Loading...
FY 2003 Policy GuidelinesMEMORANDUM November 28, 2001 TO: FROM: SUBJECT: The Honorable Mayor and City Council Members Michael C. Van Milligen, City Manager Fiscal Year 2003 Policy Guidelines The Fiscal Year 2003 budget process began in September with the Mayor and City Council adopting five-year goals and priorities for the next 18 months. As work proceeds on preparing a budget recommendation, two major issues have arisen. The budget problems at the State level will mean a reduction of approximately $100,000 in revenues usually received from the State for the City of Dubuque General Operating Fund. The State of Iowa issued an equalization order on commercial property in the City of Dubuque, increasing the appraised value by 18%. The State equalization order for commercial property actually causes the most difficulty in this budget process. Each year the City Council has supported not increasing the property taxes for the average homeowner. The average homeowner has not had an increase in the City portion of their property taxes for the past seven-years. In fact, in four of those years, the average homeowner actually saw a decrease in the City portion of their property taxes. If one of the goals in this year's budget is to provide no increase in the City portion of the property taxes for the average homeowner, the State adjustment of 18% in the value of commercial property would mean that, while the average homeowner saw no increase in their property taxes, a commercial property owner would see an 18% increase in their property taxes. I understand this would not be acceptable, and am proposing a modification in the property tax guideline for this year. Property subject to property tax is broken up into three classes: residential, commercial and industrial. To give a little historical perspective, since the passage of the sales tax in the late 1980's, the annual average change in the City portion of the property tax by class of property is: Average Residential Property Commercial Property Industrial Property Percent Change Dollar Increase -5% -$25.59 1.80% $45.40 -1.96% -$126.06 If you look at a three-year history of the annual average property tax change for commercial property, there was a decrease of 0.5%. Last year commercial property saw a decrease of 2.77% in the City portion of property taxes. Another important historical reference is the annual increase in property tax askings, or the actual increase in the amount of money asked for by the City through property taxes to support operations. Since the passage of the sales tax, the annual average increase in the tax asking is 1.7%. Over the last three years, the annual average increase in property tax askings has been 0.8%. I would anticipate the request in Fiscal Year 2003 being in the area of 1.8%. As you are aware, the City has made many efforts to improve operational efficiencies, diversify the revenue base and encourage growth and economic vitality. An example of how this has been successful is, that of the nine largest cities in the State of Iowa, Dubuque's property tax rate is eighth, with only Ames, having a lower tax rate. Another example is how well Dubuque is weathering the current recession. In spite of all this, we still face the equalization order issued by the State which increases the commercial valuations by 18%. In light of this, I respectfully request that the Mayor and City Council approve, as part of the budget guidelines, a 5% decrease in property taxes for the average homeowner. If we are able to meet or exceed that goal through the budget process, the commercial property taxpayer will see an increase in the City portion of property taxes of 8.9% or less next fiscal year. Looking at the current year's 2.8% reduction of the City portion of property taxes for commercial properties, that would mean that over a two-year period they would see a 5.85% increase. The impact on industrial property, with successful implementation of this guideline, would be a 5.51% decrease in the City portion of their property taxes. MCVM/jh Attachment cc: Barry Lindahl, Corporation Counsel Cindy Steinhauser, Assistant City Manager Pauline Joyce, Administrative Services Manager CITY OF DUBUQUE, IOWA MEMORANDUM November 27, 2001 TO: Michael C. Van Milligen, City Manager FROM: Pauline Joyce, Administrative Services Manager SUBJECT: Fiscal Year 2003 Policy Guidelines The purpose of this memorandum is to transmit draft Fiscal Year 2003 Fiscal Guidelines for your review and presentation to the Council. The guidelines reflect City Council direction given as part of the August 22 and 23, 2001, goal setting sessions. During those sessions the City Council established goals for the next five years and established City priorities in Fiscal Year 2003. Dubuque 2007: City Council Goals In five years the Council wants the following for the community: 1. Improved Transportation Network 2. Strong Local Economy 3. A "Balanced" Community 4. A Safe Community 5. Riverfront Development 6. Top-Quality City Services FiscalYear 2003 Priorities: OurTargets To begin the City on the path to achieving these five-year goals, the Council priorities and the foundation of the City's work program for Fiscal Year 2003 are: Top Priority · High-speed telecommunications strategy Stormwater management: policy and funding · America' River: River[ront project and development Higher Priority · Highway 20: short-term actions, long-term projects · Street program: Funding November 27, 2001 Page 2 · Owner-occupied affordable housing and residential development strategy · Federal strategy High Priority · Incentives for business attraction and expansion · Northwest arterial access policy · Downtown master plan: Review and implementation As we develop a budget to achieve these priorities I believe it is important to begin with an overview of the City's past performance in terms of growth in personnel complement, tax asking, and changes in assessed valuations. This overview summarizes the impact of fiscal guidelines established by prior City Councils as they attempted to balance resources with community expectations. The two major changes in the budget guidelines are: 1. Change the property tax guideline from no increase for the average homeowner to a 5 percent decrease for the average homeowner. In past years, the revenue estimate received from the Dubuque Racing Association for the 50 percent distribution of profits has been reduced by 15 percent in year 3, 30 percent in year 4, and 45 percent in year 5. With the longer track record we now have on receipt of those funds, these guidelines reduce the projections as follows: 10 percent in year 3, 20 percent in year 4, and 30 percent in year 5. Background Information Since 1981, the City has reduced the number of full-time employees from 588 to 519. This is a reduction in the full-time work force of 11.8 percent or 69 employees. This has happened during a time when new or expanded City programs and services have been added to meet increasing demands and mandates. Initiatives during that time period have included: · economic development efforts · yard waste and recycling programs · county-wide E911 dispatch · comprehensive housing programs · community oriented policing · DARE and other drug related programs · rental property inspections · operation of leisure pools · McAleece Recreation Complex operations · City Focus newsletter November 27, 2001 Page 3 · industrial pretreatment and lead and copper testing programs · Fifth Street parking ramp · hazardous materials team · advanced life support ambulance service · government Channel 8 programming · cable TV monitoring and regulation · additional commissions including Long Range Planning, Environmental Stewardship, Investment Oversight, Development Review Committee. · extension of hike and bike trails · City operated FBO functions · increased Zoning Code enforcement · developers and builders roundtables · implementation of Riverfront Plan · downtown circulation study · coordination and public information programs related to the Highway 20 project · implementation of the Neighborhood Reinvestment Strategy · lead paint abatement program · additional neighborhood parks and open spaces · reinstatement of traffic accident investigations · school resource officer program · police canine unit The City continues to look for operating efficiencies through the program and service review process. Those reviews currently underway include Operations and Maintenance, Street and Sewer maintenance Operations, Fire, Parking and Human Rights. Reviews to be initiated during the balance of Fiscal Year 2002 include Airport, Library, Engineering, City Clerk's Office and Finance. Reviews, which have been completed include Community and Economic Development, Housing, Park Patrol, Water, Civic Center, Water Pollution Control Plant, Administrative Services, Planning Services, Recreation, Police, Transit, City Manager's Office, Health Services, Building Services, Parks, Emergency Communications Center, and Operations and Maintenance's Vehicle Maintenance and Solid Waste Operations. The City of Dubuque has been able to hold its property tax askings down while continuing to provide the citizens with a very high level of City services. Unlike other cities, which have eliminated city services, quality of life continues to be a high priority of City Council and high service standards have been maintained by implementing operating efficiencies and using other resources such as sales tax, gaming revenues, and user fees for property tax relief. Property tax values have increased from $954,451,306 in Fiscal Year 1992 (January 1, 1990 values) to $1,454,141,449 for Fiscal Year 2002 (January 1, 2000 values), which represents an increase of $499,690,143 or 5.25 percent per year. The City's portion of November 27, 2001 Page 4 the property tax rate has gone from $12.7741 in Fiscal Year 1992 to $11.7608 per thousand dollars of assessed value; a decrease of $1.0133 or 8.0 percent over the same ten-year period. Why was the City able to reduce the tax rate over the past ten years? Some of the factors, which have affected the property tax rate include: The use of sales tax for property tax relief has grown from $2,270,000 in Fiscal Year 1992 to $3,185,098 in Fiscal Year 2002. This increase is the equivalent of property tax relief of $.6300/$1,000 of assessed value. This means that the local option sales tax has allowed a 5.0 percent reduction in the City's portion of the tax rate from Fiscal Year 1992 to Fiscal Year 2002; The net addition of only four property-tax-supported, full-time positions from Fiscal Year 1992 to Fiscal Year 2002 (the net increase has been held to only four in spite of the fact that the City added seven police officer positions in Fiscal Year 1994, five in Fiscal Year 2000, one in Fiscal Year 2002); and The use of annual gaming revenues for property tax relief. This has avoided a 8.9 percent increase in the property tax rate. Also, the use of the annual distribution of 50 percent of Dubuque Racing Association net profits to the City's Five-Year Capital Improvement Program has eliminated the need for annual General Obligation borrowing for street, storm sewer and Airport capital improvements. This analysis indicates that the City has used property tax valuation growth and other important growth revenues like sales tax to maintain City services and has not increased the tax rate to accomplish this. In fact the City has reduced the tax rate over the past ten years. A comparison of the City of Dubuque's property tax rate for Fiscal Year 2002 with the other eight largest cities in Iowa shows Dubuque ranks eighth out of nine. This comparison is summarized in table format as follows: RANK CITY TAX RATE POPULATION 1 Waterloo 17.80075 66,467 2 Des Moines 17.04857 193,187 3 Council Bluffs 15,72002 54,315 4 Iowa City 14.84983 60,349 5 Davenport 14.60301 97,500 6 Sioux City 14.40724 80,505 7 Cedar Rapids 13.04000 108,780 8 Dubuque 10.76080 57,546 9 Ames 9.35614 48,691 November 27, 2001 Page 5 Proposed Budget Guidelines Having reviewed this background information on where and how City functions and finances have developed over the past ten years, it's now time to look forward and establish the fiscal plan for the upcoming year. The budget guidelines are developed and adopted by City Council early in the budgeting process in order to provide targets or parameters within which the budget recommendation will be formulated. The final budget presented by the City Manager may not meet all of these targets due to changing conditions and updated information during budget preparation. To the extent the recommended budget varies from the guidelines, an explanation will be provided in the printed budget document. The budget guidelines for Fiscal Year 2003 that I am recommending to you can be summarized as follows: · Preliminary Citizen participation opportunities Date Starting Time Wednesday, November 7 5:15 Wednesday, February 6 6:15 Monday, February 11 6:15 Thursday, February 14 6:15 Wednesday, February 20 6:15 Thursday, February 21 6:15 Monday, February 25 6:15 Tuesday, March 5 6:30 ).m.- ).m.- ).m.- ).m.- ).m.- ).m.- City Manager's Public Input Meeting City Council Budget Worksession City Council Budget Worksession City Council Budget Worksession City Council Budget Worksession City Council Budget Worksession City Council Budget Worksession Public Hearing - City Council · Service objectives Each department will identify specific objectives that reflect City Council goals. · Balanced budget Expenditures will not exceed revenue. · Limited resources It is not possible to afford all of the services requested by individual citizens. · Review of services Existing service levels are maintained and reviewed for appropriateness. · Improved productivity Efforts will continue to become more efficient. November 27, 2001 Page 6 Volunteers Efforts to expand the use of volunteers will be maintained. Outside funding Non-City funding sources, like federal grants, public/private partnerships and coordination with other local governments will be aggressively pursued. General Fund Balance To meet financial obligations prior to receiving certain tax revenues and to assist in maintaining a AA bond rating, which reduces borrowing costs, the City will maintain a cash reserve of 10 percent of the total General Fund operating budget (excluding employee fringe benefits) or $2,455.000. Nonrecurring Income Nonrecurring income will only be spent on nonrecurring expenses to avoid future funding problems for the operating budget. Revenue Assumptions There are thirteen revenue assumptions in the attached document. Expenditure Assumptions There are eleven expenditure assumptions in the attached document. The sales tax distribution formula will be maintained at 50 percent tax relief, 30 percent for reduction of street special assessments and street construction, and 20 percent for maintenance of City-owned property and facilities. Expansion or creation of new facilities that will increase the required operation support, usually from property taxes, will only be considered with a demonstrated need and a long-term plan to incorporate the increased costs into the entire system. General Obligation borrowing is not anticipated if gaming distributions continue at the projected levels. To the extent they do not meet projections, general obligation borrowing may be necessary. Emphasis will be placed on funding projects in the CIP that reduce future operating expenditures. Gaming revenues, excluding the annual surplus distribution, will continue to be used 1/3 in operating budget and 2/3 in the capital budget. Finally, the Policy Guidelines include a property tax guideline that provides no increase in the "City" share of property taxes for the average homeowner. November 27, 2001 Page 7 At this time, I am respectfully requesting that the Mayor and City Council adopt the budget guidelines, which provide no increase in the "City" share of property taxes for the average homeowner in Fiscal Year 2003. PJ/ksf Attachments CC: Barry Lindahl, Corporation Counsel Cindy Steinhauser, Assistant City Manager Randy Peck, Human Services Manager Ken TeKippe, Finance Director POLICY GUIDELINES FOR FY 2003 BUDGET PLANNING AND ADMINISTRATION OPERATING BUDGET GUIDELINES The Policy Guidelines are developed and adopted by City Council early in the budgeting process in order to provide targets or parameters within which the budget recommendation will be formulated. The final budget presented by the City Manager may not meet all of these targets due to changing conditions and updated information during budget preparation. To the extent the recommended budget varies from the guidelines, an explanation will be provided in the printed budget document. CITIZEN PARTICIPATION Guideline To encourage citizen participation in the budget process, City Council will hold at least five work sessions in addition to the budget public hearing for the purpose of reviewing the budget recommendations for each City department and requesting public input following each departmental review. The budget will be prepared in such a way as to maximize its understanding by citizens. A limited number of the Citizens Guide to the Recommended Budget will be made available to interested citizens and groups. Other budget documents will be on file with the City Clerk and at the Carnegie Stout Public Library in their government documents section. An opportunity will be provided for citizen input prior to formulation of the City Manager's recommended budget and again prior to final Council adoption, both at City Council budget work sessions and at the required budget public hearing. SERVICE OBJECTIVES, ALTERNATIVE FUNDING AND SERVICE LEVEL Guideline The budget will identify specific objectives to be accomplished during the budget year, July 1 through June 30, for each activity of the City government. The objectives serve as a commitment to the citizens from the City Council and City administration and identify the level of service, which the citizen can anticipate. Policy Guidelines Fiscal Year 2003 Page 2 3. TWO TYPES OF BUDGET DOCUMENTS TO BE PREPARED Guideline The recommended City operating budget for Fiscal Year 2003 will consist of two types of budget documents: a Recommended City Council Policy Budget that is a collection of information that has been prepared for each department hearing and is bound by hearing date. The second type of document is a Citizens Guide to the Recommended FY 2003 Budget. The Recommended City Council Policy Budget documents contain the following information for each department: Highlights of Prior Year's Accomplishments and Future Year's Initiatives, a financial summary, a summary of decision packages requested and recommended, significant line items, index of capital improvement projects recommended over the next five years, organizational chart for larger departments, major goals, objectives and performance measures for each cost center within that department, and line item expense and revenue financial summaries. The purpose of these documents are to focus the attention of the City Council and the public on policy decisions involving what services the City government will provide, who will pay for them and the implications of such decisions. They will emphasize objectives, accomplishments and associated costs for the budget being recommended by the City Manager. It will clearly show the level of service being proposed. The Citizens Guide to the Recommended FY 2003 Budget is a composite of tables, financial summaries and explanations, operating and capital budget messages and the adopted City Council Budget Guidelines. It serves as a handout for the general public, which highlights the budget process, City Manager's recommendations, departmental accomplishments and future initiatives. Through graphs, charts and tables it presents financial summaries, which provide an overview of the total operating and capital budgets. The City of Dubuque will continue to maintain comprehensive budget documents, which meet the standards for budget presentation established by the Governmental Finance Officers Association. BALANCED BUDGET Guideline The City will adopt a balanced budget in which expenditures will not be allowed to exceed reasonable estimated resources. The City will pay for all current expenditures with current revenues. Policy Guidelines Fiscal Year 2003 Page 3 5. BALANCE BETVVEEN SERVICES AND TAX BURDEN Guideline The budget should reflect a balance between services provided and the burden of paying for those services. It is not possible or desirable for the City to provide all of the services requested by individual citizens. The City must consider the ability of citizens to pay for services in setting service levels and priorities. MAINTENANCE OF EXISTING SERVICE-~ Guideline To the extent possible with the financial resources available, the City should attempt to maintain the existing level of services. Annually, however, each service should be tested against the following questions: (a) Is this service truly necessary? (b) Should the City provide it? (c) What level of service should be provided? (d) Is there a better, less costly way to provide it? (e) What is its pdodty compared to other services? (f) What is the level of demand for the service? (g) Should this service be supported by property tax, user fees or a combination? IMPROVED PRODUCTIVITY Guideline Efforts should continue to stretch the value of each tax dollar and the City services that it buys through improved efficiency and effectiveness. Using innovative and imaginative approaches to old tasks, reducing duplication of service effort, creative application of new technologies and more effective organizational arrangements are approaches to this challenge. USE OF VOLUNTEERS Discussion As our financial capabilities decrease, we must seek to expand our resources by continuing to get citizens directly involved in supplementing our service delivery capability. Citizens must be encouraged to assume tasks previously performed or provided by City government. This may require us to change our approach to service delivery; such as, providing organizational skills, training, coordinating Policy Guidelines Fiscal Year 2003 Page 4 staff, office space, meeting space, equipment, supplies and materials, but not directly providing the more expensive full-time staff. Activities where citizens can continue to take an active role include: Library, Recreation, Parks, Five Flags Center, Cable TV (government channel camera operators) and Police. The City initiated the Dubuque Volunteer Corps Program in FY 1998 to encourage citizen involvement in the many programs offered by the City and in maintaining the facilities for community betterment. Guideline In the future the maintenance of City services may well depend on volunteer citizen staffs. In FY 2003 efforts shall continue through the Dubuque Volunteer Corps to identify and implement areas of City government where (a) volunteers can be utilized to supplement City employees to maintain service levels (i.e., Library, Recreation, Parks, Cable TV, Police) or (b) services can be "spun off" to non-government groups and sponsors (i.e., YMCA/YWCA, United Way groups, Recreation Groups). RESTRICTIONS ON INITIATING NEW SERVICF Guideline No new service will be considered except (a) when additional revenue or offsetting reduction in expenditures is proposed or (b) when mandated by state or federal law. 10. SALARY INCREASES OVER THE AMOUNT BUDGETED TO BE FINANCED FROM BUDGET REDUCTIONS IN THE DEPARTMENT(S) OF THF BENEFITING EMPLOYEES Discussion The recommended budget will include salary amounts for all City employees. However, past experience shows that budgeted amounts are often exceeded by fact finder and/or arbitrator awards. Such "neutrals" often do not take into account the overall financial capabilities and needs of the community and the fact that the budget is a carefully balanced and fragile thing. Such awards have caused budgets to be overdrawn, needed budgeted expenditures to be deferred, working balances to be expended and, in general, have reduced the financial condition or health of the City government. To protect the financial integrity of the City government, it is recommended that the cost of any salary adjustment Policy Guidelines Fiscal Year 2003 Page 5 over the amount provided in the budget (that is, not financed in the budget) come from reductions in the budget of the department(s) of the benefiting employees. Guideline Salary increases over the amount budgeted for salaries shall be financed from operating budget reductions in the department(s) of the benefiting employees. 11. BALANCE BETWEEN CAPITAL AND OPERATING EXPENDITURES Guideline The provision of City services in the most economical and effective manner requires a balance between capital (with particular emphasis upon replacement of equipment and capital projects involving maintenance and reconstruction) and operating expenditures. This balance should be reflected in the budget each year. 12. USER CHARGES Discussion User charges or fees represent a significant portion of the income generated to support the operating budget. It is the policy that user charges or fees be established when possible so those who benefit from a service or activity also help pay for it. This is easy in some cases and municipal utility funds have been established for certain activities which are intended to be self-supporting. Examples of utility funds include Water User Fund, Sewer User Fund, Refuse Collection Fund, and Parking Fund. In other cases, a user charge is made after the Council determines to what extent an activity is to be self-supporting. Examples of this arrangement are fees for swimming, golf and recreation programs and certain inspection programs. Guideline User fees and charges should be established where possible so that those who utilize or directly benefit from a service, activity or facility also help pay for it: User fees and charges for each utility fund (Water User Fund, Sewer User Fund, Refuse Collection Fund, and Parking Fund) shall be set at a level that fully supports the total direct and indirect cost of the activity, including the cost of annual depreciation of capital assets and pay-as-you-go financing for future capital improvement projects. Policy Guidelines Fiscal Year 2003 Page 6 User fees and charges in the General Fund shall be established to cover not less than the following percentages of direct operating costs (excluding debt service). DEPARTMENT/DIVISION Leisure Services Department Recreation Division Adult Athletics* 85.6 86.0 79.0 Children's Activities 62.1 61.3 57.0 Therapeutic Recreation 14.6 15.3 15.0 Recreation Classes 41.5 46.7 46.0 Swimming* 95.4 86.4 77.0 Golf* 100.0 100.0 100.0 Park Division 10.4 12.2 9.6 Civic Center Division** 41.1 48.0 43.9 Library Department 9.4 8.3 7.0 Airport Department w/abated debt86.7 79.8 84.1 Building Services Division 87,4 83.7 94.6 Planning Services Department 11.4 10.7 13.1 Health Services Department Food/Environmental Insp. 56.8 66.8 62.5 Animal Control 90.7 100.0 96.2 Housing Services Department General Housing Inspection 51.3 50.9 FY1999 FY 2000 FY 2001 ACTUAL ACTUAL ACTUAL PERCENT PERCENT PERCENT * Includes an amount to help cover indirect costs (administration) ** Excludes Self-Promotion Activity FY 2002 FY 2003 ADOPTED RECOM'D PERCENT PERCENT 87.0 80.0 58.0 58.0 19.0 18.0 43.0 42.0 80.0 80.0 100.0 100.0 11.0 11.0 45.0 45.0 6.3 8.0 82.8 80.0 92.8 90.0 9.1 10.0 60.8 60.0 86.8 85.0 50.2 47.0 47.0 13. OUTSIDE FUNDING Discussion The purpose of this guideline is to establish the policy that the City should aggressively pursue outside funding to assist in financing its operating and capital budgets. However, the long-term commitments required for such funding must be carefully evaluated before any agreements are made. Commitments to assume an ongoing increased level of service or level of funding once the outside funding ends must be avoided. Policy Guidelines Fiscal Year 2003 Page 7 Guideline In order to minimize the property tax burden, the City of Dubuque will make every effort to obtain federal, state and private funding to assist in financing its operating and capital budgets. However, commitments to guarantee a level of service or level of funding after the outside funding ends shall be avoided. 14. GENERAL FUND OPERATING RESERVE OR WORKING BALANCF Discussion An operating reserve or working balance is an amount of cash which must be carded into a fiscal year to pay operating costs until tax money or other anticipated revenue comes in. Without a working balance there would not be sufficient cash in the fund to meet its obligations and money would have to be borrowed. Workinq balances are not available for funding a budget; they am required for cash flow (i.e., to be able to pay our bills before taxes are collected). The rule of thumb the state recognizes for determining a reasonable amount for a working balance is (a) anticipated revenues for the first three months of the fiscal year less anticipated expenditures or (b) 5% of the total General Fund operating budget (excluding fringes and tort liability expense). However, in discussions with Moody's Investor Service a factor of 10% was recommended for Aa rated cities. This is due to the fact that a large portion of our revenue sources are beyond our control and therefore uncertain. In the case of Dubuque, 10% represents approximately $2,455,00. Guideline The guideline of the City of Dubuque is to maintain a General Fund working balance or operating reserve of 10% of the total General Fund Operating budget requirements or approximately $2,455,000 for FY 2003. 15. USE OF UNANTICIPATED, UNOBLIGATED, NONRECURRING INCOMF Discussion Sometimes income is received that was not anticipated and was not budgeted. Often this money is not recurring and reflects something, which happened on a one-time basis to generate the "windfall". Nonrecurring income must not be spent for recurring expenses. To do so causes a funding shortfall the next budget year before you even start budget Policy Guidelines Fiscal Year 2003 Page 8 preparation. Several Iowa cities are in financial trouble because they spent nonrecurring money for recurring expenses. Nonrecurring expenditures would include capital improvements and equipment purchases. Guideline Nonrecurring un-obligated income shall be spent only for nonrecurring expenses. Capital improvement projects and major equipment purchases tend to be nonrecurring expenditures. 16. USE OF"UNENCUMBEREDFUND BALANCES" Discussion Historically a budget is not spent 100% by the end of the year and a small unencumbered balance remains on June 30th. In addition, income sometimes exceeds revenue estimates resulting in some unanticipated balances at the end of the year. These amounts of un-obligated year end balances are in turn "carried over" into the new fiscal year to help finance it. The FY 2001-02 General Fund budget, which went into effect July 1st anticipated a "carryover balance" of $200,000 or approximately 2% of the General Fund. For multi-year budget planning purposes, these guidelines assume a carryover balance of $200,000 in FY 2003 through FY 2007. Guideline The available carryover General Fund balance to help finance the budget and to reduce the demand for increased taxation shall be anticipated not to exceed $200,000 for FY 2002-03 and beyond through the budget planning period. Any amount over that shall be programmed in the next budget cycle as part of the capital improvement budgeting process. 17. PROPERTY TAX DISCUSSION Assumptions - Resources Unencumbered funds or cash balances of $200,000 will be available in FY 2003 and each succeeding year to support the operating budget. In Fiscal Year 2003 through 2007, an additional amount of $43,872 in Pension Fund excess cash balance will be used each year for retirement expense and free up tax support for the additional police officers added in Fiscal Year 1994. Policy Guidelines Fiscal Year 2003 Page 9 State shared revenues will be reduced by 4.27 percent in the current year and FY 2003 but will return to the actual FY 2001 level of receipts beyond FY 2003. Machinery and Equipment Replacement taxes are anticipated to be eliminated in FY 2003. c. Hotel/motel tax receipts will increase 2% per year over FY 2001 actual receipts for FY 2003, and then increase at an annual rate of 3% per year. State Transit operating assistance will also be affected by the 4.27 percent state cutbacks in FY 2002 and 2003 but will continue at the actual FY 02 budgeted level of $153,445 beyond FY 2003. e. Miscellaneous revenue, excluding state shared revenues, has been estimated at 2% growth per year over Budgeted FY 2002. Revenues generated from Dubuque Greyhound Park have been estimated based on the FY 2001 actual receipts plus 2 percent per year. Riverboat related receipts also reflect the FY 2001 actual receipts plus 2% per year and are estimated at $485,000 from the 50 cent admission fee and $229,000 from % of 1% of adjusted gross receipts for FY 2003. Interest earnings from the Self-Insurance Reserves (Health and Workers' Compensation) will continue to be used to reduce tax askings for fringe benefit expense. In addition, $120,000 in cash balance is being used each year for the next five years to reduce the Health Self-Insurance Re, serve Fund balance based on recommended reserves. The residential rollback factor has been adjusted from 56.2651% to 51.668% or a decrease of 8.0% for FY 2003. No increase has been estimated for Fiscal Years 2005 and 2007, the off years of equalization orders. Assessed valuations were increased 2% per year beyond FY2003. Machinery & Equipment valuations have been reduced per the League of Iowa Municipalities estimate and state replacement revenue has been eliminated per the State's projection. Debt Service Fund balances will be used over the next four years to reduce property tax support for General Obligation debt service related expense. No additional property tax supported General Obligation debt is anticipated in the Five Year Projection. Policy Guidelines Fiscal Year 2003 Page i0 Sales tax projections anticipate 50% of four quarterly payments in the General Fund for property tax relief. Sales tax projections for FY 2003 have been estimated to increase 4% per year over the revised FY 2002 state revenue estimates. In Fiscal Year 2003 and beyond, 75% of the revenue from the Downtown TIF District is anticipated to be used for downtown development projects in order to support additional downtown parking, gateway improvements and plaza amenities. To the extent these funds are not required to support debt payments or project expense, the excess will be distributed per state code to each taxing body. For purposes of budget projections only, it is assumed that property taxes will continue to increase at a rate necessary to meet additional requirements over resources beyond Fiscal Year 2003. Assumptions - Requirements a. A wage adjustment is reflected in the projections for FY 2003 and each succeeding year. Health insurance costs are estimated to increase 15% over the FY 2002 budgeted rates. Estimates for FY 04-07 have been increased by 7% per year. The rates being charged to departments have again been decreased by $120,000 to reduce the Self-Insurance Reserve Fund balance as noted above. c. General operating supplies and services are estimated to increase 2.5% over budget in FY 2003 and succeeding years. d. Electrical energy expense is estimated to increase 2.5% per year over FY 2001 actual expense. e. Natural gas expense is estimated to decrease 1.5% from FY 2001 due to a - 6.5% degree-day adjustment and a projected 5% inflation adjustment. The Convention and Visitors Bureau contract (including the Land of Festivals) will continue at 50% of actual hotel/motel tax receipts. Equipment costs are estimated at 2.5% per year over FY 2001 actual, however, the final budget recommendation will be based on need, not on a percentage over prior years. Policy Guidelines Fiscal Year 2003 Page 11 h. Debt service is estimated based on no additional General Obligation bond sales in FY 2003 - 2007. t. Unemployment insurance expense has been maintained at $15,000 per year. Motor vehicle fuel expense has been increased 7% over FY 2001 actual expense and motor vehicle maintenance expense by 2.5% per year. k. Postage rates are estimated to increase 2.5% per year over FY 2002 budgeted expense. IMPACT ON AVERAGE RESIDENTIAL PROPERTY - EXAMPLE ACTUAL - PAST HISTORY FY 1998 FY 1990 FY 1991 FY 1992 FY 1993 FY 1994 FY 1995 FY 1996 FY 1997 FY 1998 FY 1999 FY 2000 FY 2001 FY 2002 "City" Property Tax "City" Property Tax "City" Property Tax* "City" Property Tax "City" Property Tax* "City" Property Tax "City" Property Tax* "City" Property Tax "City" Property Tax* "City" Property Tax "City" Property Tax* "City" Property Tax "City" Property Tax* "City" Property Tax CITY TAX PERCENT DOLLAR CALCULATION INCREASE INCREASE $453.99 -11.4% - $ 58.51 $ 449.94 .9% - $ 4.05 $ 466.92 + 3.8% +$16.98 $ 483.63 + 3.6% +$16.71 $ 508.73 + 5.0% +$ 5.10 $510.40 + .3% +$ 1.51 $ 522.65 + 2.4% +$12.41 $518.10 .9% -$ 4.54 $ 515.91 .4% - $ 2.19 $ 512.25 .7% - $ 3.66 $512.25 - .0% -$ 0.00 $511.38 - .2% -$ 0.87 $ 511.38 0.0% $ 0.00 $ 511.38 +0.00% +$ 0.00 PROPOSED FY 2003 "City" Property Tax Average FY 1989-FY 2003 $ 485.79 -5.00% -$ 25.59 - .29% -$ 3.11 PROJECTION FY 2004 "City" Property Tax $ 492.62 FY 2005 "City" Property Tax* $ 503.41 FY 2006 "City" Property Tax $ 515.78 FY 2007 "City" Property Tax* $ 532.19 *denotes year of State-issued equalization orders +1.41% +2.19% +2.46% +3.18% +$ 6.83 +$ 10.79 +$ 12.37 +$ 16.41 Policy Guidelines Fiscal Year 2003 Page ]2 IMPACT ON COMMERCIAL PROPERTY - EXAMPLE ACTUAL - PAST HISTORY FY 1989 FY 1990 FY 1991 FY 1992 FY 1993 FY 1994 FY 1995 FY 1996 FY 1997 FY 1998 FY 1999 FY 2000 FY 2001 FY 2002 *denotes "City" Property Tax "City" Property Tax "City" Property Tax* "City" Property Tax "City" Property Tax* "City" Property Tax "City" Property Tax* "City" Property Tax "City" Property Tax* "City" Property Tax "City" Property Tax* "City" Property Tax "City" Property Tax "City" Property Tax CITY TAX PERCENT DOLLAR CALCULATION INCREASE INCREASE $2,106.42 -15.4% -$ 384.00 $2,086.50 .9% - $ 20.00 $2,189.48 + 4.9% +$102.98 $2,280.18 4.1% +$ 90.70 $2,231.05 -2.2% -$ 49.13 $2,250.15 + 0.9% +$ 19.10 $2,439.60 + 8.4% +$189.45 $2,439.60 + 0.0% +$ 0.00 $2,659.36 + 9.0% +$ 219.76 $2,738.43 +2.97% +$ 79.07 $2,952.03 + 7.8% +$ 213.60 $2,934.21 - 0.6% -$ 17.82 $2,993.00 + 2.0% +$ 58.86 $2,910.25 -2.77% -$ 82.83 year of State-issued equalization order PROPOSED FY 2003 "City" Property Tax* Average FY 1989-2003 $3,171.57 + 8.98% +$261.33 + 1.80% +$ 45.40 PROJECTION FY 2004 FY 2005 FY 2006 FY 2007 "City" Pmperty Tax "City" PmpertyTax* "City" Property Tax "City" Property Tax* $3,216.15 + 1.41% +$ 44.58 $3,286.60 + 2.19% +$ 70.46 $3,367.39 + 2.46% +$ 80.79 $3,474.50 + 3.18% +$107.11 IMPACT ON INDUSTRIAL PROPERTY - EXAMPLE ACTUAL - PAST HISTORY FY 1989 FY 1990 FY 1991 FY 1992 FY 1993 FY 1994 FY 1995 FY 1996 "City" Property Tax "City" Property Tax "City" Property Tax "City" Property Tax "City" Property Tax "City" Property Tax "City" Property Tax "City" Property Tax CITY TAX CALCULATION $5,900.35 $5,844.55 $6,133.00 $6,387.05 $6,249.45 $6,302.95 $5,891.05 $5,891.05 PERCENT INCREASE DOLLAR INCREASE -15.4% -$1,074.65 .9% -$ 55.8O + 4.9% +$ 288.45 +4.1% +$ 254.05 - 2.2% -$ 137.60 +0.9% +$ 53.50 - 6.5% ~$ 411.90 + 0.0% +$ 0.00 Policy Guidelines Fiscal Year 2003 Page 13 ACTUAL - PAST HISTORY (cont.) FY 1997 FY 1998 FY 1999 FY 2000 FY 2001 FY 2002 "City~ Property Tax "City" Property Tax "City~ Property Tax "City" Property Tax "City" Property Tax "City" Property Tax PROPOSED FY 2003 "City" Property Tax Average FY 1989-FY 2003 PROJECTION FY 2O04 FY 2005 FY 2006 FY 2007 "City" Property Tax "City" Property Tax "City" Property Tax "City" Property Tax CITY TAX PERCENT DOLLAR CALCULATION INCREASE INCREASE $5,690.75 - 3.4% -$ 200.30 $5,700.56 + .17% +$ 9.81 $5,536.70 - 2.87% -$ 163.86 $5,358.00 - 3.23% -$ 178.70 $5,533.00 + 3.28% +$ 175.55 $5,380.42 - 2.77% -$ 153.13 $5,084.00 - 5.51% -$296.40 - 1.96% -$126.06 $5,155.46 + 1.41% +$ 71.46 $5,268.40 + 2.19% +$112.94 $5,397.90 + 2.46% +$129.50 $5,569.60 + 3.18% +$171.70 History of Increases in Property Tax Askings Fiscal "City" Property Year Tax Askings (000) % Increase FY 1998 FY 1990 FY 1991 FY 1992 FY 1993 FY 1994 FY 1995 FY 1996 FY 1997 FY 1998 FY 1999 FY 2000 FY 2001 FY 2002 $10,918 759 $10,895 321 $11,553 468 $12,249 056 $12,846 296 $13,300 756 $13,715 850 $14,076 320 $14,418 735 $14,837 670' $15,332 8O6* $15,285 754 $15,574,467 $15,686,579 Average FY 1989-2003 *Without TIF Accounting change. -12.0% - 0.2% + 6.0% + 6.0% + 4.9% + 3.5% +3.1% + 2.6% + 2.4% + 2.9% + 3.3% - 0.3% + 1.9% + .8% + 1.7% Sales Tax initiated Policy Guidelines Fiscal Year 2003 Page I~ Impact on Tax Askings and Average Residential Property To maintain the current level of service based on the previous assumptions will require the following property tax asking increases: "City" Property Year Tax Askings (000) % Increase FY 2002 $15,687 FY 2003 $15,970 + 1.81% FY 2004 $16,541 + 3.57% FY 2005 $17,233 + 4.19% FY 2006 $18,009 + 4.50% FY 2007 $18,954 + 5.25% % / $ Impact on Avg. Residential Property - 5.00% / - $25.59 + 1.41%/+$ 6.83 + 2.19%/+$10.79 + 2.46% /+$12.37 + 3.18% / +$16.41 Guideline The recommended guideline is to maintain no tax increase for the average residential property owner. Note: One percent increase in the tax rate will generate approximately $169,153 and a 1% increase in tax asking will generate approximately $156,885 CIP BUDGET GUIDELINES 18. INTEGRATION OF CAPITAL RESOURCES Guideline In order to obtain maximum utilization, coordination and impact of all capital improvement resources available to the City, state and federal block and categorical capital grants and funds shall be integrated into a comprehensive five year Capital Improvement Program (CIP) for the City of Dubuque. 19. INTEGRITY OF CIP PROCESS Guideline The City should make all capital improvements in accordance with an adopted Capital Improvement Program (CIP). If conditions change and Policy Guidelines Fiscal Year 2003 Page 15 projects are to be added and/or deleted from the CIP, the changes shall be made only after approval by the City Council. 20. · RENOVATION AND MAINTENANCF Guideline Capital improvement expenditures should concentrate on renovating and maintaining existing facilities to preserve prior community investment. 21. NEW CAPITAL FACILITIES Guideline Construction of new or expanded facilities which would result in new or substantially increased operating costs will be considered only if: 1) their necessity has been clearly demonstrated; 2) their operating cost estimates and plans for providing those operating costs have been developed; 3) they can be financed in the long term; and 4) they can be coordinated and supported within the entire system. 22. COOPERATIVE PROJECTS Guideline Increased efforts should be undertaken to enter into mutually beneficial cooperative capital improvement projects with the County, school district and private groups. Cost-sharing to develop joint use recreation facilities and cost- sharing to improve roads and bridges are examples. 23. USE OF GENERAL OBLIGATION BONDS Discussion The Iowa Constitution limits the General Obligation debt of any city to 5% of the actual value of the taxable property within the city. The Iowa legislature has determined that the value for calculating the debt limit shall be the actual value of the taxable property prior to any "rollback" mandated by state statute. Policy Guidelines Fiscal Year 2003 Page ]6 The FY 2001-02 taxable value for calculating the debt limit is $2,135,049,977, which indicates a total General Obligation debt capacity of $106,752,499. Outstanding G.O. debt (including tax increment debt) on June 30, 2002 will be $10,690,000 (10%) leaving an available debt capacity of $96,062,489 (90%). As we approach the preparation of the FY 2003-2007 Capital Improvement Program (CIP) the problem is not our capacity to borrow money but (a) how to identify, limit and prioritize projects which justify the interest payments and (b) how to balance high priority projects against their impact on the property tax rate. Guideline There are many high priority capital improvement projects, which need to be constructed during the FY 2003-2007 period. Most of these projects will be possible without borrowing the money (i.e., selling bonds) to help finance them. This is based on the plan approved by City Council in 1997 that shifts Road Use Tax funds from the operating budget to the capital budget and uses DRA distributions of annual net surpluses to the City for capital improvements. In determining whether a project should be financed in total or in part from bond funds the City Council must consider and balance off: (a) the community impact of not doing the project (poor streets, deteriorated park buildings, sewer problems, higher operating costs); (b) possible operating budget cuts to offset higher debt service payments; (c) anticipated interest rate; and (d) the impact on the tax rate and taxpayer of issuing the bonds. 24. ROAD USE TAX FUND Discussion Actual Road Use Tax Fund receipts are as follows: FY 1985 - $2,069,065 FY 1986 - $2,207,467 FY 1987 - $2,259,436 FY 1988 - $2,379,592 FY 1989 - $2,617,183 FY 1990 - $3,037,587 FY 1991 - $3,122,835 FY 1992 - $3,119,087 FY 1993 - $3,121,357 FY 1994 - $3,343,678 FY 1995 - $3,484,524 FY 1996 - $3,841,921 FY 1997 - $3,977,528 FY 1998 - $4,072,296 FY 1999 - $4,415,192 FY 2000 - $4,671,656 FY 2001 - $4,689,000 FY 2001 - $4,628,122 The FY 2002 budget was based on receiving $4,988,000 in Road Use Tax funds. Policy Guidelines Fiscal Year 2003 Page ~.7 In FY 2002, 45% of the Road Use Tax income is in the operating budget. In FY 1997, the City Council adopted a plan to shift Road Use Tax funds from the operating budget to the capital budget at a rate of $250,000 per year. As of FY 2001, $940,000 of Road Use Tax fund expense had been shifted to the General Fund per the guideline. The increase in the tax askings from this shift was offset by reduced debt service expense. Shifting additional funds was discontinued in FY 2001, and $60,000 was actually shifted back to Road Use Tax funds. This change reflected the continued growth of gaming receipts and recognition that this appeared to be a much more certain revenue stream that could be used to support the CIP budget. In FY 2003, the shift of $940,000 to the General Fund will be shifted back to RUTF to support the multi-year pay plan approved by City Council in FY 2002. Guideline Since FY 1997 Road Use Tax funds have been shifted to the capital budget for street maintenance and repair to reduce the need to borrow funds for routine street maintenance and improvements. This shift will not occur again until such time as there is increased revenues or reduced expense that would allow this shift without a property tax impact. 25. COMMERCIAL AND INDUSTRIAL DEVELOPMENT Guideline Current City, commercial and industrial development efforts should be continued to (a) preserve current jobs and create new job opportunities and (b) enlarge and diversify our economic base. Financing these efforts and programs should continue to be a high priority for Community Development funding. 26. HOUSING Guideline In order to maintain an adequate supply of safe and decent housing, the City should strive to preserve existing single family and rental housing and provide opportunities for development of new housing within the City's corporate limits for all citizens, particularly for people of Iow and moderate income. Poticy Guidelines Fiscal Year 2003 Page 18 27. SALES TAX Guideline Thirty percent of projected sales tax receipts will be used for: (a) the reduction by at least 75% of street special assessments and (b) the maintenance and repair of streets. Twenty percent will be used for: (a) the upkeep of City-owned property such as sidewalks, steps, storm sewers, walls, curbs, traffic signals and signs, bridges and buildings and facilities (e.g., Airport, Five Flags Center, Library, Law Enforcement Center, City Hall, fire stations, parks and swimming pools); (b) Transit equipment such as buses; (c) riverfront and wetland development; and (d) economic development projects. 28. NET CASH PROCEEDS (SURPLUS DISTRIBUTION) FROM THE DUBUQU,~ RACING ASSOCIATION The contract with the Dubuque Racing Association calls for distribution at the end of its fiscal year (November) of 50% of its net cash operating funds to the City of Dubuque. In mid-December, the City will receive an un-audited estimate of proceeds to be distributed. These proceeds will then be allocated beginning with the next fiscal year through the capital improvement process with the highest priority given to reducing the City's annual borrowing. In addition, the Dubuque Racing Association provides the City with projections of future distributions since gaming is a highly volatile industry the estimates are discounted prior to including them in the City's Five Year CIP. One hundred percent of the 2002 projections of operating surplus have been anticipated as resources to support the Fiscal Year 2003 capital improvement projects. This level has been maintained for the Fiscal Year 2004 resource estimate and then has been reduced from 100% to 90% of the year 2004 projected surplus for FY 2005, 80% for FY 2006, and 70% for FY 2007 resources. Guideline In Fiscal Year 2003, the City anticipates distribution of a significant amount of net cash proceeds for use in the Capital Improvement Program. These amounts will be budgeted in the Five Year CIP and will be used to reduce required General Obligation borrowing. This is a change from last year, which would have provided a reduction to 85% for FY 2005, 70% for FY 2006, and 55% for FY 2008. Policy Guidelines Fiscal Year 2003 Page ]9 29. EMPHASIS ON INITIATIVES THAT REDUCE FUTURE OPERATING BUDGET EXPENSE Guideline Capital improvement expenditures that will reduce future maintenance and operating expense will receive priority funding and these type of initiatives will be encouraged in all departments and funding sources as a means of maximizing the use of available resources. This emphasis reflects fiscally responsible long range planning efforts. 30. USE OF GAMING RELATED RECEIPTS Guideline The amount of total gaming receipts from taxes and rent committed annually in support of the annual operating budget is one-third of the total gaming tax and lease revenues. It is felt that a fiscally sound policy is to continue to commit two thirds of the gaming revenues to the capital budget, thereby providing a cushion for future years, when gaming revenues may again fluctuate with the local economy. Should gaming revenues begin to decline, the capital budget projects can either be eliminated, deferred or funded from some other source if they are a high priority. To the extent possible within the property tax guideline, the City will minimize dependence on gaming revenues in the operating budget.