FY 05 Budget TransmittalMEMORANDUM
Januaw 12,2004
TO:
The Honorable Mayor and City Council Members
FROM: Michael C. Van Milligen, City Manager
SUBJECT: Fiscal Year 2005 Budget Transmittal
For the second straight year, the City of Dubuque is contending with serious budget
concerns. While the local economy has remained stable, the state and national
financial situation fluctuates with uncertainty. As a result, the City of Dubuque is facing
some budgeting difficulties principally passed along by the State of Iowa. Funding cuts,
combined with new federal and state mandates, have contributed to another challenging
budget. To insure funding is being spent in the most efficient manner, the entire City
budget has been examined and evaluated. Every opportunity to reduce expense and
increase revenue was considered. This budget carefully balances the need for quality,
dependable City services with the obligation to be fiscally responsible. Although
demanding, completing the budget was made less difficult by the proactive actions of
the City Council. By investing in Dubuque's future through neighborhood reinvestment,
downtown redevelopment, riverfront development, creation of industrial parks,
community beautification, and utility modernization and extensions, the negative impact
of outside influences has been mitigated for the coming fiscal year.
Despite the difficulties of the Fiscal Year 2005 budget, the City will be able to offer the
tenth consecutive year without a property tax increase for the average homeowner, with
five of those years actually resulting in a property tax decrease. It also will not change
our determination to implement the Vision, Goals and Priorities, as established by the
City Council.
Our Vision for the Community
A City of...
History
Beauty
Opportunities
Excitement
Masterpiece on the Mississippi
The Honorable Mayorand Ci~ Council Members
January 14,2004
Page 2
City Council Goals
In five years the Council wants the following for the community:
< Improved Connectivity: Transportation and Telecommunications
< Planned and Managed Growth
< Diverse, Strong Dubuque Economy
< Riverfront Development
< Partnering for a Better Dubuque
City Council Priorities (2003-2005)
Top Priority:
Southwest Arterial: Funding, Land Acquisition
Stormwater Projects:
Carter Road Detention Basin
32nd Street Detention Basin: Expansion
Bee Branch Creek Restoration Project
Street Program: Funding, Improvement Projects
Zoning Ordinance Update
Erosion Policy and Strategy
High Priority:
Telecommunications Strategy and Cable Franchise Renewal
Annexation: Policy and Implementation
Riverfront Development Projects
Federal Strategy
Five Flags: Evaluation
Budget: Service, Inventory, Cost of Services, Tax Rate
Continued Priority (2002-2004)
Downtown Master Plan
Management Priorities
Julien Dubuque Bridge
River Valley Initiative
State Grants
Industrial Park Development: Next Phase
Riverfront Master Plan: Implementation
Star Brewery Lease
Adams Company: Acquisition, Relocation
Capital Improvement Program: New and Maintenance
Maior
Proiects (2003-2005)
nd
Stormwater Projects: Carter Road, 32 Street Detention Acquisition
U.S. 20 Improvement Project
The Honomble Mayorand City Council Membem
January 14,2004
Page 3
As the City works to implement these, there are funding issues that are contributing to a
budget shortfall that must first be made up:
Expense Changes
< Police and Fire Retirement expense has been increased more than $400,000
based on notification from the State of Iowa of an anticipated change in rates
from the current rate of 20.48% to 24.92% (a 21.7% increase) for FY 2005. This
is in addition to the increase from 17% to 20.48% (a 20.5% increase) received in
FY 2004.
< Estimated energy costs for the Grand River Center ($123,000 for the City's 50%)
and property insurance of the center ($24,200).
Health and dental insurance expenses have increased by 46% in Fiscal Year
2004 ($1,591,805), and Fiscal Year 2005 expenses are projected to increase by
12% ($605,041). The proposed budget offsets this increase by realizing a
$158,072 savings from health care plan modifications.
Revenue Changes
< Interest earnings decreased from $800,000 to $500,000.
< Franchise fees for 12 months versus eight months in current year (+$361,654),
which replaces non-recurring CIP cuts used last year to balance the budget.
The State of Iowa has notified cities that the Fiscal Year 2005 budget will include
the elimination of the Bank Franchise Tax. This translates into a $145,000
reduction for the City. The Iowa League of Cities advises cities to incorporate an
anticipated additional cut of approximately 2% in State revenues for the Fiscal
Year 2005 budget. The result of this State reduction is $173,328.
Dubuque Greyhound Park and Casino expansion is on line for August 1, 2005.
Although there will be no expanded gaming revenue in Fiscal Year 2005, it will
positively impact the City in Fiscal Year 2006 and beyond.
While these items represent budget challenges, the City of Dubuque has been more
fortunate than other parts of the country and the State of Iowa. Dubuque's City Council
has been proactively investing in the future of our community. By using City resources
and leveraging state, federal and private investments, all Dubuque residents and the
Dubuque economy have benefited.
In the 1980s, Dubuque averaged 8.9% unemployment, compared with the statewide
average of 6.6%, and the national average of 7.3%. In 1982, the Dubuque
unemployment rate was 14.2%. Then Dubuque became more aggressive in the area of
The Hono~ble Mayorand City Council Membe~
January 14,2004
Page 4
job creation, forming partnerships and investing in the community. From 1997-2002 the
average annual unemployment rate was 3.3%, down significantly from the levels of the
1980s.
In 2003, the Dubuque unemployment numbers experienced some fluctuation, but
overall employment remained strong. In 2002, Dubuque County finished the year with
an overall average unemployment rate lower than the state for the first time in a quarter
of a century. In 2003, Dubuque is on pace to achieve this milestone for the second
consecutive year.
According to iowa Workforce Development, Dubuque's unemployment rate began at
5% in January 2003, before dropping to 3.7% in April. The unemployment rate
continued to decline and was recorded at 3.1% in October 2003. During that same
month, the unemployment rate for Iowa was 4.5%. Dubuque's unemployment rate for
October 2003 was lower than every major city in Iowa (Cedar Rapids 3.9%; Des Moines
3.2%; Iowa City 3.2%; Sioux City 4.5%; Waterloo 5.1%; Davenport 4.1%; Council Bluffs
4.7%).
In November 2003, the unemployment rate was 3.4%. For January through November
2003, Dubuque has averaged an unemployment rate of 3.8%. During the same period
of time, the state of Iowa averaged 4.3%.
In 2002, Dubuque, Des Moines, and Sioux City were the only metro areas in Iowa to
finish the year with net job gains. In 2003, Dubuque is projected to end the year again
with increased net job gains.
Area officials are working to increase the payroll and number of paychecks for area
residents. In fact, recently McKesson announced plans to create 74 jobs that would
create almost $3.1 Million in new annual payroll. Throughout the year, other projects
like Vessel Systems ($1 million in new payroll) and Barnstead International ($1 million in
new payroll) for example, have helped to create more dollars for Dubuque residents.
Statistics kept by Iowa Workforce Development show the positive momentum Dubuque
is experiencing. By comparing the number of jobs in Dubuque County in 1980 (43,700)
with 1990 (46,000) with November 2003 (51,600), you can see that the efforts being put
forth to attract and retain business have been successful with the rate of job creation
increasing from 230 per year in the 1980's to 431 per year from 1996 to 2003.
The turnaround Dubuque is experiencing with its business community is not going
unnoticed. In 2001, the Greater Dubuque area was listed in the "Metro Business
Retention Index" as second in the nation for business retention for the nation's 324
metro areas. Also, the Greater Dubuque area was ranked first by the Milken Institute for
their "Top 50 Metros/High Tech Output Growth 1997-2002." The past year has
The Honorable Mayorand City Council Membem
Januaw 14,2004
Page 5
garnered Dubuque attention for local, state, and national recognition including being
listed as one of American City and County magazine's 2003 Crown Communities.
The job creation numbers and unemployment numbers show that Dubuque is holding
steady in a very volatile economic climate. Our construction numbers reveal an even
more encouraging picture. From 1990-1998 the City of Dubuque averaged 350,000
square feet of non-residential construction each year. The five-year period from 1999-
2003, the City of Dubuque averaged neady 1 million (988,203) square feet of non-
residential construction each year.
The year 2003 also saw continued growth in the number of residential units with 182
units being constructed. This is the second highest number since 1995 (with last year's
192 being the highest), and 40% higher than the seven previous year's average of 130
units per year.
The total community assessed valuation has increased 78.5% over the last thirteen
years from $973,733,675 to $1,738,500,017, which is an average increase of 6% per
year.
Establishing partnerships continues to play a key role in moving forward with many of
the City's long-range plans. The best example of this - the America's River Project -
has been an amazing success. The International Economic Development Council
recently recognized the America's River partnership for its innovation and creativity by
bestowing an honorable mention for its public-private partnership. The pairing of public
and private investment dollars has changed the face of Dubuque's dverfront. Through
private investment, Vision Iowa dollars, and local, state and federal dollars, the $188
million America's River project has moved from dream to reality.
This $188 million development represents an amount equal to 11% of our existing
assessed valuation. The consultant's analysis show that after this initial investment, the
City can expect over $150 million in additional private development, an amount equal to
9% of the City's assessed valuation. At the end of 50 years the City will own the Grand
Harbor Resort and Waterpark, which could produce lease revenues that could reduce
property taxes by 27% for the average homeowner.
Partnerships and City investments have been key in the redevelopment of downtown.
Since 1985, the following has occurred in downtown (including Port of Dubuque):
Fac/ade Building New Real Estate Public Net New
Renovation RehabilitationConstruction Sales Improvements Jobs
$4,498,705 $61,800,327 $117,317,663 $76,173,696 $26,640,104 +1,744
As with the non-residential construction numbers, much of this growth has occurred
recently.
The Honorable Mayorand City Council Members
Janua~ 14,2004
Page 6
Since 1998, 58%($44,213,844)ofthe $76,173,696in downtown real estate sales has
occurred.
Since 1999, 57% ($34,930,319) of the $61,800,327 in downtown building rehabilitations
has occurred and 78% ($20,892,079) of the 26,640,104 in public improvements have
been done.
Since 2000, 83% ($97,448,066) of the $117,317,663 in new construction has occurred.
Since 2000, 43% (755) of the 1,744 jobs have been created.
These redevelopment numbers are impressive, but Dubuque has also begun to grow
again. As these census numbers will tell you, Dubuque at one time was a growing,
thriving community.
Population in Dubuque
1950 1960 1970 1980 1990 2000 2010
49,671 56,606 62,309 62,374 57,538 57,686 +
+14% +10.1% +0.1% -7.8% +0.3% ?
The stagnant-to-decreasing population trend of 1980 and 1990 is starting to turn
around, and there are many reasons to be optimistic about the future.
Dubuque continues to grow geographically. Between 1990-1995, only 40 acres were
annexed into the City of Dubuque. Since 1995, just over 3,000 acres have been
annexed into the City, with an additional 700 acres anticipated to be annexed in the next
year. Much of this is a credit to the utility extensions by the City, which opened up
almost 7,000 acres of land for development.
Transportation Pinks are being created. The federal government has provided most of
the $25 million that has been invested at the Dubuque Regional Airport since 1995.
Between Wisconsin, Iowa and Illinois over $400 million is being spent between 1998
and 2005 to create 4-lane connections to the Quad Cities, Ames, Cedar Rapids and
Madison, Wisconsin, with improvements to Chicago.
The City Council has realized the importance of the neighborhoods. All existing parks
were remodeled and 13 new parks, consisting of 60 acres, were created. The City
Council has more than tripled the commitment to the street program to an annual
average of $7.2 million, reconstructing or resurfacing 70% of the streets between 1990
and 2009. Approximately 30 abandoned properties were purchased and rehabilitated.
Fifteen Police Officers were added and Community Oriented Policing was implemented,
reducing high impact crimes in targeted neighborhoods. Historic Preservation was
The Honomble Mayorand City Council Membem
Janua~14, 2004
Page 7
emphasized, with new financial support programs and the adoption of standards for
projects.
The City has accomplished many things while minimizing the financial impact on the
average homeowner. Including Fiscal Year 2005, the City has not raised property tax
for the average homeowner in ten years, with five of those years resulting in a property
tax decrease.
The City has decreased property taxes for the average homeowner by 7% over the last
ten years, or an average property tax decrease of just under 1% a year (0.8%).
Including the City portion of property tax, the sewer fee, water fee, refuse fee and
stormwater fee, the average homeowner will pay $41.90 more in Fiscal Year 2005 for
City services than they paid in Fiscal Year 1995, an average increase of only $4.19 per
year.
How does the City of Dubuque compare with the other large cities in the State of Iowa?
Tax Rate Comparison for
Nine Largest Iowa Cities
Rank City FY 04
Tax Rate
9 Waterloo $18.37
8 Des Moines $17.05
7 Iowa City $16.80
6 Council Bluffs $16.43
5 Sioux City $15.95
4 Davenport $14.63
3 Cedar Rapids $12.83
2 Dubuque $10.07
1 Ames $9.64
(FY05 Proposed)
AVERAGE $14.64
Dubuque has the second lowest property tax rate. The highest ranked city 0Naterloo) is
82% higher than Dubuque's rate, and the average is 45% higher than Dubuque.
The Honorable Mayorand City Council Membem
Januaw 14,2004
Page 8
Refuse Rate Comparison for
Seven Largest Iowa Cities
2004
Rank City Monthly Rate
7 Ames $20.50
6 Cedar Rapids
5 Iowa City
4 Des Moines
3 Watedoo
2 Sioux City $11.50
1 Dubuque
Monthly
Pay As You Throw
$12.95
$12.10
$11.75
$11.50
$8.50 (FY05 Proposed)
Average per
type $16.00 $11.36
AVERAGE $12.68
Dubuque has the lowest monthly refuse rate. The highest ranked city (Ames) is 141%
higher than Dubuque, and the average is 49% higher than Dubuque.
Water Rate Comparison for
Largest Iowa Cities with
Water Softening
Rank City Water Rate
(800 cubic feet/resident average)
5 Ames $18.42
4 Des Moines $15.86 *
3 Council Bluffs $14.00 *
2 Dubuque $13.28 (FY05 Proposed)
1 Cedar Rapids $12.48
AVERAGE $14.81
* Based on 1,000 gallon increments, 133.69 cubic feet per 1,000 gallons
Dubuque has the second lowest water costs for the average homeowner. The highest
ranked city (Ames) is 39% higher than Dubuque, and the average is 11.5% higher than
Dubuque.
The Honorable Mayorand City Council Membem
Januaw 14,2004
Page 9
Sewer Rate Comparison for
Nine Largest Iowa Cities
Rank City
9 Iowa City
8 Des Moines
7 Waterloo
6 Sioux City
5 Ames
4 Davenport
3 Council Bluffs
2 Dubuque
1 Cedar Rapids
Sewer Rate
(Based on 800 cubic feeFmonth)
$31.82
$21.56
$18.95
$17.11
$16.78
$15.13
$15.12
$13.68 (FY05 Pmposed)
$13.43
AVERAGE $18.18
Dubuque has the second lowest sewer costs for the average homeowner. The highest
ranked city (Iowa City) is 133% higher than Dubuque, and the average is 33% higher
than Dubuque.
Stormwater Utility Rate Comparison for
Cities In Iowa*
Rank City Rate
10 Des Moines $5.29
9 Garner $2.63
8 Cedar Rapids $2.50
7 Budington $2.00
6 Boone $1.95
5 Sioux City $1.84
4 Ames $1.50
3 ClearLake $1.50
2 BeEendod $1.50
I Dubuque** $1.29
(FY05 Proposed)
AVERAGE $2.20
* Average Monthly Residential Fee
**There are three residential rates: 85% of the homes pay the $1.29 rate,
smaller homes pay less and larger homes pay more.
The Honorable Mayor and City Council Members
January 14, 2004
Page 10
Dubuque has the lowest Stormwater Utility cost. The highest ranked city (Des Moines)
is 310% higher than Dubuque, and the average is 70.5% higher than Dubuque.
Dubuque has minimized the impact on the average homeowner in several ways:
1. Proactively investing in the community to diversify the economy.
2. Averaging almost 6% annual growth in assessed valuation.
3. Reduction in workforce since 1980s of nearly 13% (67.20 FTE), despite adding
15 police officers.
4. Implementing a retirement incentive program during the past calendar year
resulting in eight retirements and a projected cost savings of more than $150,000
over the next five years.
5. Increased use of Federal/State grants.
6. Diversification of revenue base.
7. Increased public/private partnerships.
8. Reduction of property tax supported debt.
9. Entrepreneurial City Council policy decisions.
Despite every effort to keep costs to a minimum, the following increases are
recommended:
A 3% increase in water rates is being proposed for Fiscal Year 2005. The additional
funding would be directed to water operations and debt repayment. This would be a
1.59% annual average increase since Fiscal Year 1992.
The Sanitary Sewer Utility was increased in Fiscal Year 1992 by 3%. The utility did not
increase again until Fiscal Year 2002 when a 4% increase was implemented. The
recommendation is for a 4% increase in Fiscal Year 2005. This would be a 0.92%
annual average increase since Fiscal Year 1992.
The transition to Pay As You Throw refuse collection has been very successful. As
predicted, the recycling program has witnessed a substantial increase in collections,
and illegal dumping has not been a widespread problem. The solid waste collection fee
is recommended to increase from $7.60 to $8.50 per month, and single use refuse
sticker fees will increase from $1.05 to $1.15. The additional income will fund an
The Honorable Mayor and City Council Members
January 14, 2004
Page 11
increase in operating expenses including increased health care costs, vehicle fuel,
vehicle repair and extra refuse tipping fees.
Parking fees are recommended for an increase. This will include fines, meter rates and
ramp fees, as well as a modification to the courtesy ticket program to one ticket per
license, instead of one per year. The proposed increases would generate an estimated
$227,066 in revenue.
A $10 research fee for each local criminal check done by the Police Department is
being recommended and will generate $22,800 in revenue.
Additional increases in recreation fees for basketball, softball, volleyball and golf are
also proposed for Fiscal Year 2005. These fee increases are detailed on the Fact
Sheet in the Citizen's Guide budget overview section.
The remaining budget shortfall is proposed to be made up by:
Maintenance level machinery and equipment expenses ($248,148), non-
recurring decision packages ($90,434), part of a recurring decision package
($500), and recurring operating expenses ($110,918)for Fiscal Year 2005
totaling $450,000 were able to be funded by a savings from Grand River Center
projects coming in under budget. This is a one-time revenue source.
Each year an overhead factor is calculated for the City Manager's Office, Budget
and Personnel activities and used to recharge expenses to each enterprise fund.
Beginning in Fiscal Year 2005, the Legal Department and City Clerk's Office will
be included in this recharge to the enterprise funds. This will more accurately
reflect the services provided to these funds by these departments.
For the second year, the Professional Conference Travel budget for General
Fund (excluding Economic Development's Washington DC travel) will not be
funded - saving $76,374. This cut again deeply concerns me because we are
partially mortgaging our future by diminishing our ability to find solutions to
existing problems and to learn how to better serve our fellow citizens.
< The Department Managers' annual strategic planning session is not funded for
the second year saving $20,000.
Prior to Fiscal Year 2004, gaming revenues from taxes and lease payments (not
the annual DRA distribution) was split 33% to the operating budget and 67% to
the ClP. In Fiscal Year 2004, the first operating budget shortfall of more than $1
million was addressed through a change in this formula to a 50/50 split between
the ClP budget and the operating budget (excluding the DRA annual distdbufion).
The Honorable Mayorand City Council Members
Januaw 14,2004
Page12
Fiscal Year 2005, I am recommending that formula be adjusted to reflect 75% for
the operating budget and 25% for the ClP budget. This will pump an additional
$1,091,610 into the Fiscal Year 2005 operating budget.
Finally, it is important to recognize this budget was developed to include certain
assumptions. The capital improvement program budget reflects the current Iowa
Supreme Court ruling, which found in favor of the Dubuque Racing Association. If that
ruling changes, there will be a drastic reduction in revenues available. The shortfall is
estimated to impact the CIP budget by $21,780,256.
Again, this was a complex and challenging budget, and it required the assistance of
many City of Dubuque staff members. I am especially proud of the work that was done
this year, including input from Department Managers and City Commissions. I would
like to thank Administrative Services Manager Pauline Joyce, who retired after
completing this final, difficult budget. Her nearly 31 years of services to the City of
Dubuque have been invaluable. Also, I would like to thank new Budget Officer Dawn
Lang, along with Office Manager Juanita Hilkin and Secretary Kevin Firnstahl.
Corporation Counsel Barry Lindahl and City Clerk Jeanne Schneider continue to provide
their expertise and assistance throughout the budget process.
I would like to say how much I appreciate the courageous and entrepreneurial
leadership of the Mayor and City Council. This year, I was privileged and honored to be
named the International City/County Management Association's "Outstanding Manager
of the Year." While this award was given to me, it belongs to the Dubuque City Council
- who constantly and consistently make the difficult decisions and provide guidance -
and to the Dubuque City staff who work so diligently to achieve the City's goals and
vision.
I respectfully submit this budget to the Mayor and City Council for consideration and
deliberation. While I know that all needs and requests were not met, I believe the
budget as presented keeps the community moving forward in a fiscally responsible
manner.
MCVM:jh