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FY 2006 Policy Guidelines D~ ~ck~ MEMORANDUM December 2, 2004 TO: The Honorable Mayor and City Council Members FROM: Michael C. Van Milligen, City Manager SUBJECT: Fiscal Year 2006 Policy Guidelines The purpose of this memorandum is to transmit draft Fiscal Year 2006 Fiscal Guidelines for your review and presentation to the Council. The guidelines reflect City Council direction given as part of the September 13 and 14, 2004, goal setting sessions. During those sessions the City Council established goals for the next five years and established City priorities in Fiscal Year 2006. City Council Goals In five years the Council wants the following for the community: 1. Improved connectivity: Transportation, Telecommunications 2. Planned and Managed Growth 3. Diverse, Strong Dubuque Economy 4. Riverfront Development 5. Partnering for a Better Dubuque Fiscal Year 2006 Priorities 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 2006 are: Top Priorities . Southwest Arterial . Opportunitylowa . Stormwater Projects . Street Improvement Programs . Arts Policy and Funding High Priorities . East-West Corridor Study . Air Service and Emplanement Strategy . National Pollution Discharge Elimination System (NPDES) . Annexation Study and Policy . Newly Annexed Areas: Plan, Zoning, Services . Property Maintenance Cases . Water and Sewer Services to New Developments Management Agenda 2004-2006 . Mediacom Franchise Agreement . Zoning Ordinance: Update . Adams Company Relocation Completion . Collective Bargaining Negotiations . Incident Tracking System . Healthcare Cost Containment Strategy and Action . Federal Strategy . Dubuque Industrial Center West, Phase III . Gaming Agreement: Protect City's Interest . Star Brewery Completion . Waterworks ParklPyatigorsk Park . State Strategy Major Projects 2004-2006 Municipal Services Center Project Landscape Gateways Project Pedestrian Signage Project 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, increasing the tax base, eliminating property tax supported debt payment, and using other resources such as sales tax, gaming revenues, utility franchise fee, and user fees for property tax relief. Fiscal Year 2005 is the current fiscal year, with a budget that was approved by the City Council in March 2004. During that process, I projected that the budget for Fiscal Year 2006 would require a 1.49% increase in taxes for the average homeowner based on no equalization order and a rollback factor of 48.8622%. However, expenditure changes in Fiscal Year 2006 that impact this projection include an increase in police and fire retirement rates of 13.2% (this is in addition to the 21.7% increase in Fiscal Year 2005 and the 20.5% increase in Fiscal Year 2004), and increases in gas and electric expense as high as 12%. The increases have been offset by healthy sales tax revenues, hotel/motel tax receipts, and increased gaming revenues estimated based on revised projections from the implementation of a new lease agreement and expanded gaming operations from 2 increasing slot machines (600 to 1,000). 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 Fiscal Year 2005 budget was approved and raised the lease payment from Y: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, allows the split between capital and operating expenses to be adjusted from 25% capital and 75% operating, to 35% capital and 65% operating and allows the City to avoid a property tax increase in Fiscal Year 2006. Fiscal Year 2006 reflects changes to City of Dubuque assessed valuations. Property reappraisals were completed by the Dubuque City Assessor's office and went into affect January 1, 2004. The Fiscal Year 2006 assessed valuation for the City of Dubuque is based on the reappraised valuations. Residential property valuations increased 6 percent, Commercial property valuations decreased 2.7 percent and Industrial property valuations increased 19.4 percent. In order for the City to not increase the average homeowner's property taxes for the eleventh consecutive year, in fact, in five of those years there have been property tax decreases, the average home value was increased 6 percent when determining the Fiscal Year 2006 property tax rate of $9.6991/$1 ,000. This means the property tax rate will decrease by 3.7%. Lowering the rate reflects no property tax increase for the average homeowner. The City's portion of the property tax rate has gone from $14.5819 in Fiscal Year 1987 to $9.6991 in Fiscal Year 2006 per thousand dollars of assessed value; a decrease of $4.88 or 33.5 percent. A comparison of the City of Dubuque's property tax rate as projected for Fiscal Year 2006 with the other eight largest cities in Iowa shows Dubuque ranks ninth out of nine, an improvement from last year's position of eighth out of nine cities. This comparison is summarized in table format as follows: RANK 1 2 3 4 5 6 7 8 9 Average CITY Waterloo Sioux City Council Bluffs Iowa City Des Moines Davenport Cedar Rapids Ames Dubuque TAX RATE 18.78999 17.78712 17.76669 17.31394 17.05539 15.24000 13.11797 9.94868 9.69910 15.19099 POPULATION 68,747 85,013 58,268 62,380 198,682 98,359 120,758 50,731 57,686 The average tax rate is 56.6% higher than Dubuque's and the highest comparable city, Waterloo, is 93.7% higher. 3 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 2006 that are being recommended to you can be summarized as follows: . Preliminary Citizen participation opportunities Date Wednesday, December 8 Tuesday, February 15 Wednesday, February 16 Tuesday, February 22 Thursday, February 24 Monday, February 28 Wednesday, March 2 Wednesday, March 9 Startina Time 5:15 p.m. - City Manager's Public Input Meeting 6:30 p.m. - City Council Budget Worksession 6:30 p.m. - City Council Budget Worksession 6:30 p.m. - City Council Budget Worksession 6:30 p.m. - City Council Budget Worksession 6:30 p.m. - City Council Budget Worksession 6:30 p.m. - City Council Budget Worksession 6:30 p.m. - Public Hearing - City Council . Gaming revenues, excluding the annual surplus distribution, will be used 65 percent in operating budget and 35 percent in the capital budget. This is a change from last year's guidelines of a 75/25 split and reflects a priority given to maintaining current City services over capital improvement projects. . The Policy Guidelines include a property tax guideline that provides no increase in the "City" share of property taxes for the average homeowner. . There are many high priority capital improvement projects, which need to be constructed during the FY 2006-2010 period. Most of these projects will be possible without borrowing the money (i.e., selling bonds) to help finance them. However, debt will be required on 5 major capital projects, that being the Drainage Basin Master Plan, the expansion of Dubuque Industrial Center West, Sanitary Sewer Fund, Water Fund and the Parking Division. I respectfully request Mayor and City Council adoption of the budget guidelines, which provides for no increase in the "City" share of property taxes for the average homeowner in Fiscal Year 2006, and reduces the property tax rate by 3.7%. /l1,..V / ¿< I}l tL I LI( Lv C,t!, l Michael C. Van Milligen 4 MCVM:dll Attachment cc: Barry Lindahl, Corporation Counsel Cindy Steinhauser, Assistant City Manager Dawn Lang, Budget Director Randy Peck, Human Services Manager Ken TeKippe, Finance Director 5 POLICY GUIDELINES FOR FY 2006 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. 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.citvofdubuaue.ora 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 2006 Policy Guidelines Page 2 3. TWO TYPES OF BUDGET DOCUMENTS TO BE PREPARED Guideline The recommended City operating budget for Fiscal Year 2006 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 2006 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 decision 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 2006 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 2006 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 FY 2006 Policy Guidelines Page 4 or provided by City government. This may require us to change our 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), 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 2006, 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., YMCAlYWCA, 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" 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 FY 2006 Policy Guidelines Page 5 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. 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. 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 FY 2006 Policy Guidelines Page 6 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 2002 FY 2003 FY 2004 FY 2005 FY 2006 ACTUAL ACTUAL ACTUAL BUDGETED RECOM'D DEPARTMENT/DIVISION PERCENT PERCENT PERCENT PERCENT PERCENT Leisure Services Department Recreation Division Adult Athletics' 81.0 81.0 76.0 77.0 76.0 Children's Activities 41.6 54.0 52.0 57.0 55.0 Therapeutic Recreation 20.0 19.0 14.0 21.0 19.0 Recreation Classes 46.7 42.0 45.0 51.0 50.0 Swimming' 81.0 69.0 73.0 76.0 74.0 Golf* 100.0 100.0 100.0 100.00 100.00 Park Division 10.3 10.50 10.7 12.1 12.0 Library Department 8.2 6.1 6.1 5.2 6.0 Airport Department w/abated debt 89.6 79.8 79.4 72.7 77.0 Building Services Division 94.4 77.77 95.6 98.0 98.0 Planning Services Department 11.6 11.9 18.5 19.9 18,0 Health Services Department Food/Environmental Insp. 58.6 57.6 52.7 52.7 58.0 Animal Control 94.3 81.7 100.0 90.4 90.0 Housing Services Department General Housing Inspection 45.4 34.8 42.7 43.0 45.0 . Includes an amount to help cover indirect costs (administration) 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. FY 2006 Policy Guidelines Page 7 Guideline In order to minimize the property tax burden, the City of Dubuque will make every effort to obtain federal, state and private funding to assist in financing its operating and capital budgets. However, commitments to guarantee a level of service or level of funding after the outside funding ends shall be avoided. 14. GENERAL FUND OPERATING RESERVE OR WORKING 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. WorkinQ balances are not available for fundinQ a budaet: thev 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% represents approximately $2,796,000. 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 $2,796,000 for FY 2006. 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 FY 2006 Policy Guidelines Page 8 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 2004-05 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 2006 through FY 2010. 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 2005-06 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 2006 and each succeeding year to support the operating budget. b. State-shared revenues, such as Bank Franchise, Municipal Assistance, Liquor Sales, Personal Property Replacement Taxes, and Monies and Credits have been permanently cut from the City's resources in the last 2 budget years. FY 2006 Policy Guidelines Page 9 c. Hotel/motel tax receipts will increase 10 percent over FY 2005 budgeted receipts for FY 2006, and then increase at an annual rate of 5 percent per year. d. State Transit operating assistance will also be maintained at its current level. e. Miscellaneous revenue, excluding state shared revenues, has been estimated at 2 percent growth per year over budgeted FY 2005. f. Gaming revenues generated have been estimated based on revised projections from the implementation of a new lease agreement and expanded gaming operations from increasing slot machines (600 to 1,000). g. Gaming revenues from taxes and the DRA lease (not distributions) have been adjusted from the FY 2005 split of 75% / 25% between operating and capital budgets, to a 65% percent operating and 35% capital budget split for FY 2006. h. The residential rollback factor will decrease from 48.456 percent to 47.960 percent or a 1.02 percent reduction for FY 2006. For Fiscal Years 2007 and beyond, a 10-year average for rollbacks and equalization orders was used. Property reappraisals were completed by the Dubuque City Assessor's office and went into affect January 1, 2004. The FY 2006 assessed valuation for the City of Dubuque is based on the reappraised valuations. Residential property valuations increased 6 percent, Commercial property valuations decreased 2.7 percent and Industrial property valuations increased 19.4 percent. The average home value was increased 6 percent when determining the FY 2006 property tax rate, reflecting no property tax increase for the average homeowner. Assessed valuations were increased 2 percent per year beyond FY 2006. j. Sales tax projections anticipate 50 percent of four quarterly payments in the General Fund for property tax relief. Sales tax projections for FY 2006 have been estimated to increase 10 percent over actual FY 2004 and then increase at an annual rate of 4 percent per year. k. It is anticipated that in FY 2005 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 FY 2006 Policy Guidelines Page 10 each taxing body. Certain economic development grants require 100 percent of the revenue from a particular project. I. 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 2006, with the gaming revenue (from taxes and the DRA lease) split remaining at 65% operating budget and 35% capital budget. m. Gas and electric franchise fees have been adjusted based on one year's trend data. The FY 2006 budget is estimated to increase about 7 percent over 2003-2004 actual, and then increases at an annual rate of 2.5 percent per year. Assumptions - Reauirements a. A wage adjustment is reflected in the projections for FY 2006 and each succeeding year. Police and Fire retirement rates have been increased 13.2 percent, costing the City an additional $270,000 per year. b. Health insurance costs are estimated to increase 9 percent over the FY 2005 budgeted rates. Estimates for FY 07-10 have been increased by 7 percent per year. c. General operating supplies and services are estimated to increase 6 percent over actual in FY 2004 or 3 percent over budget in FY 2005, depending on which year reflects expenditures more accurately. 2.5 percent increase is estimated in succeeding years. d. Electrical energy expense is estimated to increase 12 percent over FY 2004 actual expense, then 2.5 percent per year beyond. e. Natural gas expense is estimated to increase 10 percent over FY 2004 actual, then 2.5 percent per year beyond. There is no degree-day adjustment this year. f. The Convention and Visitors Bureau contract will continue at 50 percent of actual hotel/motel tax receipts, less the loan repayment. g. Equipment costs are estimated higher for FY 2006 budget to get "back on track"; due to the decreased approved replacements in FY 2005. FY 2006 Policy Guidelines Page 11 h. Debt service is estimated based on no additional tax-supported General Obligation bond sales in FY 2006 - 2010. I. Unemployment expense in the General Fund has been increased from $25,000 to $45,000 for FY 2006 based on past years actual experience. j. Motor vehicle fuel expense is estimated to increase 8 percent over FY 2004 actual expense and maintenance expense has been increased 6 percent over FY 2004 actual expense. k. Postage rates are estimated to remain steady over the next few years. I. Travel Professional Conference and Strategic Planning expense are funded in FY 2006. FY 2006 Policy Guidelines Page 12 IMPACT ON AVERAGE RESIDENTIAL PROPERTY - EXAMPLE CITY TAX PERCENT DOLLAR ACTUAL - PAST HISTORY CALCULATION INCREASE INCREASE FY 1989 "City" Property Tax $ 453.99 -11.4% - $ 58.51 FY 1990 "City" Property Tax $ 449.94 - .9% -$ 4.05 FY 1991 "City" Property Tax' $ 466.92 + 3.8% +$ 16.98 FY 1992 "City" Property Tax $ 483.63 + 3.6% +$ 16.71 FY 1993 "City" Property Tax' $ 508.73 +5.0% +$ 5.10 FY 1994 "City" Property Tax $ 510.40 + .3% +$ 1.51 FY 1995 "City" Property Tax' $ 522.65 +2.4% +$ 12.41 FY 1996 "City" Property Tax $518.10 - .9% -$ 4.54 FY 1997 "City" Property Tax' $ 515.91 - .4% -$ 2.19 FY 1998 "City" Property Tax $ 512.25 - .7% -$ 3.66 FY 1999 "City" Property Tax' $ 512.25 - .0% -$ 0.00 FY 2000 "City" Property Tax $ 511.38 - .2% -$ 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 $ 493.24 + 1.53% +$ 7.45 Adjustment FY 2005 "City" Property Tax' $ 485.93 - 1.48% -$ 7.32 FY 2005 With Homestead' $ 493.25 0.00% $ 0.01 Adjustment PROPOSED FY 2006 "City" Property Tax" $ 493.25 + 0.00% +$ 0.00 Average FY 1989-FY 2006 - .24% -$ 2.59 PROJECTION " FY 2007 "City" Property Tax' $ 493.25 + 0.78% +$ 3.86 FY 2008 "City" Property Tax $497.11 + 4.00% +$ 19.91 FY 2009 "City" Property Tax' $ 517.01 + 3.90% +$ 20.14 FY 2010 "City" Property Tax $ 537.15 + 3.68% +$ 19.77 . Denotes year of State-issued equalization orders. "The FY 2006 property tax calculation takes into account the 6% valuation increase for the average residential homeowner as detenmined by the reappraisal. FY 2006 Policy Guidelines Page 13 IMPACT ON COMMERCIAL PROPERTY - EXAMPLE CITY TAX ACTUAL - PAST HISTORY CALCULATION FY1989 "City"PropertyTax $2,106.42 FY 1990 "City" Property Tax $2,086.50 FY 1991 "City" Property Tax' $2,189.48 FY1992 "City"PropertyTax $2,280.18 FY1993 "City"PropertyTax' $2,231.05 FY1994 "City"PropertyTax $2,250.15 FY 1995 "City" Property Tax' $2,439.60 FY 1996 "City" Property Tax $2,439.60 FY 1997 "City" Property Tax' $2,659.36 FY 1998 "City" Property Tax $2,738.43 FY 1999 "City" Property Tax' $2,952.03 FY 2000 "City" Property Tax $2,934.21 FY 2001 "City" Property Tax $2,993.00 FY 2002 "City" Property Tax $2,910.25 FY 2003 "City" Property Tax' $3,186.27 FY 2004 "City" Property Tax $3,278.41 FY 2005 "City" Property Tax' $3,349.90 'denotes year of State-issued equalization order PERCENT INCREASE -15.4% - .9% +4.9% +4.1% - 2.2% +0.9% +8.4% +0.0% +9.0% +2.97% +7.8% -0.6% +2.0% -2.77% +9.48% + 2.89% + 2.18% DOLLAR INCREASE -$ 384.00 - $ 20.00 +$ 1 02.98 +$ 90.70 -$ 49.13 +$ 19.10 +$ 189.45 +$ 0.00 +$ 219.76 +$ 79.07 +$ 213.60 -$ 17.82 +$ 58.86 -$ 82.83 +$276.03 +$ 92.14 +$ 71.49 PROPOSED FY 2006 "City" Property Tax" $3,162.27 - 5.60% -$187.63 Average FY 1989-2006 + 1.51% +$ 37.32 PROJECTION .. FY 2007 "City" Property Tax' $3,163.02 + 0.02% +$ 0.75 FY 2008 "City" Property Tax $3,277.79 + 3.63% +$ 114.77 FY 2009 "City" Property Tax' $3,379.87 + 3.11 % +$ 102.08 FY 2010 "City" Property Tax $3,491.64 + 3.31% +$111.77 . Denotes year of State-issued equalization orders "The FY 2006 property tax calculation takes into account the 2.7% valuation decrease for commercial property as determined by the reappraisal. FY 2006 Policy Guidelines Page 14 IMPACT ON INDUSTRIAL PROPERTY - EXAMPLE CITY TAX PERCENT DOLLAR ACTUAL - PAST HISTORY CALCULATION INCREASE INCREASE 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 PROPOSED FY 2006 "City" Property Tax" $5,790.36 + 14.98% +$ 754.36 Average FY 1989-FY 2006 - 0.86% -$ 65.81 PROJECTION" FY 2007 "City" Property Tax $5,791.74 + 0.02% +$ 43.58 FY 2008 "City" Property Tax $6,001.88 + 3.63% +$ 20.78 FY 2009 "City" Property Tax $6,188.80 + 3.11% +$ 43.04 FY 2010 "City" Property Tax $6,393.45 + 3.31% +$ 20.54 "The FY 2006 property tax calculation takes into account the 19.4% valuation increase for industrial property as determined by the reappraisal. FY 2006 Policy Guidelines Page 15 History of Increases in Property Tax Askings Fiscal Year "City" Property Tax Askinas /000) $10,918,759 $10,895,321 $11,553,468 $12,249,056 $12,846,296 $13,300,756 $13,715,850 $14,076,320 $14,418,735 $14,837,670' $15,332,806' $15,285,754 $15,574,467 $15,686,579 $15,771,203 $16,171,540 $16,372,735 $16,019,435 FY 1989 FY 1990 FY 1991 FY 1992 FY 1993 FY 1994 FY 1995 FY 1996 FY 1997 FY 1998 FY 1999 FY 2000 FY 2001 FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 Estimate Average FY 1989-2006 *Without TIF Accounting change. % Chanae in Tax Askinas -12.0% - 0.2% +6.0% +6.0% 4.9% + 3.5% + 3.1% +2.6% +2.4% +2.9% +3.3% - 0.3% + 1.9% + .8% + .5% +2.5% + 1.2% - 2.2% + 1.49% Present Impact on Homeowner Sales Tax initiated -11.4% - .9% + 3.8% + 3.6% +5.0% + .3% +2.4% - .9% - .4% - .7% .0% - .2% .0% .0% -5.0% + 1.5% .0% .0% - .16% 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 Askinas ¡OOO) % Increase Residential Property' FY 2005 $16,373 FY 2006 $16,019 - 2.16% 0% / $ 0.0 FY 2007 $16,344 + 2.03% +0.78% / +$ 3.86 FY 2008 $17,275 + 5.70% +4.00% / +$19.91 FY 2009 $18,170 + 5.18% +3.90% / +$20.14 FY 2010 $19,146 + 5.37% +3.68% / +$19.77 FY 2006 Policy Guidelines Page 16 Guideline The recommended guideline is no tax increase for the average residential property owner, and to change the percent of annual gaming revenues going into the operating budget from 75 percent to 65 percent. Note: One percent increase in the tax rate will generate approximately $160,194. 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. 20. RENOVATION AND MAINTENANCE Guideline Capital improvement expenditures should concentrate on renovating and maintaining existing facilities to preserve prior community investment. FY 2006 Policy Guidelines Page 17 21. 22. 23. 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. 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. 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 2004-05 taxable value for calculating the debt limit is $2,647,847,961, which indicates a total General Obligation debt capacity of $132,392.398. Outstanding G.O. debt (including tax increment debt) on June 30, 2005 will be $24,035,000 (18.2 percent) leaving an available debt capacity of $108,357,398 (81.8 percent). As we approach the preparation of the FY 2006-2010 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. FY 2006 Policy Guidelines Page 18 Guideline There are many high priority capital improvement projects, which need to be constructed during the FY 2006-2010 period. Most of these projects will be possible without borrowing the money (i.e., selling bonds) to help finance them. However, debt will be required on 5 major capital projects, that being the Drainage Basin Master Plan, the expansion of Dubuque Industrial Center West, Sanitary Sewer Fund, Water Fund and the Parking Division. 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. 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 FY1991-$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 The FY 2005 budget was based on receiving $4,632,453 in Road Use Tax funds. In FY 2005, 72.5 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 is increased revenues or reduced expense that would allow this shift without a property tax impact. FY 2006 Policy Guidelines Page 19 25. 26. 27. 28. 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. 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 low and moderate income. 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. 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 30th, of 40 percent (this was 50 percent, but changed with the new lease agreement on April 1, 2004) of its net cash operating funds to the City of Dubuque. In mid-December, the City will receive FY 2006 Policy Guidelines Page 20 an un-audited estimate of proceeds to be distributed. These proceeds will then be allocated beginning with the next fiscal year through the capital improvement process with the highest priority given to reducing the City's annual borrowing. This policy was changed in FY 2004 to allow for use of the proceeds to support the current capital improvement budget (versus the next fiscal year's 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 2006 projections of operating surplus have been anticipated as resources to support the Fiscal Year 2006 capital improvement projects. This level will be maintained for the Fiscal Year 2007 surplus for the FY 2007 resource estimate and then reduced by 5 percent for the January 2008 projected surplus for FY 2008, 10 percent for FY 2009, and 15 percent for FY 2010 resources. Guideline In Fiscal Year 2006, the City anticipates distribution of a significant amount of net cash proceeds for use in the Capital Improvement Program. These amounts will be budgeted in the Five Year CIP 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 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 FY 2006 Policy Guidelines Page 21 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 brought new financing challenges including double-digit inflation in key areas (health costs, liability and property insurance, and electrical costs), a 20,5 percent increase in Police and Fire Pension costs, decreasing State revenues, and reduced sales tax projections. The FY 2004 guideline reflected the impact of the changes and included a change to a 50/50 split of gaming taxes and rents between the operating and capital budgets. The FY 2005 guideline again reflected increasing financing challenges and the split was recommended to change from 50/50 to 75 percent operating and 25 percent capital. This change reflects priority being given to maintaining current service levels in the operating budget and reduced resources in the capital budget. 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 Y: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, allows the split between capital and operating expenses to be adjusted from 25% capital and 75% operating, to 35% capital and 65% operating.