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Budget Policy Guideline FY 2004MEMORANDUM November 14, 2002 TO: FROM: SUBJECT: The Honorable Mayor and City Council Members Michael C. Van Milligen, City Manager Fiscal Year 2004 Policy Guidelines Prior to preparing a Fiscal Year 2004 budget recommendation, two very important things need to come from the City Council. First, the City Council Goals and Priorities must be established, and this was done in late August. Second, the Budget Policy Guidelines must be adopted, and that is what is being recommended at this City Council meeting. The five-year goals of the City Council are: 2. 3. 4. 5. Improved connectivity, including roads, air, and telecommunications Strong diverse local economy Riverfront development Planned and managed growth Partnership for a better Dubuque The Fiscal Year 2004 priorities of the City Council are: Top Priorities · Air service strategy Short-term actions, Highway 20 · America's Riverproject and development Stormwater study High Priorities · Arts policy and funding · Downtown master plan · Marketing riveffront and total community · Gaming referendum · Property acquisition at riverfront O. c~ Page I of 6 Other Priorities · Erosion policy · School local option tax · Marketing program - America's River · Brewery project Management Priorities · Telecommunications strategy · Street program funding · Southwest Arterial · Julien Dubuque Bridge plan and design · Zoning ordinance update · Vacant property redevelopment · River Valley Initiative · State grant to extend road to industrial park · Riverfront master plan implementation · Federal strategies Fiscal Year 2003 is the current fiscal year, with a budget that was approved by the City Council in March 2002. During that process, I projected that the budget shortfall for Fiscal Year 2004 would be $205,936, which I believed would be manageable and anticipated avoiding a property tax increase on the average homeowner in Fiscal Year 2004 for the ninth consecutive year (five of those years seeing a property tax decrease). However, there have been several changes to our revenue and expense projections for Fiscal Year 2004, mostly caused by the State of Iowa and the softening economy, that bring that budget shortfall to $1,038,421. This is $833,025 over the projections made last year. The statewide police and fire retirement system contribution will be increasing from 17% of an employee's salary to between 21 and 23% in order to fund additional benefits granted by the Legislature and to cover diminishing returns on the funds' investments. This increase alone is $458,239. Another major cause of the increased shortfall is the projection the City has received from the State showing that sales tax proceeds will increase, but not as much as were projected. This revenue shortfall for Fiscal Year 2004 is $288,902. A more detailed list of significant expense changes include: · A projected 15% increase in health insurance costs based on Fiscal Year 2002 actual experience ($118,732); · Police and Fire Retirement expense has been increased $458,239 based on notification from the State of Iowa of an anticipated change in rates from the current rate of 17% to between 21% and 23% for FY 2004; Page 2 of 6 A more detailed list of significant revenue changes include: Hotel/Motel Tax revenues (excluding new Hotel/VVater Park) estimated to decrease by $76,827 based on actual Fiscal Year 2002 and year-to-date experience; · Municipal Assistance and Liquor Sales Tax are projected to be down $33,480 and $29,317 respectively; · The State estimate for Local Option Sales Tax proceeds is down $288,902; and · Other miscellaneous revenues are projected to increase $209,399 over adopted Fiscal Year 2003. In summary, these changes have increased the budget shortfall over last year's projections by $652,021. In addition, last year's projections indicated a 1.41% increase was necessary on the average home in order to support a maintenance level budget. To reduce this to zero requires an additional need of $205,936, for a total budget shortfall of $857,957. To complicate matters even further, the State has just issued the new rollback factors for residential and commercial property classes. These factors are very difficult to project due to the linkage of residential to agricultural land value changes. The rollback factor for residential property has been reduced by .5% from 51.6676 to 51.3874. The rollback factor for commercial property has been increased from .9777 to 100% or a .23% increase. The reduction in residential rollback results in lower taxable valuations, generating less taxes with the same property tax rate. The impact of the reduced rollback factor on taxable values is a $180,464 loss in tax dollars generated from last year's projections. The impact of the valuation changes together with the revised assumptions from the previous page means cuts and/or increases of $1,038,42'1 would be necessary to maintain a zero property tax increase on the average home, this is $833,025 over last year's projections. Each 1% property tax increase on the average homeowner generates $160,482 in revenue. To avoid a property tax increase or a significant reduction in City programs and services, Administrative Services Manager Pauline Joyce is recommending that each department closely review their user fees and the City Council adopt the following Budget Policy Guideline changes: Currently one-third of gaming revenues are used to support the operating budget, and two-thirds are used to support the Capital Improvement Program budget. With the successful election for gaming facilities, it is reasonable to change to 50% CIP and 50% operating budget. This change would provide an additional $743,000 for the operating budget and reduce the shortfall from $1,038,421 to $295,1 '15. This reallocation of gaming revenues does not Page 3 of 6 impact the annual distribution of profits from the Dubuque Racing Association, which will continue to go 100% to the Capital Improvement Program Budgetl Each year the Dubuque Racing Association distributes 50% of its year-end surplus to the City of Dubuque to support capital improvements. These funds are received in early January. The City's past practice has been to budget the January distributions as part of the following year's Capital Improvement Program (effective July I following the receipt of funds). Beginning in Fiscal Year 2004, it is recommended that estimated annual distributions be budgeted in the fiscal year received, rather than the following fiscal year. This is how most City revenues are treated. This will allow the City to move forward on capital projects that address City Council priorities. Since 1981, the City has operated with greater efficiency and has reduced the number of full-time employees from 588 to 524. This is a reduction in the full-time work force of 10.9%, or 64 employees. This has happened during a time when new or expanded City programs and services have been added to meet increasing demands and mandates. For example, 15 police officers have been added in the last ten years. There has not been a property tax increase for the average homeowner for the past eight years; in fact five of those years have seen decreases. The City compares favorably when we look at the other large cities in Iowa when you look at the property tax rate and fees: Property Tax Rate RANK CITY TAX RATE 9 Waterloo $18,37162 8 Des Moines $17.04857 7 Iowa City $16.81344 6 Council Bluffs $16.42850 5 Sioux City $15.95108 4 Davenport $14.63000 3 Cedar Rapids $12.82969 2 Dubuque $10.21200 1 Ames $9.63962 AVERAGE $14.65828 Page 4 of 6 Refuse Rates RANK CITY MONTHLY FEE 7 Ames $20.50 6 Cedar Rapids $12.56 5 Iowa City $11.00 4 Waterloo $10.36 3 Des Moines $10.25 2 Sioux City $9.50 1 Dubuque $7.20 AVERAGE $11.62 PAY AS YOU THROW No (average fee for private service) Yes Yes Yes No No Yes Water Rates RANK CITY WATER USED 5 Ames $18.42 4 Council Bluffs $14.15 3 Des Moines $12.86 2 Dubuque $12.00 1 Cedar Rapids $11.61 AVERAGE $13.81 Sewer Rates RANK CITY SEWER FEE 9 Iowa City $31.82 8 Des Moines $22.22 7 Ames $16.78 6 Waterloo $16.55 5 Council Bluffs $15.12 4 Sioux City $14.98 3 Davenport $13.76 2 Dubuque $12.56 1 Cedar Rapids $10.93 AVERAGE $17.19 Not considering a Stormwater Utility Fee, which has not yet been approved by the City Council, an average homeowner pays $25.57 less for City services in Fiscal Year 2003 than they paid in Fiscal Year 1995. Page 5 of 6 I respectfully request Mayor and City Council approval of the recommended Fiscal Year 2004 Budget Policy Guidelines. Michael C. Van Milligen MCVM/jh Attachment cc: Barry Lindahl, Corporation Counsel Cindy Steinhauser, Assistant City Manager Pauline Joyce, Administrative Services Manager Page 6 of 6 CITY OF DUBUQUE, IOWA MEMORANDUM November 14, 2002 TO: Michael C. Van Milligen, City Manager FROM: Pauline Joyce, Administrative Services Manager~~/~'''-''~~ / SUBJECT: Fiscal Year 2004 Policy Guidelines The purpose of this memorandum is to transmit draft Fiscal Year 2004 Fiscal Guidelines for your review and presentation to the Council. The guidelines reflect City Council direction given as part of the August 27 and 29, 2002, goal setting sessions. During those sessions the City Council established goals for the next five years and established City priorities in Fiscal Year 2004. Dubuque 2007: City Council Goals In five years the Council wants the following for the community: 1. Improved connectivity, including reads, air, and telecommunications 2. Strong diverse local economy 3. Riverfront development 4. Planned and managed growth 5. Partnering for a better Dubuque Fiscal Year 2004 Priorities: Our Tarqets 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 2004 are: Top Priorities · Air service strategy · Short-term actions- Highway 20 · America's River project and development · Stormwater study High Priorities · Arts policy and funding · Downtown master plan · Marketing riverfront and total community November 18, 2002 · Gaming referendum · Property acquisition at riverfront Other Priorities · Erosion policy · School local option · Marketing program-America's River · Brewery project Management Agenda 2002-2004 · Telecommunications strategy · Street program funding · Southwest Arterial · Julien Dubuque bridge plan and design · Zoning ordinance update · Vacant property redevelopment · River Valley Initiative · State grant to extend road to industrial park · Riverfront master plan implementation · Federal strategies Significant Changes 1. 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. In past years, the gaming revenue from facility rent and taxes have been split one- third operating budget and two-thirds capital budget. Beginning in Fiscal Year 2004, it is recommended that this split be changed to 50 percent operating budget and 50 percent capital budget. This will result in an additional $746,291 toward property tax relief in Fiscal Year 2004. This is necessary to address the following cost increases and/or declining revenue: Significant expense changes include: · A projected 15% increase in Health costs based on Fiscal Year 2002 actual experience ($118,732); · In FY 04 there are 2096 versus 2088 hours ($60,125) earned based upon the actual hours worked between July 1, 2003 and June 30, 2004; · Police and Fire Retirement expense has been increased $458,239 based on notification from the State of Iowa of an anticipated change in rates from the current rate of 17% to between 21% and 23% for FY 2004; 2 November 18, 2002 · Property and Boiler Insurance are estimated to increase 15% and General Liability costs to increase 12%; electrical expense increasing 15%; and offset by savings in other areas of Supplies and Services for a net change of -$144,117; · Impact these same changes have on Transit tax support ($26,676); Significant revenue changes include: · Hotel/Motel Tax revenues (excluding new Hotel/VVater Park) estimated to decrease by $76,827 based on actual FY 2002 and year-to-date experience; · Municipal Assistance and Liquor Sales Tax are projected to be down $33,480 and $29,317 respectively; · The State estimate for Local Option Sales Tax proceeds is down $288,902; and · Other miscellaneous revenues are projected to increase $209,399 over adopted Fiscal Year 2003. In summary, these changes have increased tax askings over last years projections by $652,021. In addition, last years projections indicated a 1.41% increase was necessary on the average home in order to support a maintenance level budget. To reduce this to zero requires an additional reduction in tax askings of $205,936, for a total reduction of $857,957. To complicate matters even further, the State has just issued the new rollback factors for residential and commercial property classes. These factors are very difficult to project due to the linkage of residential to agricultural land value changes. The rollback factor for residential property has been reduced by .5% from 51.6676 to 51.3874. The rollback factor for commercial property has been increased from .9777 to 100% or a .23% increase. The reduction in residential rollback results in lower taxable valuations, generating less taxes with the same property tax rate. The impact of the reduced rollback factor on taxable values is a $180,464 loss in tax dollars generated from last years projections. The impact of the valuation changes together with the revised assumptions from the previous page means cuts and/or fee increases of $1,038,421 would be necessary to maintain a zero tax increase on the average home, this is $833,025 over last year's projections. To address this sizable shortfall, I would recommend that each department closely review their user fees to insure fees cover all related expense. Second, I believe we will need to recommend a change to the current policy of using 1/3 of gaming revenues to support operating budget and 2/3 for the capital budget. With the successful election for gaming revenues, it is reasonable to recommend a 3 November 18, 2002 change to 50% CIP and 50% operating budget. This change would provide an additional $743,000 for the operating budget and reduce the shortfall from $1,038,421 to $295,115. 2. There will be a renewed emphasis on reviewing user fees to make sure they are covering assorted costs and/or defraying a targeted percent of those costs. This is being done to address budget issues discussed above. Each year the Dubuque Racing Association distributes 50 percent of its year-end surplus to the City of Dubuque to support capital improvements. These funds are received in early January. The City's past practice has been to budget the January distributions as part of the following years Capital Improvement Program (effective July I of the year funds are received). There have been several years when funds were spent before July I in order to finance urgent capital needs. Beginning in Fiscal Year 2004, it is recommended that estimated annual distributions be budgeted in the fiscal year received, rather than the following fiscal year. Since the City's fiscal year (July 1-June 30) overlaps two construction seasons, this policy will not cause cash flow problems and will allow the City to move forward on capital projects that address City Council priorities. Background Information Since 1981, the City has reduced the number of full-time employees from 588 to 524. This is a reduction in the full-time work force of 10.9 percent or 64 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 · 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 4 November 18, 2002 · 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 · Washington D.C. initiative · Increased security operations at Airport The City continues to look for operating efficiencies through the program and service review process. 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 $1,023,003,527 in Fiscal Year 1993 (January 1, 1991 values) to $1,541,188,216 for Fiscal Year 2003 (January 1, 2001 values), which represents an increase of $518,184,689 or 5.07 percent per year. The City's portion of the property tax rate has gone from $12.6862 in Fiscal Year 1993 to $10.21203 per thousand dollars of assessed value; a decrease of $2.47417 or 2.0 percent per year 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: 5 November 18, 2002 The use of sales tax for property tax relief has grown from $2,270,000 in Fiscal Year 1993 to $3,454,941 in Fiscal Year 2003. This increase is the equivalent of property tax relief of $.6519/$1,000 of assessed value. This means that the local option sales tax has allowed a 5.1 percent reduction in the City's portion of the tax rate from Fiscal Year 1993 to Fiscal Year 2003; The net addition of only six property-tax-supported, full-time positions from Fiscal Year 1993 to Fiscal Year 2003 (the net increase has been held to only six 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 one full-time security person at the Airport in Fiscal Year 2003); and The use of annual gaming revenues for property tax relief. This has avoided a 9.7 percent increase in the property tax rate for FY 2003. 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. The increase in taxable value averaging five percent per year over the 10-year period. 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 2003 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 18.37162 66,467 2 Des Moines 17.04857 193,187 3 Iowa City 16.81344 60,349 4 Council Bluffs 16.42850 54,315 5 Sioux City 15.95108 80,505 6 Davenport 14.63000 97,500 7 Cedar Rapids 12.82969 108,780 8 Dubuque 10.21200 57,546 9 Ames 9.63962 48,691 6 November 18, 2002 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 2004 that I am recommending to you can be summarized as follows: · Preliminary Citizen participation opportunities Date Startinq Time Tuesday, November 19 Wednesday, February 5 Monday, February 10 Thursday, February 20 Monday, February 24 Wednesday, February 26 Thursday, February 27 5:15 p.m. - City Manager's Public Input Meeting 6:15 p.m. - City Council Budget Worksession 6:15 p.m. - City Council Budget Worksession 6:15 p.m. - City Council Budget Worksession 6:15 p.m. - City Council Budget Worksession 6:15 p.m. - City Council Budget Worksession 6:30 p.m. - Public Hearing - City Council This schedule has been reduced by one hearing from past years per City Council direction. · 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. 7 November 18, 2002 · Improved productivity Efforts will continue to become more efficient. · 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 an AA bond rating, which reduces borrowing costs, the City will maintain a cash reserve of 10 pement of the total General Fund operating budget (excluding employee fringe benefits) or $2,566,000. 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 be used 50 percent in operating budget and 50 percent in the capital budget. 8 November 18, 2002 Finally, the Policy Guidelines include a property tax guideline that provides no increase in the "City" share of property taxes for the average homeowner. In order to meet this guideline it is anticipated that tax-supported services will need to be reduced and/or user fees increased by $295,115. · The January DRA distributions of surplus funds will be committed to support current- year capital projects. 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 2004. PJ/ksf Attachments CC: Barry Lindahl, Corporation Counsel Cindy Steinhauser, Assistant City Manager Randy Peck, Human Services Manager Ken TeKippe, Finance Director 9 POLICY GUIDELINES FOR FY 2004 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 LEVELS 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. FY 2004 Po[icy Guidelines Page 2 3. TVVOTYPES OF BUDGET DOCUMENTS TO BE PREPARED Guideline The recommended City operating budget for Fiscal Year 2004 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 2004 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 2004 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. FY 2004 Policy Guidelines Page 3 5. BALANCE BETWEEN 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. 6. MAINTENANCE OF EXISTING SERVICES 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 priority 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? 7. 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. 8. 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 FY 2004 Policy Guidelines 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 2004 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/YVVCA, United Way groups, Recreation Groups). RESTRICTIONS ON INITIATING NEW SERVICE 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 THE 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 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. FY 2004 Policy Guidelines Page 5 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. 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). FY 2004 Policy Guidelines Page 6 DEPARTMENT/DIVISION Leisure Services Department Recreation Division Adult Athletics* 86.0 79,0 81.0 80.0 81.0 Children's Activities 61.3 57.0 41.6 58.0 57.0 Therapeutic Recreation 15.3 15.0 20.0 18.0 20,0 Recreation Classes 46.7 46.0 46.7 42.0 46.0 Swimming* 86.4 77.0 81.0 80.0 80.0 Golf* 100.0 100.0 100.0 100.0 100.0 Park Division 12.2 9.6 10.3 11.0 10.0 Civic Center Division** 48.0 43.9 42.1 45.0 45.0 Library Department 8.3 7.0 8.2 8.0 8.1 Airport Department w/abated debt79.8 84.1 89.6 80.0 85.0 Building Services Division 83.7 94.6 94.4 90.0 94.0 Planning Services Department 10.7 13.1 11.6 10.0 11.0 Health Services Department Food/Environmental Insp. 66.8 62.5 58.6 60.0 60.0 Animal Control 100.0 96.2 94.3 85.0 90.0 Housing Services Department General Housing Inspection 50.9 50.2 45.4 47.0 47.0 FY 2000 FY 2001 FY 2002 FY 2003 FY 2004 ACTUAL ACTUAL ACTUAL ADOPTED RECOM'D PERCENT PERCENT PERCENT PERCENT PERCENT * Includes an amount to help cover indirect costs (administration) ** Excludes Self-Promotion Activity 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. 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. FY 2004 Policy Guidelines Page 7 14. GENERAL FUND OPERATING RESERVE OR WORKING BALANCE Discussion An operating reserve or working balance is an amount of cash, which must be carried 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. Working balances are not available for funding a budget; they are 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 percent 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 percent was recommended for "A" 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 percent represents approximately $2,556,000 Guideline The guideline of the City of Dubuque is to maintain a General Fund working balance or operating reserve of 10 percent of the total General Fund Operating budget requirements or approximately $2,556,000 for FY 2004. 15. USE OF UNANTICIPATED, UN-OBLIGATED, NONRECURRING INCOME 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 preparation. 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. FY 2004 Policy Guidelines Page 8 16. USE OF "UNENCUMBERED" FUND BALANCES Discussion Historically a budget is not spent 100 pement 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 2002-03 General Fund budget, which went into effect July 1, anticipated a "carryover balance" of $200,000 or approximately 2 percent of the General Fund. For multi-year budget planning purposes, these guidelines assume a carryover balance of $200,000 in FY 2004 through FY 2008. 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 2003-04 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 2004 and each succeeding year to support the operating budget. In Fiscal Year 2003 through 2008, an additional amount of $80,000 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. State shared revenues will be reduced by 4.27 pement from FY 2002 Actual to arrive at the FY 2004 estimate; FY 2005 and beyond will return to the actual FY 2002 level of receipts. Hotel/motel tax receipts will increase 2 pement per year over FY 2002 actual receipts for FY 2004, and then increase at an annual rate of 3 pement per year. State Transit operating assistance will also be reduced by 4.27 percent from FY 02 Actual for FY 04 and then continue at the Actual FY 02 level of $155,596 beyond FY 2004. FY 2004 Policy Guidelines Page 9 Miscellaneous revenue, excluding state shared revenues, has been estimated at two percent growth per year over budgeted FY 2003. Revenues generated from Dubuque Greyhound Park have been estimated based on the FY 2002 actual receipts plus 5 percent per year. Riverboat related receipts also reflect the FY 2002 actual receipts plus 2.5 percent per year and are estimated at $564,373 from the 50-cent admission fee and $257,127 from ~ of I percent of adjusted gross receipts for FY 2004. Gaming revenues have been split 50 percent for operating budget support and 50 percent capital budget support. Interest earnings from the Self-Insurance Reserves (Health and Workers' Compensation) will continue to be used to reduce tax askings for fringe benefit expense. Cash balances are no longer available to help reduce property tax support. The residential rollback factor will decrease from 51.6676 percent to 51.3874 percent or -.5 for FY 2004. Fiscal Years 2005 and beyond a 10- year average for rollbacks and equalization orders was used. Assessed valuations were increased 2 percent per year beyond FY 2004. Debt Service Fund balances will be used over the next two 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. Sales tax projections anticipate 50 percent of four quarterly payments in the General Fund for property tax relief. Sales tax projections for FY 2004 have been estimated to increase 3 percent per year over the revised FY 2003 state revenue estimate. It is anticipated that in FY 2004 and beyond, 75 percent of the revenue from the Downtown TIF will 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. Certain economic development grants require 100 percent of the revenue from a particular project. 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 FY 2004. FY 2004 Policy Guidelines Page 10 Assumptions - Requirements a. A wage adjustment is reflected in the projections for FY 2004 and each succeeding year. b. Health insurance costs are estimated to increase 15 percent over the FY 2003 budgeted rates. Estimates for FY 05-08 have been increased by 7 percent per year. c. General operating supplies and services are estimated to increase 2 percent over budget in FY 2004 and succeeding years. d. Electrical energy expense is estimated to increase 15 percent over FY 2002 actual expense, then 2.5 percent per year beyond. e. Natural gas expense is estimated to increase 17.8 percent from FY 2002 actual due to a 12.3 percent degree-day adjustment and a projected 2.5 percent inflation adjustment. f. The Convention and Visitors Bureau contract will continue at 50 percent of actual hotel/motel tax receipts. g. Equipment costs are estimated at 2 percent per year over the FY 2003 budget; however, the final budget recommendation will be based on need, not on a percentage over prior years. h. Debt service is estimated based on no additional tax-supported General Obligation bond sales in FY 2004 - 2008. I. Unemployment insurance expense has been maintained at $15,000 per year. j. Motor vehicle fuel expense has been increased 3 percent over FY 2002 actual expense and motor vehicle maintenance expense by 3 percent per year. k. Postage rates are estimated to increase 8.5 percent per year over FY 2003 budgeted expense for FY 2004 then +3 percent beyond. FY 2004 Policy Guidelines Page ii IMPACT ON AVERAGE RESIDENTIAL PROPERTY - EXAMPLE ACTUAL - PAST HISTORY CITY TAX CALCULATION PERCENT INCREASE FY 1989 "City" Property Tax $ 453.99 -11.4% FY 1990 "City" Property Tax $ 449.94 .9% FY 1991 "City" Property Tax* $ 466.92 + 3.8% FY 1992 "City" Property Tax $ 483.63 + 3.6% FY 1993 "City" Property Tax* $ 508.73 + 5.0% FY 1994 "City" Property Tax $ 510.40 + .3% FY 1995 "City" Property Tax* $ 522.65 + 2.4% FY 1996 "City" Property Tax $ 518.10 .9% FY 1997 "City" Property Tax* $ 515.91 .4% FY 1998 "City" Property Tax $ 512.25 .7% FY 1999 "City" Property Tax* $ 512.25 0.0% FY 2000 "City" Property Tax $ 511.38 .2% FY 2001 "City" Property Tax* $ 511.38 0.0% FY 2002 "City" Property Tax $ 511.38 0.0% FY 2003 "City" Property Tax $ 485.79 - 5.00% DOLLAR INCREASE ~ $ 58.51 - $ 4.05 +$16.98 +$16.71 +$ 5.10 +$ 1.51 +$12.41 -$ 4.54 - $ 2.19 - $ 3.66 -$ 0.00 - $ 0.87 $ 0.00 +$ 0.00 -$ 25.59 PROPOSED FY 2004 "City" Property Tax Average FY 1989-FY 2004 $494.65 + 1.82% +$ 8.86 .16% -$ 1.82 PROJECTION FY 2005 "City" Property Tax* $ 523.72 FY 2006 "City" Property Tax $ 501.28 FY 2007 "City" Property Tax* $ 491.62 FY 2008 "City" Property Tax $ 503.51 *denotes year of State-issued equalization orders + 5.88% - 4.29% - 1.93% + 2.42% -$ 29.07 -$ 22.44 -$ 9.66 +$ 11.89 IMPACT ON COMMERCIAL PROPERTY - EXAMPLE ACTUAL-PAST HISTORY CITY TAX CALCULATION PERCENT INCREASE FY 1989 "City" Property Tax $2,106.42 -15.4% FY 1990 "City" Property Tax $2,086.50 .9% FY 1991 "City" Property Tax* $2,189.48 + 4.9% FY 1992 "City" Property Tax $2,280.18 + 4.1% FY 1993 "City" Property Tax* $2,231.05 - 2.2% FY 1994 "City" Property Tax $2,250.15 + 0.9% FY 1995 "City" Property Tax* $2,439.60 + 8.4% FY 1996 "City" Property Tax $2,439.60 + 0.0% DOLLAR INCREASE -$ 384.00 - $ 2O.OO +$102.98 +$ 90.70 -$ 49.13 +$ 19.10 +$189.45 +$ 0.00 FY 2004 Policy Guidelines Page ]2 FY 1997 FY 1998 FY 1999 FY 2000 FY 2001 FY 2002 FY 2003 *denotes year "City" Property Tax* "City" Property Tax "City" Property Tax* "City" Property Tax "City" Property Tax "City" Property Tax "City" Property Tax* of State-issued equalization PROPOSED FY 2004 "City" Property Tax Average FY 1989-2004 PROJECTION FY 2005 FY 2006 FY 2007 FY 2008 "City" Property Tax* "City" Property Tax "City"PropertyTax* "City~ Property Tax $2,659.36 + 9.0% +$ 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 $3,186.27 + 9.48% +$276.03 o~er $3,285.85 + 3.13% +$ 99.58 + 1.93% +$ 49.71 $3,325.88 + 1.22% +$ 40.03 $3,422.81 + 2.91% +$ 96.94 $3,482.94 + 1.76% +$ 60.12 $3,534.03 + 1.47% +$ 51~09 IMPACT ON INDUSTRIAL PROPERTY - EXAMPLE ACTUAL - PAST HISTORY FY 1989 FY 1990 FY 1991 FY1992 FY 1993 FY 1994 FY 1995 FY 1996 "City" Property Tax "City"PmpertyTax "City"PropertyTax "City" Property Tax "City"PropertyTax "City" PmpertyTax "City"Property Tax "City" Property Tax CITY TAX CALCULATION $5,900.35 $5,844.55 $6,133.00 $6,387.05 $6,249.45 $6,3O2.95 $5,891.05 $5,891.05 PERCENT INCREASE DOLLAR INCREASE -15.4% -$1,074.65 .9% -$ 55.80 + 4.9% +$ 288.45 +4.1% +$ 254.05 -2.2% -$ 137.60 +0.9% +$ 53.50 - 6.5% -$ 411.90 + 0.0% +$ 0.00 ACTUAL - PAST HISTORY (cont.) FY 1997 FY 1998 FY 1999 FY 2000 FY 2001 FY 2002 FY 2003 "City" Property Tax "City"Proper-b/Tax "City" Property Tax "City" P~pertyTax "City" Property Tax "City"PmpertyTax "City"Property Tax CITY TAX CALCULATION PERCENT INCREASE DOLLAR 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 $5,106.00 - 5.10% -$274.40 FY 2004 Policy Guidelines Page 13 PROPOSED FY 2004 "City" Property Tax Average FY 1989-FY 2004 $5,148.16 PROJECTION FY 2005 FY 2006 FY 2007 FY 2008 "City"Pmpe~yTax "City" Prope~yTax "City" Prope~yTax "City'PmpertyTax $5,210.88 $5,362.75 $5,456.95 $5,537.00 History of Increases in Property Tax Askings Fiscal "City" Property Year Tax Askings (000) % Increase FY1998 $10,918,759 -12.0% FY1990 $10,895,321 - 0.2% FY1991 $11,553,468 + 6.0% FY 1992 $12,249,056 + 6.0% FY1993 $12,846,296 + 4.9% FY1994 $13,300,756 + 3.5% FY 1995 $13,715,850 + 3.1% FY 1996 $14,076,320 + 2.6% FY 1997 $14,418,735 + 2.4% FY 1998 $14,837,670' + 2.9% FY1999 $15,332,806' + 3.3% FY2000 $15,285,754 - 0.3% FY2001 $15,574,467 + 1.9% FY 2002 $15,686,579 + .8% FY 2003 $15,771,203 +.55 FY 2004 est. $16,446,271 +4.28 Average FY 1989-2004 + 1.9% *Without TIF Accounting change. Impact on Tax Askings and Average Residential Property + .83% - 1.76% + 1.22% + 2.91% + 1.76% +1.47% Sales Tax initiated +$ 42.16 -$114.18 +$ 62.71 +$151.88 +$ 94.20 +$ 80.05 FY 2004 Policy Guidelines Page ~4 To maintain the current level of service based on the previous assumptions would require the following property tax asking increases: "City" Property Year Tax Askin.qs (000) % Increase FY 2003 $15,771 FY 2004 $16,446 +4.28% FY 2005 $16.970 +3.19% FY 2006 $17.807 +4.93% FY 2007 $18,403 +3.80% FY 2008 $19,130 +3.50% % / $ Impact on Avg. Residential Property* +3.60% / +$17.50 +1.22% / +$6.13 +2.9% / +$14.85 +1.76% / +$9.21 +1.47 / +$7.83 *Assumes no changes in residential rollback factor beyond FY 04. Guideline The recommended guideline is to maintain no tax increase for the average residential property owner, which will require budget cuts and/or revenue increase in the tax supported operations of $295,115, and a change in the use of gaming revenues from one-third operating budget to one-half operating budget. Without the change in gaming revenue split, the reduction and/or revenue increase needed to maintain no property tax increase would be $1,041,406 Note: One percent increase in the tax rate will generate approximately $163,001 and a 1 percent increase in tax asking will generate approximately $157,712. Each one percent increase in property taxes on the average home generates $160,482. 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 FY 2004 Policy Guidelines Page ]5 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 MAINTENANCE Guideline Capital improvement expenditures should concentrate on renovating and maintaining existing facilities to preserve prior community investment. 2'1. 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 percent 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. The FY 2002-03 taxable value for calculating the debt limit is $2,399,324,846, which indicates a total General Obligation debt capacity of $119,966,242. FY 2004 Policy Guidelines Page ]6 Outstanding G.O. debt (including tax increment debt) on June 30, 2003 will be $25,779,757 (21.5 percent) leaving an available debt capacity of $94,186,485 (79.5 percent). As we approach the preparation of the FY 2004-2008 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 2004-2008 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 FY1988-$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 FY 2002-$4,620,514 The FY 2003 budget was based on receiving $4,429,000 in Road Use Tax funds. In FY 2003, 74.3 percent of the Road Use Tax income is in the operating budget. FY 2004 Policy Guidelines Page 17 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 was 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. FY 2004 Policy Guidelines Page ].8 27. SALES TAX Guideline Thirty percent of projected sales tax receipts will be used for: (a) the reduction by at least 75 percent 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 DUBUQUE RACING ASSOCIATION The contract with the Dubuque Racing Association calls for distribution at the end of its fiscal year (November) of 50 percent 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 were allocated beginning with the next fiscal year through the capital improvement process with the highest priority given to reducing the City's annual borrowing. This policy is being changed to allow for use of the proceeds to support the current capital improvement budget (versus the next fiscal years' budget). 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 January 2003 and 2004 projections of operating surplus have been anticipated as resources to support the Fiscal Year 2005 capital improvement projects. This level has been maintained for the Fiscal Year 2005 resource estimate and then has been reduced from 100 percent to 90 percent of the year 2005 projected surplus for FY 2006, 80 percent for FY 2007, and 70 percent for FY 2008 resources. Guideline In Fiscal Year 2004, 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 ClP in the year they are received and will be used to reduce required General Obligation borrowing. FY 2004 Page ]9 29. Policy Guidelines 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 types 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 has historically been one-third of the total gaming tax and lease revenues. It was felt that a fiscally sound policy was to commit two thirds of the gaming revenues to the capital budget, thereby providing a cushion for future years, when gaming revenues could fluctuate with the local economy. Should gaming revenues begin to decline, the capital budget projects would be eliminated, deferred or funded from some other source if they were a high priority. The City has always tried to minimize dependence on gaming revenues in the operating budget. This was maintained over years, while still meeting the property tax guideline of no increase for the average residential property. However, FY 2004 has brought new financing challenges including double-digit inflation in key areas (health costs, liability, and property insurance, electrical costs), a 5 percent increase in Police and Fire Pension costs, decreasing State revenues and reduced sales tax projections. This year's guideline reflects the impact of the changes and recommends a change to a 50/50 split of gaming taxes and rents between the operating and capital budgets. This will result in an additional $746,291 toward property tax relief in Fiscal Year 2004. It is felt that this is still a fiscally responsible policy.