Loading...
Fiscal Year 2002 Budget Policy Guidelines CITY OF DUBUQUE, IOWA MEMORANDUM December 4, 2000 TO: The Honorable Mayor and City Council Members FROM: Michael C. Van Milligen, City Manager SUBJECT: Fiscal Year 2002 Policy Guidelines The purpose of this memorandum is to transmit draft Fiscal Year 2002 Fiscal Guidelines for your review and adoption. The guidelines reflect City Council direction given as part of the August 28 and 29, 2000, goal setting sessions. During those sessions the City Council established goals for the next five years and established City priorities in Fiscal Year 2002. Dubuque 2006: City Council Goals In five years the Council wants the following for the community: 1 . Improved Transportation Network 2. Strong Local Economy 3. A "Balanced" Community 4. Safe Community 5. Riverfront Development 6. Top Quality City Services Fiscal Year 2002 Priorities: Our Targets 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 2002 are: Top Priority Affordable Housing Highway 20 Incentives to Attract/Expand Businesses Riverfront Land Acquisition/Condemnation The Honorable Mayor and City Council September 13, 1999 Page 2 High Priority Riverfront Land Uses and Development Standards Telephony: Infrastructure Historic Preservation Town Clock Plaza Moderate Priority Street Program Traffic Synchronization Downtown Compensation Policy for Professionals As we develop a budget to achieve these priorities I believe it is important to begin with an overview of the City's past performance in terms of growth in personnel complement, tax asking, and changes in assessed valuations. This overview summarizes the impact of fiscal guidelines established by prior City Councils as they attempted to balance resources with community expectations. Background Information Since 1981, the City has reduced the number of full-time employees from 588 to 516 (including the addition of three temporary positions for the Lead Paint Grant). This is a reduction in the full-time work force of 12.2 percent or 72 employees. This has happened during a time when new or expanded City programs and services have been added to meet increasing demands and mandates. Initiatives during that time period have included: . economic development efforts . yard waste, recycling programs and household hazardous waste disposal programs . county-wide E911 dispatch . comprehensive housing programs . community oriented policing . DARE and other drug related programs . rental property inspections . operation of leisure pools . McAleece Recreation Complex operations The Honorable Mayor and City Council September 13, 1999 Page 3 . City Focus newsletter . industrial pretreatment and lead and copper testing programs . Fifth Street parking ramp . Third Street parking ramp . hazardous materials team . advanced life support ambulance service . government Channel 8 programming . cable TV monitoring and regulation . additional commissions including Long Range Planning, Environmental Stewardship, Investment Oversight, Development Review Committee, Police Advisory Panel and Community Based Task Force on Gangs, Drugs and Youth Violence . extension of Heritage hike and bike trails . City operated FBO functions . increased Zoning Code enforcement . developers and builders round tables . implementation of Riverfront Plan through America's River Partnership . downtown circulation improvements . coordination and public information programs related to the Highway 20 project . implementation of the Neighborhood Reinvestment Strategy . lead paint abatement program . additional neighborhood parks and open spaces . reinstatement of traffic accident investigations The City continues to look for operating efficiencies through the program and service review process. Those reviews currently underway include Operations and Maintenance, Emergency Communications Center, Fire, Parking and Human Rights. Reviews to be initiated during the balance of Fiscal Year 2001 include Airport, Library, Engineering, City Clerk's Office and Finance. Reviews which have been completed include Community and Economic Development, Housing, Park Patrol, Water, Civic Center, Water Pollution Control Plant, Administrative Services, Planning Services, Recreation, Police, Transit, City Manager's Office, Health Services, Building Services and Parks. 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 who have eliminated city services, quality of life continues to be a high priority of City Council and high service standards have been maintained by The Honorable Mayor and City Council September 13, 1999 Page 4 implementing operating efficiencies and using other resources such as sales tax, gaming revenues, and user fees for property tax relief. Property tax values have increased from $937,934,744 in Fiscal Year 1991 (January 1, 1989 values) to $1,402,309,002 for Fiscal Year 2001 (January 1, 1999 values) which represents an increase of $464,374,258 or 49.5 percent over the ten year period. The City's portion of the property tax rate has gone from $12.2660 in Fiscal Year 1991 to $11.0671 per thousand dollars of assessed value; a decrease of $1.1989 or -9.8 percent over the same ten year period. Why was the City able to reduce the tax rate over the past ten years? Some of the factors which have affected the property tax rate include: 1. The use of sales tax for property tax relief has grown from $2,000,000 in Fiscal Year 1991 to $3,112,608 in Fiscal Year 2001. This increase is the equivalent of property tax relief of $.7934/$1,000 of assessed value. This means that the local option sales tax has allowed a 6.5 percent reduction in the City's portion of the tax rate from Fiscal Year 1991 to Fiscal Year 2001; 2. The net addition of only four property tax supported full-time positions from Fiscal Year 1991 to Fiscal Year 2001 (the net increase has been held to only four in spite of the fact that the City added seven police officer positions in Fiscal Year 1994 and five in Fiscal Year 2000); and 3. The use of annual gaming revenues for property tax relief. This has avoided a 6.2 percent increase in the property tax rate. Also, the use of the annual distribution of 50 percent of Dubuque Racing Association net profits to the City of Dubuque which has been used to eliminate the City's annual General Obligation borrowing to street, storm sewer and Airport capital improvements. This analysis indicates that the City has used property tax valuation growth and other important growth revenues like sales tax to maintain City services and has not increased the tax rate to accomplish this. In fact the City has reduced the tax rate over the past ten years. A comparison of the City of Dubuque's property tax rate for Fiscal Year 2001 with the other eight largest cities in Iowa shows Dubuque ranks eighth out of nine. This comparison is summarized in table format as follows: The Honorable Mayor and City Council September 13, 1999 Page 5 RANK CITY TAX RATE POPULATION 1 Des Moines 16.57804 193,187 2 Waterloo 16.49097 66,467 3 Council Bluffs 15.78900 54,315 4 Iowa City 14.75759 60,148 5 Davenport 14.63000 95,333 6 Sioux City 14.40724 80,505 7 Cedar Rapids 12.74497 108,780 8 Dubuque 11.06712 57,538 9 Ames 9.60628 48,691 Proposed Budget Guidelines Having reviewed this background information on where and how City functions and finances have developed over the past ten years, it's now time to look forward and establish the fiscal plan for the upcoming year. The budget guidelines are developed and adopted by City Council early in the budgeting process in order to provide targets or parameters within which the budget recommendation will be formulated. The final budget presented by the City Manager may not meet all of these targets due to changing conditions and updated information during budget preparation. To the extent the recommended budget varies from the guidelines, an explanation will be provided in the printed budget document. The budget guidelines for Fiscal Year 2002 that I am recommending to you can be summarized as follows: . Preliminary Citizen participation opportunities Date Wednesday, December 6 Starting Time 5:00 p.m. - City Manager's Public Input Meeting 6: 15 p.m. - City Council Budget Worksession 6: 15 p.m. - City Council Budget Worksession 6: 15 p.m. - City Council Budget Worksession 6: 15 p.m. - City Council Budget Worksession Wednesday, February 7 Monday, February 1 2 Thursday, February 1 5 Wednesday, February 21 The Honorable Mayor and City Council September 13, 1999 Page 6 Date Monday, February 26 Tuesday, February 27 Tuesday, March 6 Starting Time 6: 15 p.m. - City Council Budget Worksession 6: 15 p.m. - City Council Budget Worksession 6:30 p.m. - Public Hearing - City Council . Service objectives Each department will identify specific objectives that reflect City Council goals. . Balanced budget Expenditures will not exceed revenue. . Limited resources It is not possible to afford all of the services requested by individual citizens. . Review of services Existing service levels are maintained and reviewed for appropriateness. . Improved productivity Efforts will continue to become more efficient. . Volunteers Efforts to expand the use of volunteers will be maintained. . Outside funding Non-City funding sources, like federal grants, public-private partnerships and coordination with other local governments will be aggressively pursued. . General Fund Balance To meet financial obligations prior to receiving certain tax revenues and to assist in maintaining a AA bond rating, which reduces borrowing costs, the City will maintain a cash reserve of 10 percent of the total General Fund operating budget (excluding employee fringe benefits) or $2,386,000. The Honorable Mayor and City Council September 13, 1999 Page 7 . Nonrecurring Income Nonrecurring income will only be spent on nonrecurring expenses to avoid future funding problems for the operating budget. . Revenue Assumptions There are thirteen revenue assumptions in the attached document. . Expenditure Assumptions There are eleven expenditure assumptions in the attached document. . The sales tax distribution formula will be maintained at 50 percent tax relief, 30 percent reduction of assessments and street construction and 20 percent maintenance of City-owned property. . Expansion or creation of new facilities that will increase the required operation support, usually from property taxes, will only be considered with a demonstrated need and a long-term plan to incorporate the increased costs into the entire system. . General Obligation borrowing is not anticipated if gaming distributions continue at the projected levels. To the extent they do not meet projections, general obligation borrowing may be necessary. . Emphasis will be placed on funding projects in the CIP that reduce future operating expenditures. . Gaming revenues, excluding the annual surplus distribution, will continue to be used 1/3 in the operating budget and 2/3 in the capital budget. . Finally, the Policy Guidelines include a property tax guideline that provides no increase in the "City" share of property taxes for the average homeowner. At this time, I am respectfully requesting that the Mayor and City Council adopt the budget guidelines which provides no increase in the "City" share of property taxes for the average homeowner in Fiscal Year 2002. The Honorable Mayor and City Council September 13, 1999 Page 8 , ld. Ie > ij l 'Michael C. Van Milligen City Manager POLICY GUIDELINES FOR FY 2002 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 five work sessions in addition to the budget public hearing for the purpose of reviewing the budget recommendations for each City department and requesting public input following each departmental review. The budget will be prepared in such a way as to maximize its understanding by citizens. A limited number of the Citizens Guide to the Recommended Budget will be made available to interested citizens and groups. Other budget documents will be on file with the City Clerk and at the Carnegie Stout Public Library in their government documents section. An opportunity will be provided for citizen input prior to formulation of the City Manager's recommended budget and again prior to finql 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. Policy Guidelines Fiscal Year 2002 Page 2 3. TWO TYPES OF BUDGET DOCUMENTS TO BE PREPARED Guideline The recommended City operating budget for Fiscal Year 2002 will consist of two types of budget documents: a Recommended City Council Policy Budget that is a collection of information that has been prepared for each department hearing and is bound by hearing date. The second type of document is a Citizens Guide to the Recommended FY 2002 Budget. The Recommended City Council Policy Budget documents contain the following information for each department: Highlights of Prior Year's Accomplishments and Future Year's Initiatives, a financial summary, a summary of decision packages requested and recommended, significant line items, index of capital improvement projects recommended over the next five years, organizational chart for larger departments, major goals, objectives and performance measures for each cost center within that department, and line item expense and revenue financial summaries. The purpose of these documents are to focus the attention of the City Council and the public on policy decisions involving what services the City government will provide, who will pay for them and the implications of such decisions. They will emphasize objectives, accomplishments and associated costs for the budget being recommended by the City Manager. It will clearly show the level of service being proposed. The Citizens Guide to the Recommended FY 2002 Budget is a composite of tables, financial summaries and explanations, operating and capital budget messages and the adopted City Council Budget Guidelines. It serves as a handout for the general public which highlights the budget process, City Manager's recommendations, departmental accomplishments and future initiatives. Through graphs, charts and tables it presents financial summaries which provide an overview of the total operating and capital budgets. The City of Dubuque will continue to maintain comprehensive budget documents which meet the standards for budget presentation established by the Governmental Finance Officers Association. 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. Policy Guidelines Fiscal Year 2002 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? @ 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 or user fees or a combination? 7. IMPROVED PRODUCTIVITY Guideline Efforts should continue to stretch the value of each tax dollar and the City services that it buys through improved efficiency and effectiveness. Using innovative and imaginative approaches to old tasks, reducing duplication of service effort, creative application of new technologies and more effective organizational arrangements are approaches to this challenge. 8. USE OF VOLUNTEERS Discussion As our financial capabilities decrease, we must seek to expand our resources by continuing to get citizens directly involved in supplementing our service delivery capability. Citizens must be encouraged to assume tasks previously performed or provided by City government. This may require us to change our approach to Policy Guidelines Fiscal Year 2002 Page 4 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, 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 2002 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 nongovernment groups and sponsors (i.e., YMCANWCA, 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 condition or health of the City government. To protect the financial integrity of the City government, it is recommended that the cost of any salary adjustment Policy Guidelines Fiscal Year 2002 Page 5 over the amount provided in the budget (that is, not financed in the budget) come from reductions in the budget of the department(s) of the benefiting employees. Guideline Salary increases over the amount budgeted for salaries shall be financed from operating budget reductions in the department(s) of the benefiting employees. 11. BALANCE BETWEEN CAPITAL AND OPERATING EXPENDITURES Guideline The provision of City services in the most economical and effective manner requires a balance between capital (with particular emphasis upon replacement of equipment and capital projects involving maintenance and reconstruction) and operating expenditures. This balance should be reflected in the budget each year. 12. USER CHARGES Discussion User charges or fees represent a significant portion of the income generated to support the operating budget. It is the policy that user charges or fees be established when possible so those who benefit from a service or activity also help pay for it. This is easy in some cases and municipal utility funds have been established for certain activities which are intended to be self-supporting. Examples of utility funds include Water User Fund, Sewer User Fund, Refuse Collection Fund, and Parking Fund. In other cases, a user charge is made after the Council determines to what extent an activity is to be self-supporting. Examples of this arrangement are fees for swimming, golf and recreation programs and certain inspection programs. Guideline User fees and charges should be established where possible so that those who utilize or directly benefit from a service, activity or facility also help pay for it. User fees and charges for each utility fund (Water User Fund, Sewer User Fund, Refuse Collection Fund, and Parking Fund) shall be set at a level that fully supports the total direct and indirect cost of the activity, including the cost of annual depreciation of capital assets and pay-as-you-go financing for future capital improvement projects. Policy Guidelines Fiscal Year 2002 Page 6 User fees and charges in the General Fund shall be established to cover not less than the following percentages of direct operating costs (excluding debt service). FY1998 FY1999 FY 2000 FY 2001 FY 2002 ACTUAL ACTUAL ACTUAL ADOPTED RECOM'D DEPARTMENT/DIVISION PERCENT PERCENT PERCENT PERCENT PERCENT Leisure Services Department Recreation Division Adult Athletics* 91.3 85.6 86.0 87.0 87.0 Children's Activities 57.2 62.1 61.3 58.0 58.0 Therapeutic Recreation 11.4 14.6 15.3 18.0 18.0 Recreation Classes 45.2 41.5 46.7 42.0 42.0 Swimming* 76.5 95.4 86.4 83.0 83.0 Golf* 99.2 100.0 100.0 100.0 100.0 Park Division 14.9 10.4 12.2 10.0 11.0 Civic Center Division** 42.8 41.1 48.0 45.0 45.0 Library Department 8.6 9.4 8.3 9.0 8.0 Airport Department w/abated debt 87.2 86.7 79.8 85.0 85.0 Building Services Division 71.9 87.4 83.7 70.0 80.0 Planning Services Department 7.8 11.4 10.7 10.0 10.0 Health Services Department Food/Environmental Insp. 56.7 56.8 66.8 68.0 68.0 Animal Control 82.0 90.7 100.0 90.0 90.0 Housing Services Department General Housing Inspection 51.9 51.3 50.9 51.0 51.0 * Includes an amount to help cover indirect costs (administration) ** Excludes Self-Promotion Activity 13. OUTSIDE FUNDING Discussion The purpose of this guideline is to establish the policy that the City should aggressively pursue outside funding to assist in financing its operating and capital budgets. However, the long-term commitments required for such funding must be carefully evaluated before any agreements are made. Commitments to assume an ongoing increased level of service or level of funding once the outside funding ends must be avoided. Policy Guidelines Fiscal Year 2002 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 budqet; they are required for cash flow (i.e., to be able to pay our bills before taxes are collected). The rule of thumb the state recognizes for determining a reasonable amount for a working balance is (a) anticipated revenues for the first three months of the fiscal year less anticipated expenditures or (b) 5% of the total General Fund operating budget (excluding fringes and tort liability expense). However, in discussions with Moody's Investor Service a factor of 10% was recommended for Aa rated cities. This is due to the fact that a large portion of our revenue sources are beyond our control and therefore uncertain. In the case of Dubuque, 10% represents approximately $2,386,000. Guideline The guideline of the City of Dubuque is to maintain a General Fund working balance or operating reserve of 10% of the total General Fund Operating budget requirements or approximately $2,386,000 for FY 2002. 15. USE OF UNANTICIPATED, UNOBLIGATED. 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 Policy Guidelines Fiscal Year 2002 Page 8 preparation. Several Iowa cities are in financial trouble because they spent nonrecurring money for recurring expenses. Nonrecurring expenditures would include capital improvements and equipment purchases. Guideline Nonrecurring unobligated 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 unobligated year end balances are in turn "carried over" into the new fiscal year to help finance it. The FY 2000-01 General Fund budget which went into effect July 1 st anticipated a "carryover balance" of $200,000 or approximately 2% of the General Fund. For multi-year budget planning purposes, these guidelines assume a carryover balance of $200,000 in FY 2002 through FY 2006. 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 2001-02 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 2002 and each succeeding year to support the operating budget. In Fiscal Year 2002, an additional amount of $145,878 in Pension Fund excess cash balance will be used for retirement expense and free up tax support for the additional police officers added in Fiscal Year 1994. Policy Guidelines Fiscal Year 2002 Page 9 b. State shared revenues will continue at the actual FY 2000 level of receipts, except Machinery and Equipment Replacement taxes which are anticipated to be eliminated in FY 2002. c. Hotel/motel tax receipts will increase 2.5% per year over FY 2000 actual receipts. d. FTA and State Transit operating assistance will continue at the actual FY 00 levels of $501,000 and $149,700 respectively. e. Miscellaneous revenue, excluding state shared revenues, has been estimated at 2% growth per year over Budgeted FY 2001. f. Revenues generated from Dubuque Greyhound Park have been estimated based on the actual Fiscal Year 2000 level of activity for FY 2002 and held constant in the out years. g. Riverboat related receipts also reflect FY 2000 actual receipts and are estimated at $605,000 from the 50 cent admission fee and $252,000 from % of 1 % of adjusted gross receipts. h. Interest earnings from the Self-Insurance Reserves (Health and Workers' Compensation) will continue to be used to reduce tax askings for fringe benefit expense. In addition, $120,000 in cash balance is being used each year for the next five years to reduce the Health Self-Insurance Reserve Fund balance based on recommended reserves. I. The residential rollback factor has been adjusted from 54.8525% to 56.2651 % or an increase of 2.15% for FY 2002. An increase of 2.5% has been estimated for Fiscal Years 2004 and 2006, the off years of equalization orders. Assessed valuations were increased 2% per year beyond FY2002. Machinery & Equipment valuations have been reduced per the League of Iowa Municipalities estimate and state replacement revenue has been eliminated per the State's projection. J. Debt Service Fund balances will be used over the next four years to reduce property tax support for General Obligation debt service related expense. No additional property tax supported General Obligation debt is anticipated in the Five Year Projection. Policy Guidelines Fiscal Year 2002 Page 10 k. Sales tax projections anticipate 50% of four quarterly payments in the General Fund for property tax relief. Sales tax projections for FY 2002 have been estimated to increase 5% per year over actual FY 2000 revenues. I. In Fiscal Year 2002 and beyond, 75% of the revenue from the Downtown TIF District is anticipated to be used for downtown development projects in order to support additional downtown parking, gateway improvements and plaza amenities. To the extent these funds are not required to support debt payments or project expense, the excess will be distributed per state code to each taxing body. m. For purposes of budget projections only, it is assumed that property taxes will continue to increase at a rate necessary to meet additional requirements over resources beyond Fiscal Year 2002. Assumptions - Requirements a. A wage adjustment is reflected in the projections for FY 2002 and each succeeding year. b. No increase is anticipated in FY 2002 for health insurance over the FY 2001 budgeted rates. Estimates for FY 03-06 have been increased by 5% per year. The rates being charged to departments have been decreased by $120,000 to reduce the Self-Insurance Reserve Fund balance as noted above. c. General operating supplies and services are estimated to increase 2.5% over budget in FY 2002 and succeeding years. d. Electrical energy expense is estimated to increase 2.5% per year over FY 2000 actual expense. e. Natural gas expense is estimated to increase 30% over FY 2000 actual plus 13% for degree day adjustment. f. The Convention and Visitors Bureau contract (including the Land of Festivals) will continue at 50% of actual hotel/motel tax receipts. g. Equipment costs are estimated at 2.5% per year over FY 2000 actual, however, the final budget recommendation will be based on need, not on a percentage over prior years. h. Debt service is estimated based on no additional General Obligation bond sales in FY 2002 - 2006. Policy Guidelines Fiscal Year 2002 Page 11 I. Unemployment insurance expense has been maintained at $15,000 per year. J. Motor vehicle fuel expense has been increased from 8 to 15% over FY 2000 actual expense and motor vehicle maintenance expense by 2.5% per year. k. Postage rates are estimated to increase 2.5% per year over FY 2001 budgeted expense. 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 0.0% $ 0.00 CITY TAX PERCENT DOLLAR PROJECTION CALCULATION INCREASE INCREASE FY 2002 "City" Property Tax $ 511 .38 + 0.00% +$ 0.00 FY 2003 "City" Property Tax $ 517.34 + 1.17% +$ 5.96 FY 2004 "City" Property Tax $ 548.53 + 6.03% +$ 31.19 FY 2005 "City" Property Tax $ 558.99 + 1.91% +$ 10.47 FY 2006 "City" Property Tax $ 582.89 + 4.27% +$ 23.90 Policy Guidelines Fiscal Year 2002 Page 12 IMPACT ON COMMERCIAL PROPERTY - EXAMPLE CITY TAX PERCENT DOLLAR ACTUAL - PAST HISTORY CALCULATION INCREASE INCREASE FY 1989 "City" Property Tax $2,106.42 - 15.4% - $ 384.00 FY 1990 "City" Property Tax $2,086.50 .9% - $ 20.00 FY 1991 "City" Property Tax* $2,189.48 + 4.9% +$ 102.98 FY 1992 "City" Property Tax $2,280.18 + 4.1% +$ 90.70 FY 1993 "City" Property Tax* $2,231.05 - 2.2% -$ 49.13 FY 1994 "City" Property Tax $2,250.15 + 0.9% +$ 19.10 FY 1995 "City" Property Tax* $2,439.60 + 8.4% +$ 189.45 FY 1996 "City" Property Tax $2,439.60 + 0.0% +$ 0.00 FY 1997 "City" Property Tax* $2,659.36 + 9.0% +$ 219.76 FY 1998 "City" Property Tax $2,738.43 + 2.97% +$ 79.07 FY 1999 "City" Property Tax* $2,952.03 + 7.8% +$213.60 FY 2000 "City" Property Tax $2,934.21 - 0.6% -$ 17.82 FY 2001 "City" Property Tax $2,993.00 + 2.0% +$ 58.86 * Denotes year of State issued equalization order. PROJECTION FY 2002 "City" Property Tax $2,910.25 - 2 .77% -$ 82.83 FY 2003 "City" Property Tax $2,944.18 + 1 .17% +$ 33.93 FY 2004 "City" Property Tax $3,040.43 + 3.27% +$ 96.25 FY 2005 "City" Property Tax $3,098.44 + 1.91 % +$ 58.01 FY 2006 "City" Property Tax $3,144.47 + 1.49% +$ 46.03 IMPACT ON INDUSTRIAL PROPERTY - EXAMPLE ACTUAL - PAST HISTORY FY 1989 "City" Property Tax FY 1990 "City" Property Tax FY 1991 "City" Property Tax FY 1992 "City" Property Tax FY 1993 "City" Property Tax FY 1994 "City" Property Tax FY 1995 "City" Property Tax FY 1996 "City" Property Tax CITY TAX CALCULATION $5,900.35 $5,844.55 $6,133.00 $6,387.05 $6,249.45 $6,302.95 $5,891.05 $5,891.05 CITY TAX PERCENT INCREASE -15.4% - .9% + 4.9% + 4.1% - 2.2% + 0.9% - 6.5% + 0.0% DOLLAR INCREASE -$1,074.65 -$ 55.80 +$ 288.45 +$ 254.05 -$ 137.60 +$ 53.50 -$ 411.90 +$ 0.00 PERCENT DOLLAR Policy Guidelines Fiscal Year 2002 Page 13 ACTUAL - PAST HISTORY (continued) CALCULATION INCREASE INCREASE FY 1997 "City" Property Tax $5,690.75 -3.4% -$ 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 PROJECTION FY 2002 "City" Property Tax $5,380.42 - 2.77% -$ 153.13 FY 2003 "City" Property Tax $5,443.15 + 1.17% +$ 62.73 FY 2004 "City" Property Tax $5,621.10 + 3.27% +$ 177.95 FY 2005 "City" Property Tax $5,728.35 + 1.91 % +$ 107.25 FY 2006 "City" Property Tax $5,813.45 + 1.49% +$ 85.10 History of Increases in Property Tax Askings Fiscal Year "City" Property Tax Askinas (000) 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 $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 *Without TIF Accounting change. % Increase -12.0% Sales Tax initiated - 0.2% +6.0% +6.0% +4.9% + 3.5% + 3.1% +2.6% +2.4% +2.9% + 3.3% - 0.3% + 1.9% Impact on Tax Askings and Average Residential Property To maintain the current level of service based on the previous assumptions will require the following property tax asking increases: Policy Guidelines Fiscal Year 2002 Page 14 Year "City" Property Tax Askin~s (000) % Increase % I $ Impact on Avg. Residential Property FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 15,380 15,543 16,358 16,998 17,588 - 1.3% + 1.1% +5.2% +3.9% +3.5% + 0.00%/+$ 0.00 + 1.17%/+$ 5.96 + 6.03%/+$ 31.19 + 1.91%/+$ 10.47 + 4.27%/+$ 23.90 Guideline The recommended guideline is to maintain no tax increase for the average residential property owner. Note: One percent increase in the tax rate will generate approximately $158,300 and a 1 % increase in tax asking will generate approximately $155,700. CIP BUDGET GUIDELINES 18. INTEGRATION OF CAPITAL RESOURCES Guideline In order to obtain maximum utilization, coordination and impact of ~ 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. Policy Guidelines Fiscal Year 2002 Page 15 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 recreation facilities and cost- sharing to improve roads and bridges are examples. 23. USE OF GENERAL OBLIGATION BONDS Discussion The Iowa Constitution limits the General Obligation debt of any city to 5% of the actual value of the taxable property within the city. The Iowa legislature has determined that the value for calculating the debt limit shall be the actual value of the taxable property prior to any "rollback" mandated by state statute. The FY 2000-01 taxable value for calculating the debt limit is $2,095,515,187 which indicates a total General Obligation debt capacity of $104,775,619. Outstanding G.O. debt (including tax increment debt) on June 30, 2001 will be $18,724,809 (18%) leaving an available debt capacity of $86,050,810 (82%). Policy Guidelines Fiscal Year 2002 Page 16 As we approach the preparation of the FY 2002-2006 Capital Improvement Program (CIP) the problem is not our capacity to borrow money but (a) how to identify, limit and prioritize projects which justify the interest payments and (b) how to balance high priority projects against their impact on the property tax rate. Guideline There are many high priority capital improvement projects which need to be constructed during the FY 2002-2006 period. Most of these projects will be possible without borrowing the money (i.e., selling bonds) to help finance them. This is based on the plan approved by City Council in 1997 that shifts Road Use Tax funds from the operating budget to the capital budget and uses ORA distributions of annual net surpluses to the City for capital improvements. In determining whether a project should be financed in total or in part from bond funds the City Council must consider and balance off: (a) the community impact of not doing the project (poor streets, deteriorated park buildings, sewer problems, higher operating costs); (b) possible operating budget cuts to offset higher debt service payments; (c) anticipated interest rate; and (d) the impact on the tax rate and taxpayer of issuing the bonds. 24. ROAD USE TAX FUND Discussion Actual Road Use Tax Fund receipts are as follows: FY 1985 - $2,069,065 FY 1986 - $2,207,467 FY 1987 - $2,259,436 FY 1988 - $2,379,592 FY 1989 - $2,617,183 FY 1990 - $3,037,587 FY 1991 - $3,122,835 FY 1992 - $3,119,087 FY 1993 - $3,121,357 FY 1994 - $3,343,678 FY 1995 - $3,484,524 FY 1996 - $3,841,921 FY 1997 - $3,977,528 FY 1998 - $4,072,296 FY 1999 - $4,415,192 FY 2000 - $4,671,656 The FY 2001 budget was based on receiving $4,689,000 in Road Use Tax funds. In FY 2001,46.6% of the Road Use Tax income is in the operating budget. In FY 1997, the City Council adopted a plan to shift Road Use Tax funds from the operating budget to the capital budget at a rate of $250,000 per year. As of FY 2001, $940,000 of Road Use Tax fund expense had been shifted to the General Policy Guidelines Fiscal Year 2002 Page 17 Fund per the guideline. The increase in the tax askings from this shift has been offset by reduced debt service expense. Shifting additional funds was discontinued in FY 2001, and $60,000 was actually shifted back to Road Use Tax funds. This change reflected the continued growth of gaming receipts and recognition that this appeared to be a much more certain revenue stream that could be used to support the CIP budget. Guideline Since FY 1997 Road Use Tax funds have been shifted to the capital budget for street maintenance and repair to reduce the need to borrow funds for routine street maintenance and improvements. This shift will not occur again until such time as there is increased revenues or reduced expense that would allow this shift without a property tax impact. 25. COMMERCIAL AND INDUSTRIAL DEVELOPMENT Guideline Current City, commercial and industrial development efforts should be continued to (a) preserve current jobs and create new job opportunities and (b) enlarge and diversify our economic base. Financing these efforts and programs should continue to be a high priority for Community Development funding. 26. HOUSING Guideline In order to maintain an adequate supply of safe and decent housing, the City should strive to preserve existing single family and rental housing and provide opportunities for development of new housing within the City's corporate limits for all citizens, particularly for people of 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% 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, Policy Guidelines Fiscal Year 2002 Page 18 Library, Law Enforcement Center, City Hall, fire stations, parks and swimming pools); (b) Transit equipment such as buses; (c) riverfront and wetland development; and (d) economic development projects. 28. NET CASH PROCEEDS (SURPLUS DISTRIBUTION) FROM THE DUBUQUE RACING ASSOCIATION The contract with the Dubuque Racing Association calls for distribution at the end of its fiscal year (November) of 50% of its net cash operating funds to the City of Dubuque. In mid-December, the City will receive an unaudited estimate of proceeds to be distributed. These proceeds will then be allocated beginning with the next fiscal year through the capital improvement process with the highest priority given to reducing the City's annual borrowing. In addition, the Dubuque Racing Association provides the City with projections of future distributions since gaming is a highly volatile industry the estimates are discounted prior to including them in the City's Five Year CIP. One hundred percent of the 2001 projections of operating surplus have been anticipated as resources to support the Fiscal Year 2002 capital improvement projects. This level has been maintained for the Fiscal Year 2003 resource estimate and then has been reduced from 100% to 85% of the year 2003 projected surplus for FY 2004, 70% for FY 2005, and 55% for FY 2006 resources. This is the same assumption used to prepare the Fiscal Years 2001- 2005 CIP. Guideline In Fiscal Year 2002, the City anticipates distribution of a significant amount of net cash proceeds for use in the Capital Improvement Program. These amounts will be budgeted in the Five Year CIP and will be used to reduce required General Obligation borrowing. 29. EMPHASIS ON INITIATIVES THAT REDUCE FUTURE OPERATING BUDGET EXPENSE Guideline Capital improvement expenditures that will reduce future maintenance and operating expense will receive priority funding and these type of initiatives will be encouraged in all departments and funding sources as a means of maximizing the use of available resources. This emphasis reflects fiscally responsible long range planning efforts. Policy Guidelines Fiscal Year 2002 Page 19 30. USE OF GAMING RELATED RECEIPTS Guideline The amount of total gaming receipts from taxes and rent committed annually in support of the annual operating budget is one-third of the total gaming tax and lease revenues. It is felt that a fiscally sound policy is to continue to commit two thirds of the gaming revenues to the capital budget, thereby providing a cushion for future years, when gaming revenues may again fluctuate with the local economy. Should gaming revenues begin to decline, the capital budget projects can either be eliminated, deferred or funded from some other source if they are a high priority. To the extent possible within the property tax guideline, the City will minimize dependence on gaming revenues in the operating budget.