,000. The only agency that would receive more funding is Main Street.

COUNCIL SEEMS WILLING TO GIVE MORE FUNDING

Frasier cautioned council that increasing contributions above the mayor’s and city administrator’s proposal will likely require general fund dollars.

But as the meeting progressed, council showed it was willing to provide more funding to other agencies. Council member Randy Ervin was unshakably in favor of providing adequate funding to partner agencies, which he suggested could be supplemented by upcoming tourism.

“For us just to maintain what we did last year we need to find $80,000…With an IndyCar race and a NASCAR race, our Hotel/Motel is going to be higher and some of our other tourist events are going to be higher and our Local Option Sales Tax should be higher,” Ervin said. “We can’t find $80,000 or $40,000?”

Muckler said the city can’t get it in Hotel/Motel Tax. Ervin went on to explain that his goal is to maintain last year’s budget, but he admitted he did not know where that money will come from. George has a different approach, saying she wanted to look at the facts when making a final decision rather than to respond emotionally.

“Is it always right to maintain status quo?” George said.

WHAT KIND OF MESSAGE DO THE CUTS SEND?

Council member Joel Mills was not convinced the proposed funding cuts to certain organizations like Newton Development Corporation and United Way of Jasper County were justified. He noted the former organization is pivotal in attracting new businesses to town and creating jobs.

“I value everybody at the city, but I don’t see a lot of effort getting placed upon new businesses coming to town,” Mills said.

Muckler said, “All the new businesses that have come to town have come because of city staff. Theisen’s, ALDI, most of the new businesses that have come in have come in basically from Craig Armstrong over the past few years.”

Mills argued Theisen’s moved from in town, but Muckler corrected him saying it was technically just outside city limits and was not paying city taxes before the move. Still, Mills argued it was not a new business, despite Muckler’s protests, and he felt reducing funding to NDC and United Way sent a bad message.

“I don’t see that reducing the United Way of Jasper County is a way that we are showing people that we are going to be here for you, we support this,” Mills said.

CONFLICTING STORIES, NO ONE IS GOING TO AGREE

Council member Melissa Dalton chimed in that some residents believe the city should not give any funding to nonprofits, which aligns with the state auditor’s sentiments. Ervin defended the practice, saying organizations like United Way and YMCA have partnered with the city on a number events and projects.

“We’ve been a good partner with the Newton YMCA for the four years I’ve been on this council, and now we’re going to turn around and say, ‘You know what? You’re not that good of a partner. We’re giving you $5,000,’” Ervin said, noting he also agreed with George that nonprofits can be supported in other ways.

Ervin went on to say that the leaders of the Newton YMCA and United Way “are not happy” about the proposed cuts. George contradicted Ervin’s observations saying she has met with every city partner and most have told her they understand the city’s situation and look forward to new ways to partner.

“Well, they may look at you and say they understand but that doesn’t mean they agree or are happy about it,” Ervin said.

George said, “No one is going to agree. Our kids didn’t like not getting money from their parents either. We all are going to have to be a little bit tighter. We’re asking every department in the city to really examine their budgets and figure out how to tighten them up. And yet we don’t expect partners to do that?”

AGENCIES SPEAK OUT AGAINST THE PROPOSED CUTS

Council members did not solicit feedback from nonprofits during the budget session, but they did receive comments last month. Jessica Lowe Vokes, executive director of the United Way of Jasper County, spoke at the Dec. 18 council meeting about the proposed 100 percent funding cuts to three nonprofits.

Lowe Vokes said the United Way, YMCA and Jasper County RSVP have served thousands of residents and have a combined 300 years of service to the community. Together, they have ensured access to medical care, supported mental health care initiatives and offered child care, among many other services.

“Through war, peace, derechos, global pandemics and every day life, these three agencies have been instrumental in ensuring the safety and wellbeing of Jasper County residents,” she said. “The groups have served as partners with the schools, emergency management and local municipalities.”

These nonprofits have always found ways to serve, and Lowe Vokes argued their work is worth the fully allotted funding from FY24. While she understands the city is going through revenue shortfalls and increased expenses, Lowe Vokes said a 100 percent cut to these agencies is a dangerous way to balance the budget.

“I know there are tough decisions to be made,” Lowe Vokes said. “But I truly believe that the Newton that I know and love and have lived in for the past 18 years will work to make supporting our struggling neighbors a priority.”

MAYOR & COUNCIL MEMBER HAVE DIFFERENT APPROACHES

Ervin challenged Muckler and his staff to prepare numbers that are closer to the FY24 allotment for partner agencies, but causing the current proposals are “unacceptable.” The city administrator then challenged Ervin, who was persistent on his stance, to propose new numbers right then and there at the meeting.

Muckler said, “So why don’t you come up with a — I mean, I don’t want to put words in your mouth. You tell me.”

“No, I’ll do it,” Ervin said. “If you want to point me and say, ‘You do it, Randy.’ I’ll be glad to sit down and talk to you.”

“Just tell me what numbers you want to have in that column. What do you want to propose? Exactly what was in last year?”

As close as possible, Ervin said. He also relented that he is in favor of holding agencies accountable to make sure the investment is worth it, but to just cut all funding sends the wrong signal. Muckler argued that the city council ultimately chooses the message it wants to send.

“So it could be that, or it could be, ‘We’re cutting police officers despite the fact that we cut our property crime in half.’ And then two years from now when the property crimes go back up it’s, ‘Well, the city decided to do this with the money instead of supporting public safety,’” Muckler said.

Ervin responded, “Has anybody up here said that? Because now you are putting words in my mouth.”

George said, “Well that’s what’s going to happen.”

“I disagree — politely!” Ervin said.

George recalled when she served on the council when the city had to make cuts. It was extremely difficult, she said. She also served when there was no capital money to purchase new police vehicles. The city has had so much discipline in the past 10 to 15 years, George added.

“We were in a great financial position at that time,” George said. “We’re moving away from those years … It’s just anticipating what’s coming ahead and starting to be conservative. When you know your income is going to go down, you start saying, ‘Do I really need deluxe cable?’”