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Fiscal Year 2011 Budget Policy GuidelinesTHE CITY OF Dubuque `~ Dj '~~ ~ AlMmedcaCity ~J 1 I .Masterpiece on the Mississippi 2007 December 14, 2009 TO: The Honorable Mayor and City Council Members FROM: Michael C. Van Milligen, City Manager SUBJECT: Budget and Fiscal Policy Guidelines for Fiscal Year 2011 Budget Director Jennifer Larson is recommending adoption of the Fiscal Year 2011 Budget Policy Guidelines. The guidelines reflect City Council direction given as part of the August 25 and 26, 2009, goal setting sessions. 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 Fiscal Year 2011 budget guidelines call fora 2.47% property tax increase for the average Dubuque homeowner and a property tax increase for commercial (1.72%) and industrial (1.72%) properties. This assumes that the State of Iowa will fund the Homestead Tax Credit at 100%, instead of the 72% funding the State provided in the current fiscal year. A significant cause of this property tax increase is the Municipal Fire and Police Retirement System increase in City contribution. The current payment of 17% of Police and Fire employee salary is mandated by the State to increase to 19.9% of salary, for an additional cost of $360,516 in FY 2011 or a 1.85% property tax increase for the average homeowner. This level of taxation includes funds for recurring improvement package requests and funds for non-recurring improvement package requests. Elimination of the funds for recurring improvement packages would reduce the impact on the average homeowner from 2.47% to 1.44%. The budget guidelines include an increase from 2% to 3% to the franchise fee that is charged on gas and electric bills. The City Council passed a resolution in 1993 which authorized the City to impose a franchise fee not to exceed 3 percent of gross revenue generated from the sale of gas and electric within the City of Dubuque. In September 2003, the City Council approved the establishment of a 2% Utility Franchise Fee. The 1 increase in the franchise fee represents an estimated increase of revenue in FY 2011 of $828,000. Without this franchise fee increase, the property tax increase for the City portion of property taxes paid by the average homeowner would result in a 6.73% increase instead of 2.47%. Recognizing that there is a great deal of uncertainty around the national economy, which has spilled over to negatively affect the local economy, these guidelines call for the continued allocation of $1 million in the uncommitted cash reserve general fund balance which was implemented in FY 2010, which is normally an amount that equals 10% of the general fund, to help weather any economic downturn with a minimal impact on the delivery of services. In addition, it is recommended that an additional $500,000 be added to this one-time reserve in FY 2011 due to the health insurance claims this year exceeding expectations and the possibility of needing to boost the health insurance reserve in FY 2011. Of the $1 million in additional reserves added in the current fiscal year, FY10, $377,562 is recommended to be used for funding of equipment replacements previously identified by departments through the FY 2011 budget process to be delayed and $122,438 is being used for property tax relief. These funds are replenished in the FY11 budget. As previously projected and approved, the monthly Stormwater Fee is recommended to increase from $4.00 per month in FY 2010 to $5.25 per month in FY 2011. The property tax rate will increase 1.72 percent from $9.8577 per thousand dollars of assessed valuation in Fiscal Year 2010 to $10.0274 per thousand dollars of assessed valuation in Fiscal Year 2011. Preliminary citizen participation opportunities will be available. There will be six City Council Work Sessions prior to the adoption of the FY 2011 budget before the state mandated deadline of March 15, 2010. I concur with the recommended Budget and Fiscal Policy Guidelines and respectfully request Mayor and City Council approval. Michael C. Van Milligen MCVM/jml Attachment cc: Barry Lindahl, City Attorney Cindy Steinhauser, Assistant City Manager Jennifer Larson, Budget Director Ken TeKippe, Finance Director THE CITY OF Dubuque DUB E A~~~ ~ ~ Masterpiece an the Mississippi 2007 December 14, 2009 TO: Michael C. Van Milligen, City Manager FROM: Jennifer Larson, Budget Director SUBJECT: Budget and Fiscal Policy Guidelines for Fiscal Year 2011 I am recommending adoption of the Fiscal Year 2011 Budget Policy Guidelines. The guidelines reflect City Council direction given as part of the August 25 and 26, 2009, goal setting sessions. 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 Fiscal Year 2011 budget guidelines call fora 2.47% property tax increase for the average Dubuque homeowner and a property tax increase for commercial (1.72%) and industrial (1.72%) properties. A significant cause of this property tax increase is the Municipal Fire and Police Retirement System increase in City contribution. The current payment of 17% of Police and Fire employee salary is mandated by the State to increase to 19.9% of salary, for an additional cost of $360,516 in FY 2011 or a 1.85% property tax increase for the average homeowner. This level of taxation includes funds for recurring improvement package requests and funds for non-recurring improvement package requests. Elimination of the funds for recurring improvement packages would reduce the impact on the average homeowner from 2.47% to 1.44%. The budget guidelines include an increase from 2% to 3% to the franchise fee that is charged on gas and electric bills. The City Council passed a resolution in 1993 which authorized the City to impose a franchise fee not to exceed 3 percent of gross revenue generated from the sale of gas and electric within the City of Dubuque. The 1 % increase in the franchise fee represents an estimated increase of revenue in FY 2011 of $828,000. Without this franchise fee increase, the property tax increase for the City portion of property taxes paid by the average homeowner would result in a 6.73% increase instead of 2.47%. Recognizing that there is a great deal of uncertainty around the national economy, which has spilled over to negatively affect the local economy, these guidelines call for the continued allocation of $1 million in the uncommitted cash reserve general fund balance which was implemented in FY 2010, which is normally an amount that equals 10% of the general fund, to help weather any economic downturn with a minimal impact on the delivery of services. In addition, it is recommended that an additional $500,000 be added to this one-time reserve in FY 2011 due to the health insurance claims this year exceeding expectations and the possibility of needing to boost the health insurance reserve in FY 2011. Of the $1 million in additional reserves added in the current fiscal year, FY10, $377,562 is recommended to be used for funding of equipment replacements previously identified by departments through the FY 2011 budget process to be delayed and $122,438 is being used for property tax relief. These funds are replenished in the FY11 budget. Some highlights of the document are: - As reported last year, with the opening of the renovated Diamond Jo Casino, there will be a decrease of $12.8 million in operating revenues for the City over five years and a decrease of $2.2 million in the capital improvement budget over five years. This adjustment to the City budget was made through last year's budgeting process. The Diamond Jo expansion was projected to decrease the Mystique gaming market and correspondingly the coin-in by just 21 percent. The Diamond Jo has now been open a full year as a land based casino and the reduction in the Mystique's coin-in has been almost 25 percent (24.85%), instead of just over 21 percent. - Gaming revenues generated from lease payments from the DRA will need to be further adjusted in this budget process by a revised DRA projection of a reduction of lease payments of just over $160,000 per year or $823,000 over the next five years. - The total decrease of gaming lease revenues over five years is $15.8 million, of which eight-five percent ($13.4 million) impacts general property tax relief and fifteen percent ($2.4 million) impacts the city's five year capital improvement program. - Gaming revenues from taxes and the DRA lease (not distributions) is recommended to remain the same between operating and capital budgets at 85% / 15% in FY 2011. - There are many high priority capital improvement projects, which need to be constructed during the FY 2011-2015 period. Many of these projects will be possible without borrowing (i.e., selling bonds) to help finance them. However, debt will be required on several major capital projects, that being the Drainage Basin Master Plan, Intermodal Facility, Airport Improvements, Park Improvements, Sidewalk and Street Improvements, Sanitary Sewer Fund, and Water Fund. Alternative sources of funds will always be evaluated (i.e. State Revolving Loan Funds) to maintain the lowest debt service costs. There is DRA distribution budgeted in this 5-Year Capital Improvement Program budget cycle beginning in FY 2011. The DRA had renegotiated the City lease to provide for no distribution in FY 2009, FY 2010 and FY 2011, however revised projections from the DRA now provide for a distribution in FY 2011 based on their successfully weathering the increased competition from the Diamond Jo by improving their product, cutting costs and increasing net income. This change by the DRA will reduce the negative impact on the City's five year capital improvement budget by over $5 million. All requested projects will not be recommended for funding. - As previously projected and approved, the monthly Stormwater Fee is recommended to increase from $4.00 per month in FY 2010 to $5.25 per month in FY 2011. - The Policy Guidelines include a property tax guideline that provides fora 2.47% increase to the "City" share of property taxes for the average homeowner assuming the Homestead Property Tax Credit is fully funded by the State of Iowa. - The property tax rate will increase 1.72 percent from $9.8577 per thousand dollars of assessed valuation in Fiscal Year 2010 to $10.0274 per thousand dollars of assessed valuation in Fiscal Year 2011. - The "City" share of commercial property taxes will increase 1.72 percent. - The "City" share of industrial property tax will increase 1.72 percent. - The property tax asking will increase 4.40 percent from Fiscal Year 2010. - The following table summarizes the impact of the Policy Guidelines: FY 2011 Im act to Avera a Homeowner +2.47% Im act to Avera a Commercial +1.72% Im act to Avera a Industrial +1.72% FY 2011 Tax Rate 10.0274 / +1.72% FY 2011 Pro a Tax Askin $19,935,231 / +4.40% Preliminary citizen participation opportunities will be available. There will be six City Council Work Sessions prior to the adoption of the FY 2011 budget before the state mandated deadline of March 15, 2010. Attachment cc: Barry Lindahl, City Attorney Cindy Steinhauser, Assistant City Manager Jennifer Larson, Budget Director Ken TeKippe, Finance Director BUDGET AND FISCAL POLICY GUIDELINES FOR FY 2011 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. 1. CITIZEN PARTICIPATION Guideline To encourage citizen participation in the budget process, City Council will hold at least six 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 copy of the recommended budget documents will be made available with the City Clerk and in the government documents section at the Carnegie Stout Public Library. The budget can be reviewed on the City's website at www.cityofdubugue.org and copies of the budget on CD will be available. 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. 2. 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 2011 Policy Guidelines Page 2 3. TWO TYPES OF BUDGET DOCUMENTS TO BE PREPARED Guideline The recommended City operating budget for Fiscal Year 2011 will consist of a Recommended City Council Policy Budget that is a collection of information that has been prepared for department hearings and a Citizens Guide to the Recommended FY 2011 Budget. The Recommended City Council Policy Budget includes the following information for each department: Highlights of Prior Year's Accomplishments and Future Year's Initiatives, a financial summary, a summary of improvement packages requested and recommended, significant line items, capital improvement projects in the current year and those 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. The Citizens Guide section of the Recommended FY 2011 Budget is a composite of tables, financial summaries and explanations, operating and capital budget messages and the adopted City Council Budget Policy Guidelines. Through graphs, charts and tables it presents financial summaries, which provide an overview of the total operating and capital budgets. 4. 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 2011 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 Out of the respect for citizens that must pay taxes, the City must seek to expand resources by continuing to get citizens directly involved in supplementing service delivery capability. Citizens are encouraged to assume tasks previously performed or provided by City government. This may require the City to change the approach to service delivery, such as, providing organizational skills, training, coordinating 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 (through SMG, Inc., the private management company hired by the City as of July 1, 2004), Transit, and Police. FY 2011 Policy Guidelines Page 4 Guideline In the future, the maintenance of City services may well depend on volunteer citizen staffs. In FY 2011, efforts shall continue 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, Transit, Police) or (b) services can be "spun off' to non-government groups and sponsors (i.e., YMCA/YWCA, United Way groups, Recreation Groups). 9. 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" 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. Guideline Salary increases over the amount budgeted for salaries shall be financed from operating budget reductions in the department(s) of the benefiting employees. FY 2011 Policy Guidelines Page 5 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, Stormwater 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. FY 2011 will be the third fiscal year that the Stormwater User Fund is fully funded by stormwater use fees. The General Fund will continue to provide funding for the stormwater fee subsidies which provide a 50% subsidy for the stormwater fee charged to property tax exempt properties, low-to-moderate income residents, and residential farms. 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, Stormwater 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 financing for future capital improvement projects. FY 2011 Policy Guidelines Page 6 In FY 2011, the Stormwater User Fund will be self-supporting. The schedule of rate increases to make this guideline is proposed as follows: FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 Current Rates $4.00 $5.25 $5.60 $6.85 $6.90 $7.00 Proposed Rates $4.00 $5.25 $5.60 $6.85 $6.90 $7.00 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* McAleece Concessions Children's Activities Therapeutic Recreation Recreation Classes Swimming* Golf* Surplus to Golf Devel' Fund Park Division Library Department eXCi' Gift Trusts Airport Department w~abatea debt Building Services Division Inspections Planning Services Department Health Services Department Food/Environmental Insp. Animal Control*** Housing Services Department General Housing Inspection Federal Building Maint. FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 ACTUAL ACTUAL ACTUAL BUDGETED RECOM'D PERCENT PERCENT PERCENT PERCENT PERCENT 61.8** 61.4 60.1 59.6 59.5 146.9** 151.9 157.9 162.7 153.2 53.2 45.9 46.8 45.7 43.2 13.3 23.4 14.8 20.3 18.1 32.1 39.0 23.6 26.0 25.3 69.6 51.0 56.7 62.8 61.4 101.6 102.3 112.2 100.5 101.0 12.7 10.6 12.4 11.1 11.8 14.5 9.3 10.6 3.7 5.0 81.7 86.3 84.8 83.3 80.0 84.5 90.7 73.0 101.4 77.9 16.0 13.5 30.6 33.3 33.5 49.5 66.6 69.8 69.7 67.1 61.3 126.3 118.8 54.1 53.3 78.5 72.6 62.5 58.8 57.0 91.4 124.3 86.2 83.4 100.0 '` Includes an amount to help cover indirect costs (administration). *'` McAleece concessions moved to a separate activity in FY 2007. '`*'` Humane Society contract moved to the Purchase of Service activity in FY 2008. FY 2011 Policy Guidelines Page 7 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. 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 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 revenue sources are beyond the City's control and therefore uncertain. In the case of Dubuque, 10% represents approximately $4,017,317. 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 $4,017,317 for FY 2011. However, recognizing the current economic uncertainties for FY 2010 and FY 2011 it is recommended that the one-time General Fund operating reserve of one million dollars that was implemented FY 2011 Policy Guidelines Page 8 in FY 2010 be carried over into FY 2011. In addition, it is recommended that an additional $500,000 be added to this one-time reserve in FY 2011 due to the health insurance claims this year exceeding expectations and the possibility of needing to boost the health insurance reserve in FY 2011. If these funds are not needed in FY 2010 or FY 2011, they would be available in FY 2012 for a capital project, or for an important economic development initiative. 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 even starting 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. 16. USE OF "UNENCUMBERED FUND 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 2009-10 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 2011 through FY 2015. 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 FY 2011 Policy Guidelines Page 9 for FY 2010-11 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 a. Unencumbered funds or cash balances of $200,000 will be available in FY 2011 and each succeeding year to support the operating budget. b. Sales tax funds are set by resolution to be used 50 percent in the General Fund for property tax relief. Sales tax projections for FY 2011 are projected to increase 2.0 percent over FY 2010 actual receipts, and then increase at an annual rate of 2.0 percent per year. c. Hotel/motel tax receipts are projected to increase 2 percent over FY 2010 budget, and then increase at an annual rate of 3 percent per year. d. State Transit operating assistance is anticipated to decrease 10 percent from FY 2010 budget. Federal Transportation Administration (FTA) is anticipated to increase 3.1 % from FY 2010 budget. In addition, the City Council approved wrapping Transit fixed route and mini- buses with advertisements. This would eliminate the four advertisements currently on each fixed route bus which generates $12,684 annually. The advertisement wraps would also eliminate the need to repaint the buses every ten years. This is projected to increase operating revenue by a net $75,000 in FY 2011 and $100,000 annually in FY 2012 and beyond. e. Miscellaneous revenue, excluding state shared revenues, has been estimated at 2 percent growth per year over budgeted FY 2010. f. Gaming revenues generated from lease payments from the DRA have been decreased by $139,861 per year based on revised projections from the DRA. In addition, in FY 2009, the Diamond Jo Casino paid a 50¢ patron fee. After learning that the facility in Clinton stopped paying the patron fee after they became land based, the FY 2011 projections assumed that after the November 2010 gaming referendum the Diamond Jo would stop paying. The 50¢ per patron tax previously received from the Diamond Jo is now replaced by a $500,000 fixed payment based on their revised parking agreement. The riverboat related tax on bets has also been increased 2.5 percent ($11,015) in FY 2011. FY 2011 Policy Guidelines Page 10 h. Gaming revenues from taxes and the DRA lease (not distributions) remains unchanged from the FY 2009 split of 85% / 15% between operating and capital budgets. The operating portion of the split includes the debt service required on the 2002 general obligation bonds for the America's River Project that was previously considered as part of the capital portion of the DRA lease. Debt obligations are considered a continuing annual expense and are more accurately reflected as part of the operating portion of the DRA lease. The Diamond Jo Patio lease ($25,000) and the Diamond Jo parking privileges ($503,927 in FY 2011 increased 3.3 percent thereafter) have not been included in the split with gaming revenues. This revenue is allocated to the operating budget. The residential rollback factor will increase from 45.589 percent to 46.909 percent or a 2.90 percent increase for FY 2011. The rollback has been estimated to increase 4% each year from Fiscal Years 2012 thru 2015 and a 10-year average for equalization orders was used for Fiscal Years 2012 and beyond. The increase in the residential rollback factor increases the value that each residence is taxed on. This increased taxable value for the average homeowner ($130,367 assessed value) results in more taxes to be paid per $1,000 of assessed value. In an effort to keep property taxes low to the average homeowner, the City calculates the property tax impact to the average residential property based on the residential rollback factor and property tax rate. In a year that the residential rollback factor increases, the City recommends a lower property tax rate than what would be recommended had the rollback factor remained the same. Commercial and Industrial taxpayers normally are taxed at 100 percent of assessed value and benefit from the lower tax rate that is recommended by the City when the residential rollback factor increases. FY 2011 reflects this increased assessed value for the average homeowner. Assessed valuations were increased 2 percent per year beyond FY 2011. k. Gas and electric franchise fees have been projected to increase 4.0 percent over FY09 actual collections based on four years trend data. Also, Alliant has applied fora 17% increase and Black Hills Energy fora 7.6% increase with the State Utility Board and this budget assumes that they will each get 50% of their requested increase. The franchise fee increases at an annual rate of 2.5 percent per year from FY 2013 thru FY 2015. These estimates are based on increasing the franchise fee charged on gas and electric bills from 2% to 3% in FY 2011. For purposes of budget projections only, it is assumed that City property taxes will continue to increase at a rate necessary to meet additional requirements over resources beyond FY 2011, with the gaming revenue (from taxes and the DRA lease) split at 85% operating budget and 15% capital budget based on note "g" above. FY 2011 Policy Guidelines Page 1 1 m. FY 2011 reflects the third year that payment in lieu of taxes is charged to the Water and Water Pollution Control funds for Police and Fire Protection. In FY 2011, the Water Pollution Control fund is charged 0.43% of building value and the Water fund is charged 0.62% of building value, which increased 5.84%, for payment in lieu of taxes for Police and Fire Protection. This revenue is reflected in the General Fund and is used for general property tax relief. n. FY 2011 anticipates the City receiving an Energy Efficiency and Conservation Block Grant to fund the Sustainability Community Coordinator position ($77,339) and the remainder of the grant to fund a portion of the annual Growing Sustainable Conference and printing of sustainability materials. The current federal allocation was for FY 2010, so congressional action to continue this revenue source would be needed. o. Industrial riverfront property lease revenue is projected to increase by $100,000 in FY 2011. Assumptions -Requirements a. A wage increase is reflected in the projections for FY 2011 of 3.5 percent. b. The Municipal Fire and Police Retirement System of Iowa Board of Trustees have increased the City contribution for Police and Fire retirement from 17.00 percent to 19.90 percent (+17.06% or an increase of $360,516 in General Fund). Also, the Iowa Public Employee Retirement System (IPERS) increased the City contribution from 6.65 percent to 6.95 percent (+4.5% or an increase of $36,782 in General Fund) and the employee contribution from 4.30% to 4.50% (which did not affect the City's portion of the budget). The IPERS rate is anticipated to increase 0.3 percent each succeeding year according to IPERS. c. The City portion of health insurance expense will increase from $665 per month per contract to $725 per month per contract (based on 534 contracts) which is a 9 percent increase to fund health fund reserves. Estimates for FY 11-15 have been increased by 6.5 percent per year. d. General operating supplies and services are estimated to increase 2.5 percent over actual in FY 2009. A 2.5 percent increase is estimated in succeeding years. e. Electrical energy expense is estimated to increase 5 percent over FY 2009 actual expense, then 2.5 percent per year beyond. f. Natural gas expense is estimated to have no increase over FY 2009 actual, then 2.5 percent per year beyond. There is no degree-day adjustment this year. FY 2011 Policy Guidelines Page 12 g. The Convention and Visitors Bureau contract will continue at 50 percent of actual hotel/motel tax receipts, less a $35,000 loan repayment. h. Equipment costs for FY 2011 are estimated to decrease 23.4 percent under FY 2010 budget, then increase 5 percent per year beyond. Of the FY 2011 equipment costs, $377,562 is funded by the one-time General Fund operating reserve that was implemented in FY 2010. Debt service is estimated based on the tax-supported unabated General Obligation bond sale for fire truck and ambulance replacements in FY 2010. j. Unemployment expense in the General Fund increased from $52,356 in FY 2010 to $58,478 based on past years actual experience. k. Motor vehicle fuel, and low and high sulfur diesel fuel expense based on FY 2009 actual, then 2.5 percent per year beyond. Postage rates for FY 2011 are estimated to have no increase over FY 2010 actual expense. A 5.0 percent increase is estimated in succeeding years. m. Vehicle maintenance expense for FY 2011 is estimated to decrease 10 percent under FY 2009 actual expense due to the Garage Overhead Service Rate decreasing from $53.40 per hour in FY 2009 to $48.40 in FY 2011, then 2.5 percent per year beyond. n. Insurance costs are estimated to change as follows: Workers Compensation is increasing 0.7 percent, General Liability is decreasing 0.26 percent, Property insurance is decreasing 36.94 percent due to the City's insurance agent going out for bid and receiving a lower contract price with a new carrier, and Boiler and Machinery insurance is increasing 4.68 percent. FY 2011 Policy Guidelines Page 13 IMPACT ON AVERAGE RESIDENTIAL PROPERTY -EXAMPLE CITY TAX PERCENT DOLLAR ACTUAL -PAST HISTORY CALCULATION CHANGE CHANGE FY 1989 "City" Property Tax $ 453.99 - 11.40% - $ 58.39 FY 1990 "City" Property Tax $ 449.94 - 0.89% - $ 4.04 FY 1991 "City" Property Tax* $ 466.92 + 3.77% +$ 16.98 FY 1992 "City" Property Tax $ 483.63 + 3.58% +$ 16.71 FY 1993 "City" Property Tax* $ 508.73 + 5.19% +$ 25.10 FY 1994 "City" Property Tax $ 510.40 + 0.30% +$ 1.51 FY 1995 "City" Property Tax* $ 522.65 + 2.43% +$ 12.41 FY 1996 "City" Property Tax $ 518.10 - 0.87% - $ 4.54 FY 1997 "City" Property Tax* $ 515.91 - 0.42% - $ 2.19 FY 1998 "City" Property Tax $ 512.25 - 0.71 % - $ 3.66 FY 1999 "City" Property Tax* $ 512.25 - 0.00% $ 0.00 FY 2000 "City" Property Tax $ 511.38 - 0.17% - $ 0.87 FY 2001 "City" Property Tax $ 511.38 0.00% $ 0.00 FY 2002 "City" Property Tax $ 511.38 0.00% $ 0.00 FY 2003 "City" Property Tax* $ 485.79 - 5.00% -$ 25.58 FY 2004 "City" Property Tax $ 485.79 0.00% $ 0.00 FY 2004 With Homestead Adj. $ 493.26 + 1.54% +$ 7.46 FY 2005 "City" Property Tax* $ 485.93 + 0.03% +$ 0.14 FY 2005 With Homestead Adj.* $ 495.21 + 0.40% +$ 1.95 FY 2006 "City" Property Taxi>> $ 494.27 + 1.72% +$ 8.34 FY 2006 With Homestead Adj. ~~> $ 504.62 + 1.90% +$ 9.41 FY 2007 "City" Property Tax*~z> $ 485.79 - 1.72% -$ 8.48 FY 2007 With Homestead Adj.* $ 496.93 - 1.52% -$ 7.69 FY 2008 "City" Property Tax $ 496.93 0.00% $ 0.00 FY 2008 With Homestead Adj. $ 510.45 + 2.72% +$13.52 FY 2009 "City" Property Tax $ 524.53 + 2.76% +$14.08 FY 2009 With Homestead Adj. ~s> $ 538.07 + 5.41 % +$27.62 FY 2010 "City" Property Tax $ 538.07 + 0.00% +$ 0.00 FY 2010 With Homestead Adj. ~s~ $ 550.97 + 2.40% +$12.90 PROPOSED FY 2011 "City" Property Tax*~a> $564.59 / ($578.54)" +2.47% / (+5.00%)^ +$13.62 / (+$27.57)^ Average FY 1989-FY 2011 with Homestead Adj. + 0.59% + $ 2.88 Average FY 1989 -FY 2011 without Homestead Adj. + 0.05% + $ 0.05 PROJECTION ** FY 2012 "City" Property Tax* $ 645.35 / ($660.33)" + 14.30% / (+14.14%)^ +$ 80.76 / (+$81.79)" FY 2013 "City" Property Tax $ 677.97 / ($693.02)^ + 5.05% / (+ 4.95%)^ +$ 32.62 / (+$32.69)^ FY 2014 "City" Property Tax* $ 747.82 / ($763.71)" + 10.30% / (+10.20%)^ +$ 69.85 / (+$70.69)^ FY 2015 "City" Property Tax $ 779.21 / (.$795.06)^ + 4.20% / (+ 4.10%)" +$ 31.39 / (+$31.35)^ * Denotes year of State-issued equalization orders. FY 2011 Policy Guidelines Page 14 ^ Impact to the average homeowner if the State funds the Homestead Property Tax Credit at 72%. (1) The FY 2006 property tax calculation takes into account the 6.2% valuation increase for the average residential homeowner as determined by the reappraisal. (2) Offsets the impact of the State reduced Homestead Property Tax Credit in FY 2005 & 2006. (3) The City adopted a budget in FY 2009 and 2010 that provided no increase to the average homeowner. The State of Iowa under funded the Homestead Property Tax Credit in both years costing the average homeowner additional $27.62 in FY 2009 and $12.90 in FY 2010. This provided no additional revenues to the City, as this money would have come to the City from the State if they appropriated the proper amount of funds. (4) Assumes State of Iowa funds 100% of Homestead Property Tax Credit in FY 2011 and beyond. Homestead Property Tax Credit History 2002-2003 2003-2004 ~~ 2004-2005 2005-2006 2006-2007 a~ 2007-2008 2008-2009 2009-2010 ~` 2010-2011 State of Iowa Funded 100% of the Homestead Property Tax Credit State of Iowa Funded 85% of the Homestead Property Tax Credit State of Iowa Funded 81 % of the Homestead Property Tax Credit State of Iowa Funded 78% of the Homestead Property Tax Credit State of Iowa Funded 77% of the Homestead Property Tax Credit State of Iowa Funded 73% of the Homestead Property Tax Credit State of Iowa Funded 72% of the Homestead Property Tax Credit State of Iowa Funded 72% of the Homestead Property Tax Credit Assumed Homestead will be 100% Funded by the State of Iowa The Homestead Property Tax Credit was established by the state legislature to reduce the amount of property t collected. The intent of the credit was to be a form of tax relief and provide an incentive for home ownership. The State Homestead Property Tax Credit works by discounting the tax collected on the first $4,850 of a property's taxable value. This has no impact on what the City receives from property tax collections, but provide tax relief for the average homeowner. FY 2011 Policy Guidelines Page 15 Beginning FY 2004, the State of Iowa did not fully fund the State Homestead Property Tax Credit resulting in the average homeowner paying the unfunded portion. Again this has no impact on what the City receives, however as a result has caused the average homeowner to pay more taxes. In the FY 2011 budget, the City will not offset the prior year unfunded portion of the Homestead Tax Credit. FY 2011 reflects a 2.47% increase in property taxes paid by the average homeowner, however if the State continuE to not fully fund the Homestead Property Tax Credit, this will increase the property taxes paid. This will not provide any additional revenues to the City, however. IMPACT ON COMMERCIAL PROPERTY -EXAMPLE CITY TAX PERCENT DOLLAR ACTUAL -PAST HISTORY CALCULATION CHANGE CHANGE FY 1989 "City" Property Tax $2,106.42 -15.43% -$ 384.19 FY 1990 "City" Property Tax $2,086.50 - .95% - $ 19.92 FY 1991 "City" Property Tax* $2,189.48 + 4.94% +$ 102.98 FY 1992 "City" Property Tax $2,280.18 + 4.14% +$ 90.70 FY 1993 "City" Property Tax* $2,231.05 - 2.15% -$ 49.13 FY 1994 "City" Property Tax $2,250.15 + 0.86% +$ 19.10 FY 1995 "City" Property Tax* $2,439.60 + 8.42% +$ 189.45 FY 1996 "City" Property Tax $2,439.60 + 0.00% +$ 0.00 FY 1997 "City" Property Tax* $2,659.36 + 9.01 % +$ 219.76 FY 1998 "City" Property Tax $2,738.43 + 2.97% +$ 79.07 FY 1999 "City" Property Tax* $2,952.03 + 7.80% +$ 213.60 FY 2000 "City" Property Tax $2,934.21 - 0.60% -$ 17.82 FY 2001 "City" Property Tax $2,993.00 + 2.01 % +$ 58.86 FY 2002 "City" Property Tax $2,910.25 - 2.77% -$ 82.84 FY 2003 "City" Property Tax* $3,186.27 + 9.48% +$ 276.03 FY 2004 "City" Property Tax $3,278.41 + 2.89% +$ 92.15 FY 2005 "City" Property Tax* $3,349.90 + 2.18% +$ 71.48 FY 2006 "City" Property Tax ~~~ $3,152.52 - 5.89% -$ 197.38 FY 2007 "City" Property Tax* $3,538.03 +12.23% +$ 385.50 FY 2008 "City" Property Tax $3,668.64 + 4.26% +$ 150.62 FY 2009 "City" Property Tax* $3,524.48 - 3.63% -$ 133.94 FY 2010 "City" Property Tax $3,524.48 - 0.85% -$ 30.23 PROPOSED FY 2011 "City" Property Tax $3,585.16 + 1.72% +$ 60.68 Average FY 1990-2010 + 1.77% +$ 47.59 PROJECTION ** FY 2012 "City" Property Tax* $3,927.38 + 9.55% +$ 342.22 FY 2013 "City" Property Tax $3,954.64 + .69% +$ 27.27 FY 2014 "City" Property Tax* $4,181.60 + 5.74% ~ + $ 226.95 FY 2015 "City" Property Tax $4,177.32 - 0.10% - $ 4.27 * Denotes year of State-issued equalization orders (1) The FY 2006 property tax calculation takes into account the 3% valuation decrease for commercial property as determined by the reappraisal. FY 2011 Policy Guidelines Page 16 IMPACT ON INDUSTRIAL PROPERTY -EXAMPLE CITY TAX PERCENT DOLLAR ACTUAL -PAST HISTORY CALCULATION CHANGE CHANGE FY 1989 "City" Property Tax $5,900.35 -15.40% -$1 ,074.65 FY 1990 "City" Property Tax $5,844.55 - .90% -$ 55.80 FY 1991 "City" Property Tax $6,133.00 + 4.90% +$ 288.45 FY 1992 "City" Property Tax $6,387.05 + 4.10% +$ 254.05 FY 1993 "City" Property Tax $6,249.45 - 2.20% -$ 137.60 FY 1994 "City" Property Tax $6,302.95 + 0.90% +$ 53.50 FY 1995 "City" Property Tax $5,891.05 - 6.50% -$ 411.90 FY 1996 "City" Property Tax $5,891.05 + 0.00% +$ 0.00 FY 1997 "City" Property Tax $5,690.75 - 3.40% -$ 200.30 FY 1998 "City" Property Tax $5,700.56 + .17% +$ 9.81 FY 1999 "City" Property Tax $5,536.70 - 2.87% -$ 163.86 FY 2000 "City" Property Tax $5,358.00 - 3.23% -$ 178.70 FY 2001 "City" Property Tax $5,533.00 + 3.28% +$ 175.55 FY 2002 "City" Property Tax $5,380.42 - 2.77% -$ 153.13 FY 2003 "City" Property Tax $5,106.00 - 5.10% -$ 274.40 FY 2004 "City" Property Tax $5,136.50 + .60% +$ 30.50 FY 2005 "City" Property Tax $5,036.00 - 1.96% -$ 100.50 FY 2006 "City" Property Tax~~~ $5,814.61 +15.46% +$ 778.61 FY 2007 "City" Property Tax $5,983.21 + 2.90% +$ 168.60 FY 2008 "City" Property Tax $6,184.95 + 3.37% +$ 201.74 FY 2009 "City" Property Tax $5,976.44 - 3.37% -$ 208.51 FY 2010 "City" Property Tax $5,909.69 - 1.12% -$ 66.75 PROPOSED FY 2011 "City" Property Tax $6,011.44 + 1.72% +$ 101.75 Average FY 1990-FY 2010 - 0.50% -$ 41.89 PROJECTION** FY 2012 "City" Property Tax $6,585.25 +9.55% +$ 573.81 FY 2013 "City" Property Tax $6,630.97 + 0.69% +$ 45.72 FY 2014 "City" Property Tax $7,011.51 +5.74% +$ 380.54 FY 2015 "City" Property Tax $7,004.35 -0.10% -$ 7.16 (1)The FY 2006 property tax calculation takes into account the 19.9% valuation increase for industrial property determined by the reappraisal. FY 2011 Policy Guidelines Page 17 History of Increases in Property Tax Askings Change Fiscal "City" Property in Tax Present Impact on Year Tax Askings Askings Homeowner** FY 1989 $10,918,759 -12.0% Sales Tax -11.4% initiated FY 1990 $10,895,321 - 0.2% - 0.9% FY 1991 $11,553,468 + 6.0% + 3.8% FY 1992 $12,249,056 + 6.0% + 3.6% FY 1993 $12,846,296 + 4.9% + 5.0% FY 1994 $13,300,756 + 3.5% + 0.3% FY 1995 $13,715,850 + 3.1 % + 2.4% FY 1996 $14,076,320 + 2.6% - 0.9% FY 1997 $14,418,735 + 2.4% - 0.4% FY 1998 $14,837,670* + 2.9% - 0.7% FY 1999 $15,332,806* + 3.3% 0.0% FY 2000 $15,285,754 - 0.3% - 0.2% FY 2001 $15,574,467 + 1.9% 0.0% FY 2002 $15,686,579 + 0.7% 0.0% FY 2003 $15,771,203 + 0.5% - 5.0% FY 2004 $16,171,540 + 2.5% 0.0% FY 2005 $16,372,735 + 1.2% 0.0% FY 2006 $16,192,215 - 1.1% + 1.7% FY 2007 $17,179,994 + 6.1% - 1.7% FY 2008 $18,184,037 + 5.8% 0.0% FY 2009 $18,736,759 + 3.0% +2.8% FY 2010 $19,095,444 + 1.9% 0.0% FY 2011 $19,935,231 + 4.4% +2.5%/ (+5.00%)^ Estimate Average FY 1989-2011 + 2.13% +0.04% "Without TIF Accounting change. "*Does not reflect State unfunded portion of Homestead Credit. ^ Impact to the average homeowner if the State funds the Homestead Property Tax Credit at 72% FY 2011 Policy Guidelines Page 18 Impact on Tax Askings and Average Residential Property To maintain the current level of service based on the previous assumptions would require the following property tax asking increases: "City" Property % / $ Impact on Avg. Year Tax Askings (000) % Increase Residential Property* FY 2010 $19,095 FY 2011 $19,935 + 4.40% +2.47% / +$ 13.62 FY 2012 $22,732 + 14.03% +14.30% / +$80.76 FY 2013 $24,192 + 6.42% +5.05% / +$32.62 FY 2014 $26,656 + 10.18% +10.30% / +$69.85 FY 2015 $28,191 + 5.76% +4.20% / +$31.39 Guideline The recommended guideline is a 2.47 percent increase for the average residential property owner assuming the Homestead Property Tax Credit is fully funded, and the percent of annual gaming revenues going into the operating budget at 85 percent. Note: One percent increase in the tax rate will generate approximately $195,847. 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 projects are to be added and/or deleted from the CIP, the changes shall be made only after approval by the City Council. FY 2011 Policy Guidelines Page 19 20. RENOVATION AND MAINTENANCE 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 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 2009-10 assessable values for calculating the debt limit is $3,239,036,697, which indicates a total General Obligation debt capacity of $167,243,676. Outstanding G.O. debt (including tax increment debt) on June 30, 2010 will be $94,014,545 (56.20 percent) leaving an available debt capacity of $73,229,131 (43.79 percent). It should be noted that most of the City of Dubuque's outstanding debt is not paid with property taxes (except TIF), but is abated from other revenues except for one issuance for the replacement of a Fire Pumper truck in the amount of $1,410,000 with debt service of $96,070 in FY 2011. FY 2011 Policy Guidelines Page 20 As we approach the preparation of the FY 2011-2015 Capital Improvement Program (CIP) the problem is not the city's 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 2010-2014 period. Many of these projects will be possible without borrowing the money (i.e., selling bonds) to help finance them. However, debt may be required on some capital projects, that being the Drainage Basin Master Plan, Intermodal Facility, Airport Improvements, Park Improvements, Sidewalk and Street Improvements, Motor Grader Replacement, Sanitary Sewer Fund, and Water Fund. In determining whether a project should be financed in total or in part from bond funds the City Council must consider and balance: (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. Alternative sources of funds should always be evaluated (i.e. State Revolving Loan Funds) to maintain the lowest debt service costs. All requested projects will not be recommended for funding. The following table shows the schedule of GO debt for CIP projects in FY 2011: Project FY 2011 Intermodal Facility (TIF Abated) 1,472,900 Airport Improvements (Sales Tax Abated) 218,535 Park Improvements (Sales Tax Abated) 300,000 Fiber Optic Conduit -Paving Projects (Sales Tax Abated) 78,000 Public Works Equipment Replacement (RUT Abated) 519,640 Streetlight Replacement -City Owned (Sales Tax Abated) 40,000 Sidewalk Curb Catch Basin (Sales Tax Abated) 47,000 Sidewalk Program -City Owned (Sales Tax Abated) 105,000 Total 2,781,075 FY 2011 Policy Guidelines Page 21 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 - $4,628,072 FY 2002 - $4,620,514 FY 2003 - $4,696,399 FY 2004 - $4,806,295 FY 2005 - $4,798,667 FY 2006 - $4,831,935 FY 2007 - $4,809,990 FY 2008 - $4,944,336 FY 2009 - $4,788,633 The FY 2010 budget was based on receiving $5,058,595 in Road Use Tax funds. In FY 2010, 97.2 percent of the Road Use Tax income is in the operating budget. Guideline It is preferable to shift Road Use Tax funds to the capital budget for street maintenance and repair to reduce the need to borrow funds for routine street maintenance and improvements. This shift cannot occur until such time as there are 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 the economic base. Financing these efforts and programs should continue to be a high priority. FY 2011 Policy Guidelines Page ZZ 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, particularly owner occupied, within the City's corporate limits for all citizens, particularly for people of low and moderate income. 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, December 31St, of 50 percent of its net cash operating funds to the City of Dubuque. In mid-January, the City receives payment of proceeds to be distributed. These proceeds are then allocated for capital improvements, with the highest priority given to reducing the City's annual borrowing. 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, when a distribution is projected. The reduction in DRA Distribution will require some General Fund supported debt issuances to support the Five Year Capital Improvement Program budget. Guideline In Fiscal Year 2011, the City does anticipate distribution of net cash proceeds for use in the Capital Improvement Program based on revised DRA projections. In Fiscal Years where there is anticipated distribution of a significant amount of net cash FY 2011 Policy Guidelines Page 23 proceeds, these amounts will be budgeted in the Five Year CIP in the year they are received and will be used to reduce required General Obligation borrowing. The three out-years will be discounted by 5 percent, 10 percent, and 15 percent respectively. 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 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 On April 1, 2004, a new lease took effect with the Dubuque Racing Association for lease of the Dubuque Greyhound Park and Casino. This new lease was negotiated after the FY 2005 budget was approved and raised the lease payment from '/Z% of coin-in to 1 % of coin-in. This new lease and the expansion of gaming at Dubuque Greyhound Park and Casino, from 600 gaming positions to 1,000 gaming positions, effective August 1, 2005, provided additional revenues to the City of Dubuque. In FY 2009 the split was 76% operating and 24% capital. In FY 2010, the budget was changed to reflect the actual split of 85% operating and 15% capital. The operating portion of the split now includes the debt service required on the 2002 general obligation bonds for the America's River Project that was previously considered as part of the capital portion of the DRA lease. Debt obligations are considered a continuing annual expense and are more accurately reflected as part of the operating portion of the DRA lease. The Diamond Jo expanded to a land based barge casino facility and increased to 1,100 slots on December 1, 2008. This expansion was projected to decrease the Mystique gaming market and correspondingly the coin-in by just over 21 percent. Based on the projected market share loss, the City will not expect to receive a distribution of cash flows from the Dubuque Racing Association (DRA) in Fiscal Year 2010. Revised distribution projections from the DRA now show the distribution restarting in FY 2011 instead of FY 2012. The DRA has decreased the distributions an additional $1,039,725 over the next five years which will impact the City's five-year capital improvement program. FY 2011 Policy Guidelines Page Z4 The reduction in the DRA's market share also impacts the City's lease payment from the DRA. The current lease requires the DRA to pay the City 1 percent of coin in from slot machines and 4.8 percent of table drop from table games. In FY 2010, it was estimated that the City would lose $9.5 million through FY 2014 in lease payments based on what was originally projected to be received compared to the revised projections. Eighty-five percent of the lease payments are used for general property tax relief and fifteen percent is used to fund the City's five year capital improvement program. The reduction of the lease payment over the next five years was estimated to impact the operating budget by $8.1 million and the capital improvement budget by $1.4 million. The reduction in coin-in has been almost 25% (24.85%) instead of just over 21%. In FY 2010, Gaming revenues generated from lease payments from the DRA were further adjusted by a revised DRA projection of a reduction of lease payments of just over one million dollars per year or $5,500,000 over the next five years. In FY 2011, Gaming revenues generated from lease payments from the DRA have been decreased by an additional $164,542 per year based on revised projections from the DRA. The total decrease of gaming lease revenue over five years is $15.8 million, of which eighty-five percent ($13.4 million) impacts general property tax relief and fifteen percent ($2.4 million) impacts the City's five year capital improvement program. In addition, in FY 2009, the Diamond Jo Casino paid a 50¢ patron fee. After learning that the facility in Clinton stopped paying the patron fee after they became land based, the FY 2011 projections assumed that after the November 2010 gaming referendum the Diamond Jo would stop paying. The 50¢ per patron tax previously received from the Diamond Jo is now replaced by a $500,000 fixed payment based on their revised parking agreement. The riverboat related tax on bets has also been increased 2.5 percent ($11,015) in FY 2011.