As part of ongoing conversations about the budget for Fiscal Year 2027, which begins on July 1, Public Works Director Heather Thomas presented an annual report on the state of Marshalltown Municipal Transit (MMT), the Capital Improvement Plan (CIP) for the next five years and the levy rate during Monday night’s city council meeting.

Thomas reported that the ongoing partnership with the Marshalltown Community School District (MCSD) has led to a continued increase in ridership, transporting about 52,000 students during the last fiscal year. The overall increase in ridership from FY24 to FY25 was 3.4 percent with 4.7 percent less revenue hours and 5.6 percent less revenue miles, reducing operating costs by 0.2 percent.

She also noted that efficiency numbers for Marshalltown are “a bit higher” than those in similarly sized communities because MMT’s service effectiveness rating is the highest in the state, and the rides per hour number is also the top within its sector at 14.7. The city’s buses are currently the oldest in average age among comparable communities, and the fleet size is smaller than most of them.

Thomas broke down the various federal and state funding sources for the transit service along with the local tax levy, and she again highlighted that ridership continues to increase overall — in FY2025, they had over 130,000 rides, the highest number in the last nine years. Promotions during the community outreach events like storytime at the library and the Healthy Families Fair and an interactive map feature on the city website were successful, Thomas said, in increasing awareness of MMT’s offerings. She then dove into challenges, noting that staffing drivers has been an ongoing struggle, but they are currently fully staffed with full and part-time drivers.

During the current fiscal year, over $18,000 has been spent on overtime, resulting in “burnout and fatigue” before full staffing was achieved. The aging fleet is another persistent concern, and Thomas said they have been applying for grants to help offset the costs of purchasing new buses — they are currently waiting on three of them to modernize the fleet.

“That leads to some of our buses needing higher costs of repairs, more time from our mechanic. Recently, in fact in December, we took two of our buses down to get new transmissions in them because we’re trying to scrape by the best we can until some of these buses can get replaced,” she said.

The city continues to purchase used CyRide buses from Iowa State University (ISU), and Thomas added that changes in Medicaid billing also resulted in a delay receiving revenue they were owed. From there, she moved onto the budget outlook for FY2027, noting that wages and benefits for employees are paid out of a standalone enterprise fund separate from the general fund that covers other departments.

After explaining a budget amendment request of about $150,000 in the positive toward the bottom line, Thomas noted that 2027 would look “very, very off” because of the delay in purchasing the three aforementioned new buses estimated to cost about $2.2 million in all with 85 percent of the funding potentially coming from a federal grant (the application is in process) and a local share of $328,000.

About 50 percent of annual operating revenue and 85 percent of capital revenue is state and federal money, which the city doesn’t currently have estimates for, so Thomas made her “best guesses” in presenting numbers to the council with the levy rate held steady at $0.40 per $1,000 of valuation.

The costs of buses continue to jump substantially — a 58 percent increase for a 30-foot bus in one fiscal year and a 49.9 percent increase for a 40-foot bus, for example — and the Iowa Department of Transportation (IDOT) guidance that just came out is “not looking good,” Thomas said. Councilor Greg Nichols asked about the possibility of purchasing smaller buses, but she replied that they need 40-foot buses to accommodate the school district riders. At other times of day, however, the smaller buses could work.

Councilor Melisa Fonseca inquired about how changing the levy rates could affect the overall budget outlook and fund balances going forward, and Thomas said she was not recommending an increase in the rate and possibly even considering a reduction by five cents. In response to another question from Nichols, City Administrator Carol Webb said the transit levy, which can be set as high as $0.95, is separate from the general fund levy formula that the state legislature is currently pursuing major changes to, but it does still affect the overall tax rate.

“I think the issue is the long-term sustainability of the fund. With increasing bus prices, I don’t see how we’re gonna get away from increasing this levy to be ready for it,” Councilor Jeff Schneider said.

Schneider also asked why MMT was busing so many MCSD students as opposed to the district itself, and Thomas responded that the district does not provide transportation for students who live within three miles of their elementary school and two miles of the high school. The new arrangement has actually been a win-win in terms of increasing ridership and ensuring student attendance, and the city provides a monthly discount for bus passes to the district for students who utilize it.

Councilor Gary Thompson felt the council either needed to end the discount for the district or raise the levy to maintain financial sustainability.

“I think I’ve been one that every year, I’ve tried to push you to raise this transit levy higher. This falls into that category of being proactive vs. reactive. If we don’t get ahead of this and stay with that $1 million to $1.7 million buffer, I see us falling behind in probably three years,” he said.

MMT Administrator Kevin Pigors then stepped forward and spoke about the rising bus costs and pending grant applications, and Councilor Mark Mitchell asked about whether prices are locked in or if they will continue to increase year after year.

He responded that once a contract is signed, the price is locked in, but if the state and federal funding doesn’t come through, the city would be obligated to cover the entire cost. Schneider wondered if other larger municipalities are selling their used buses, and Pigors replied that the city has mostly been working with Ames — but other communities like Des Moines and Dubuque aren’t selling theirs.

“Countrywide, there’s a bus shortage, so they’re not as readily available as they were five, six years ago. So yeah, everybody’s in the same boat as we are,” Pigors said.

Thomas commended city leaders for not “jumping on the bandwagon” of purchasing electric buses due to operating issues, and Mayor Mike Ladehoff then asked Thomas for her levy recommendation.

“I’m gonna say $0.40, hold $0.40 right now and see what the next year brings,” she said. “When we do this, we can always take it to the $0.95 (rate). Nobody wants to do that in a given year, but things change from year to year.”

She added that she understood the idea of being proactive, but she felt the current rate could be sustained for at least one more year. Councilor Marco Yepez-Gomez, who described himself as “obsessed” with public transit, said he drove to Mason City to check out their system and felt some of the practices could be emulated in Marshalltown.

“We need a better long-term vision for transit, and I’ll just leave it at that. I think there’s other places like Mason City that have already figured this out,” he said.

Ultimately, Schneider motioned to increase the levy to $0.65 per $1,000, citing the need to be proactive before the city enters “a world of hurt,” and it passed by a 6-1 vote with Councilor Sue Cahill opposed.