Budget FY 07 Policy Guidelines
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MEMORANDUM
November 16, 2005
TO:
The Honorable Mayor and City Council Members
FROM:
Michael C. Van Milligen, City Manager
SUBJECT: Policy Guidelines for Fiscal Year 2007 Budget Planning and
Administration
Budget Director Dawn Lang is recommending adoption of the Fiscal Year 2007 Budget
Policy Guidelines. The guidelines reflect City Council direction given as part of the
September 7 and 8, 2005, goal setting sessions.
The budget guidelines are developed and adopted by City Council early in the
budgeting process in order to provide targets or parameters within which the budget
recommendation will be formulated. The final budget presented by the City Manager
may not meet all of these targets due to changing conditions and updated information
during budget preparation. To the extent the recommended budget varies from the
guidelines, an explanation will be provided in the printed budget document.
Some highlights of the document are:
1. Prior to Fiscal Year 2006 the policy in the Downtown Urban Renewal District was
to only use 75% of the available Tax Increment Financing Revenues, returning
the other 25% to the taxing districts. That policy was changed in Fiscal Year
2006 to allow capturing 100% of the TIF revenues to help fund the renovations
needed for the downtown parking ramps. Only 6% of the TIF revenues, for a
total of 81 %, are needed to finance those renovations.
These Fiscal Year 2007 guidelines continue the policy of claiming 100% of the
available Downtown TIF revenues to help with financing the Downtown Loan
Pool, to help with providing the 20% match toward Federal funds to build an
intermodal transportation facility in the Port of Dubuque and assist with
renovation of the Federal Building.
2. There are many high priority capital improvement projects, which need to be
constructed during the FY 2007-2011 period. Most of these projects will be
possible without borrowing the money (Le., selling bonds) to help finance them.
However, debt will be required on 3 major capital projects, that being the
Drainage Basin Master Plan, Sanitary Sewer Fund, and Water Fund.
3. The Policy Guidelines include a property tax guideline that provides a reduction
in the "City" share of property taxes for the average homeowner. The State of
Iowa has negatively impacted homeowners in Dubuque by chronically under-
funding the Homestead Tax Credit. In Fiscal Year 2004, the State only funded
85% of the tax credit, 81 % in Fiscal Year 2005, and 78% in Fiscal Year 2006.
The Homestead Property Tax Credit was established by the State Legislature to
reduce the amount of property tax collected. The intent of the credit was to be a
form of tax relief and provide an incentive for home ownership. The State
Homestead Property Tax Credit works by discounting the tax collected on the
first $4,850 of a property's taxable value. This has no impact on what the City
receives from State property tax collections, but provides tax relief for the
average homeowner.
Beginning in Fiscal Year 2004, the State of Iowa did not fully fund the State
Homestead Property Tax Credit, resulting in the average homeowner paying the
unfunded portion. Again this has no impact on what the City receives, however
as a result has caused the average homeowner to pay more taxes.
The City of Dubuque has a benchmark for no property tax increase to the
average homeowner. This benchmark is for the City portion of the property tax
paid by the average homeowner reduced by the State-mandated Homestead
Property Tax Credit. The City of Dubuque's benchmark should not go up, just
because the State Homestead Property Tax Credit was not fully funded.
The benchmark used to calculate the property tax the average homeowner paid
was $485.79 in Fiscal Year 2003 and Fiscal Year 2004. When the State started
under-funding the Homestead Property Tax Credit in Fiscal Year 2004, City staff
inadvertently changed the benchmark to the higher amount of property taxes
paid by the average homeowner because of the State action. To adjust for that
miscalculation by the City, these Fiscal Year 2007 guidelines adjust the guideline
below the Fiscal Year 2006 average homeowner payment of $504.62 and below
the Fiscal Year 2004 guideline of $485.79, and sets the average homeowner
payment at $477.17. This guideline will be readjusted to $485.79 in Fiscal Year
2008 and beyond. This would be a 5.4% property tax decrease for the average
homeowner in Fiscal Year 2007. The only reasonable alternative to this action
would be to adjust in Fiscal Year 2007 from the $504.62 amount paid in Fiscal
Year 2006 to $485.79 in Fiscal Year 2006; however, that is not the
recommendation.
One benefit of this reduction in Fiscal Year 2007 for the average homeowner is that it
would also reduce the impact of the 10% equalization order issued by the State of Iowa
on commercial properties.
Preliminary citizen participation opportunities will be available. There will be a City
Manager's Public Input meeting on Wednesday, November 30th at 5:15 p.m. and 6 City
Council Work Sessions prior to the adoption of the FY 2007 budget before March 15th.
2006.
I concur with the recommendation and 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 2007, and reduces the
property tax rate by 5.4%.
flJ ~~ (lzJb,
Michael C. Van Milligen
MCVM/jh
Attachment
cc: Barry Lindahl, Corporation Counsel
Cindy Steinhauser, Assistant City Manager
Dawn Lang, Budget Director
POLICY GUIDELINES FOR FY 2007
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.citvofdubuque.orq 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 2007 Policy Guidelines
Page 2
3. TWO TYPES OF BUDGET DOCUMENTS TO BE PREPARED
Guideline
The recommended City operating budget for Fiscal Year 2007 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 2007 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 2007 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 2007 Policy Guidelines
Page 3
5. BALANCE BETWEEN SERVICES AND TAX BURDEN
Guideline
The budget should reflect a balance between services provided and the burden
of paying for those services. It is not possible or desirable for the City to provide
all of the services requested by individual citizens. The City must consider the
ability of citizens to pay for services in setting service levels and priorities.
6. MAINTENANCE OF EXISTING SERVICES
Guideline
To the extent possible with the financial resources available, the City should
attempt to maintain the existing level of services. Annually, however, each
service should be tested against the following questions: (a) Is this service truly
necessary? (b) Should the City provide it? (c) What level of service should be
provided? (d) Is there a better, less costly way to provide it? (e) What is its
priority compared to other services? (f) What is the level of demand for the
service? (g) Should this service be supported by property tax, user fees, or a
combination?
7. IMPROVED PRODUCTIVITY
Guideline
Efforts should continue to stretch the value of each tax dollar and the City
services that it buys through improved efficiency and effectiveness. Using
innovative and imaginative approaches to old tasks, reducing duplication of
service effort, creative application of new technologies and more effective
organizational arrangements are approaches to this challenge.
8. USE OF VOLUNTEERS
Discussion
As our financial capabilities decrease, we must seek to expand our resources by
continuing to get citizens directly involved in supplementing our service delivery
capability. Citizens must be encouraged to assume tasks previously performed
or provided by City government. This may require us to change our approach to
FY 2007 Policy Guidelines
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 (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 2007, 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 (Le.,
Library, Recreation, Parks, Cable TV, Police) or (b) services can be "spun off" to
non-government groups and sponsors (Le., YMCNYWCA, 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{SI 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
FY 2007 Policy Guidelines
Page 5
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.
FY 2007 Policy Guidelines
Page 6
User fees and charges for each utility fund (Water User Fund, Sewer User Fund,
Stormwater User Fund, Refuse Collection Fund, and Parking Fund) shall be set
at a level that fully supports the total direct and indirect cost of the activity,
including the cost of annual depreciation of capital assets and 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 2003 FY 2004 FY 2005 FY 2006 FY 2007
ACTUAL ACTUAL ACTUAL BUDGETED RECOM'D
DEPARTMENT/DIVISION PERCENT PERCENT PERCENT PERCENT PERCENT
Leisure Services Department
Recreation Division
Adult Athletics* 81.0 76.0 77.9 74.9 61.8**
Children's Activities 54.0 52.0 54.7 52.4 53.2
Therapeutic Recreation 19.0 14.0 13.6 18.0 13.3
Recreation Classes 42.0 45.0 38.8 48.0 42.0
Swimming* 69.0 73.0 72.4 71.7 69.6
Golf* Surplus to Golf Devel' Fund 100.0 93.0 111.2 100.2 101.5
Park Division 10.5 10.7 13.4 11.2 12.7
Library Department excl' Gift Trusts 6.1 5.9 6.1 5.0 4.8
Airport Department wlabated debt 79.8 77.6 82.2 75.9 76.8
Building Services Division 77.8 95.6 100.1 105.9 102.7
Planning Services Department 11.9 17.6 16.6 15.3 15.3
Health Services Department
Food/Environmental Insp. 57.6 51.8 54.4 54.5 53.0
Animal Control*** 81.7 99.2 70.2 69.3 55.7
Housing Services Department
General Housing Inspection 34.8 54.6 42.1 37.1 41.3
* Includes an amount to help cover indirect costs (administration).
** McAleece concessions moved to a separate activity.
***Increased cost of the Humane Society contract is decreasing this percentage
FY 2007 Policy Guidelines
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13. OUTSIDE FUNDING
Discussion
The purpose of this guideline is to establish the policy that the City should
aggressively pursue outside funding to assist in financing its operating and
capital budgets. However, the long-term commitments required for such funding
must be carefully evaluated before any agreements are made. Commitments to
assume an ongoing increased level of service or level of funding once the
outside funding ends must be avoided.
Guideline
In order to minimize the property tax burden, the City of Dubuque will make every
effort to obtain federal, state and private funding to assist in financing its
operating and capital budgets. However, commitments to guarantee a level of
service or level of funding after the outside funding ends shall be avoided.
14. GENERAL FUND OPERATING RESERVE OR WORKING BALANCE
Discussion
An operating reserve or working balance is an amount of cash, which must be
carried into a fiscal year to pay operating costs until tax money, or other
anticipated revenue comes in. Without a working balance there would not be
sufficient cash in the fund to meet its obligations and money would have to be
borrowed. Workinq balances are not available for fundinq a budqet: thev are
required for cash flow (Le., 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 $3,093,000.
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 $3,093,000 for FY 2007.
FY 2007 Policy Guidelines
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15. USE OF UNANTICIPATED, UN-OBLIGATED. NONRECURRING INCOME
Discussion
Sometimes income is received that was not anticipated and was not budgeted.
Often this money is not recurring and reflects something, which happened on a
one-time basis to generate the "windfall".
Nonrecurring income must not be spent for recurring expenses. To do so
causes a funding shortfall the next budget year before you even start budget
preparation. Nonrecurring expenditures would include capital improvements and
equipment purchases.
Guideline
Nonrecurring un-obligated income shall be spent only for nonrecurring expenses.
Capital improvement projects and major equipment purchases tend to be
nonrecurring expenditures.
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 tum
"carried over" into the new fiscal year to help finance it.
The FY 2005-06 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 2007 through FY 2011.
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 2006-07 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.
FY 2007 Policy Guidelines
Page 9
17. PROPERTY TAX DISCUSSION
Assumptions - Resources
a. Unencumbered funds or cash balances of $200,000 will be available in FY
2007 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 Machinery and
Equipment Property Tax Replacement have been permanently cut from the
City's resources in the last 3 budget years.
c. Hotel/motel tax receipts are projected at the same level as the FY 2006
budgeted receipts (which included a 10% increase over FY 2005 budgeted
receipts), and then increase at an annual rate of 3 percent per year.
d. State Transit operating assistance will also be maintained at its FY 2006
budgeted level.
e. Miscellaneous revenue, excluding state shared revenues, has been
estimated at 2 percent growth per year over budgeted FY 2006.
f. Gaming revenues generated have been estimated based on FY 2006
projections from the implementation of a new lease agreement and
expanded gaming operations from increasing slot machines (600 to 1,000)
and adding table games.
g. Gaming revenues from taxes and the ORA lease (not distributions) remain
unchanged from the FY 2006 split of 62.72% / 37.28% between operating
and capital budgets for FY 2007.
h. The residential rollback factor will decrease from 47.960 percent to 45.996
percent or a 4.10 percent reduction for FY 2007. For Fiscal Years 2008 and
beyond, a 10-year average for rollbacks and equalization orders was used.
i. 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 6.2 percent, Commercial property
valuations decreased 3 percent and Industrial property valuations increased
19.9 percent. FY 2007 reflects this increased assessed value for the
average homeowner. Assessed valuations were increased 2 percent per
year beyond FY 2007.
FY 2007 Policy Guidelines
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j. Sales tax projections anticipate 50 percent of four quarterly payments in the
General Fund for property tax relief. Sales tax projections for FY 2007 are
projected at the same level as the FY 2006 budgeted receipts (which
included a 10% increase over FY 2005 budgeted receipts), and then
increase at an annual rate of 3 percent per year.
k. During the FY 2006 budget process, the City Council approved changing the
amount requested from certain parcels in the former Downtown TIF district
from 75 percent to 100 percent of Tax Increment revenue, excluding certain
economic development grants that require 100 percent of the revenue from a
particular project. This district is now referred to as the Greater Downtown
TIF after the Downtown and Ice Harbor TIF districts were combined.
The FY 2006 five year CI P included using a portion of the additional funds in
FY 2007-2010 for Parking Fund major ramp improvement debt service
abatement. It will be recommended through the FY 2007 budget process that
the remaining TIF revenue from this change be used for downtown and Ice
Harbor development projects such as the federal building, a source for the
depleted Downtown Loan Pool Program, and parking demands in the Ice
Harbor. These additional Tax Increment funds would be paid to the City in
FY 2007 (September/March). 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.
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 2007, with the gaming revenue (from
taxes and the ORA lease) split remaining the same as FY 2006 at 62.72%
operating budget and 37.28% capital budget.
m. Gas and electric franchise fees have been adjusted based on two year's
trend data and an estimated increase in energy costs. The FY 2007 budget
is estimated to increase 13 percent over FY 2005 actual for electric and 20%
over FY 2005 for gas, and then increases at an annual rate of 2.5 percent per
year.
n. New revenues include $45,000 per year for the Dog Track Hotel Land Lease
and $225,000 per year beginning in FY 2009 for Diamond Jo parking
privileges.
FY 2007 Policy Guidelines
Page II
Assumptions - Reauirements
a. A wage increase is reflected in the projections for FY 2007 of 3.5% and 3%
for each succeeding year. Police and Fire retirement rates have been
decreased 1.6 percent, saving the City approximately $45,000 per year.
b. Medical expense costs for Police and Fire retirees is anticipated to increase
for FY 2007 from $31,000 to $100,000 based on actual trend data.
c. Health insurance costs are estimated to increase 7 percent over the
FY 2006 budgeted rates with FY 2007 representing the 2nd year employees
are contributing 10% towards their health insurance premium. Estimates for
FY 08-11 have been increased by 7 percent per year.
d. General operating supplies and services are estimated to increase 6 percent
over actual in FY 2005 or 3 percent over budget in FY 2006, depending on
which year reflects expenditures more accurately. 2.5 percent increase is
estimated in succeeding years.
e. Electrical energy expense is estimated to increase 13 percent over FY 2005
actual expense, then 2.5 percent per year beyond.
f. Natural gas expense is estimated to increase 20 percent over FY 2005
actual, then 2.5 percent per year beyond. There is no degree-day
adjustment this year and is higher due to natural disasters affecting costs.
g. The Convention and Visitors Bureau contract will continue at 50 percent of
actual hotel/motel tax receipts, less a $35,000 loan repayment.
h. Equipment costs for FY 2007 are estimated to increase 3 percent over FY
2006 budget, then 2.5 percent per year beyond.
i. Debt service is estimated based on no additional tax-supported General
Obligation bond sales in FY 2007 - 2011.
j. Unemployment expense in the General Fund has been increased from
$30,000 to $50,000 for FY 2007 based on past years actual experience.
k. Motor vehicle fuel expense is estimated to increase 25 percent, low sulfur
diesel fuel increases 40 percent, and high sulfur diesel fuel increases 29
percent over FY 2005 actual expense, then 2.5 percent per year beyond.
I. Postage rates for FY 2007 are estimated to increase 9.4 percent over FY
2006 and remain at that level per year beyond.
FY 2007 Policy Guidelines
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m. Damage claims expense for FY 2007 is anticipated to increase from $75,500
to $100,000 to cover the aggregate deductible based on past years actual
experience.
FY 2007 Policy Guidelines
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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 T ax* $ 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 T ax* $ 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 Adj. $ 493.26 + 1.54% +$ 7.46
FY 2005 "City" Property Tax* $ 485.93 + 0.03% +$ 0.14
FY 2005 With Homestead Adj.* $ 495.21 +0.40% +$ 1.95
FY 2006 "City" Property Tax(1) $ 494.27 + 1.72% +$ 8.34
FY 2006 With Homestead Adj. (1) $ 504.62 + 1.90% +$ 9.41
PROPOSED
FY 2007 "City" Property Tax*(2) $477.17 - 5.44% -$ 27.44
Average FY 1989-FY 2007 - .19% -$ 2.13
PROJECTION **
FY 2008 "City" Property Tax (3) $ 488.48 + 2.37% +$ 11.31
FY 2009 "City" Property Tax*(3) $ 501.83 + 2.73% +$ 13.35
FY 2010 "City" Property Tax (3) $ 520.42 + 3.70% +$ 18.59
FY 2011 "City" Property Tax*(3) $ 540.76 + 3.91 % +$ 20.34
. Denotes year of State-issued equalization orders.
(1) The FY 2006 property tax calculation takes into account the 6.2% valuation increase for the average
residential homeowner as determined by the reappraisal.
(2) FY 2007 rate offsets the miscalculation of the FY 2005 & 2006 tax rate, to show no increase to the
average homeowner (explained on the next 2 pages).
(3) If in FY 2008 and beyond, the goal of City Council is no property tax increase for the average
homeowner, the rate would be the benchmark of $485.79.
FY 2007 Policy Guidelines
Page I 4
EXPLANATION OF FY 2007 TAX RATE ADJUSTMENT
ACTUAL BENCHMARK DIFFERENCE
FY 2004 Assessed Value $ 101,458 $ 101,458
Rollback Factor 0.513874 0.513874
Taxable Value $ 52,137 $ 52,137
Tax Rate 10.2730 10.2730
Gross "City" Property Tax $ 535.61 $ 535.61
Homestead Tax Credit 49.82 49.82
BENCHMARK Net "City" Property Tax $ 485.79 $ 485.79 $ 0.00
FY 2005 Assessed Value $ 101,458 $ 101,458
Equalization Order 8.00% 8.00%
Taxable Value $ 109,575 $ 109,575
Rollback Factor 0.48456 0.48456
Taxable Value $ 53,095 $ 53,095
Tax Rate 10.0720 10.0692
Gross "City" Properly Tax $ 534.78 $ 534.63
Homestead Tax Credit 48.85 48.84
Net "City" Property Tax $ 485.93 $ 485.79 $ 0.14
Projected 6% increase in Assessed Value for Average Homeowner
for revaluation, final was 6.2%
FY 2006 Assessed Value $ 116,368 $ 116,368
Rollback Factor 0.4796 0.4796
Taxable Value $ 55,810 $ 55,810
Tax Rate 9.6991 9.5328
Gross "City" Property Tax $ 541.31 $ 532.03
Homestead Tax Credit 47.04 46.23
Net "City" Property Tax $ 494.27 $ 485.79 $ 8.48
PROJECTION
FY 2007 Assessed Value $ 116,368 $ 116,368
Equalization Order 0.00% 0.00%
Taxable Value $ 116,368 $ 116,368
Rollback Factor 0.45996 0.45996
Taxable Value $ 53,525 $ 53,525
Tax Rate 9.8033 9.9803
Gross "City" Property Tax $ 524.72 $ 534.19
Homestead Tax Credit 47.55 48.40
Net "City" Property Tax $ 477.17 $ 485.79 $ (8.62)
FY 2007 Policy Guidelines
Page I 5
The Homestead Property Tax Credit was an unfunded mandate established by the state legislature to
reduce the amount of property tax collected. The intent of the credit was to be a form of tax relief and
provide an incentive for home ownership. The State Homestead Property Tax Credit works by discounting
the tax collected on the first $4,850 of a property's taxable value. This has no impact on what the City
receives from State property tax collections, but provides tax relief for the average homeowner.
Beginning FY 2004, the State of Iowa did not fully fund the State Homestead Property Tax Credit resulting
in the average homeowner paying the unfunded portion. Again this has no impact on what the City
receives, however as a result has caused the average homeowner to pay more taxes.
The City of Dubuque has a benchmark for no property tax increase to the average homeowner. This
benchmark is for the City portion of the property tax paid by the average homeowner reduced by the FULL
State mandated Homestead Property Tax Credit. The City of Dubuque's benchmark should not go up, just
because the State Homestead Property Tax Credit was not fully funded.
In FY 2005 and FY 2006 a miscalculation of the property tax rate occurred by using the benchmark
reduced by the partially funded State Homestead Property Tax Credit. To correct this oversight, the FY
2007 City property tax rate will include a one time reduction (-$8.62) of the City portion of property taxes
paid by the average homeowner. Once again, incompliance with policy guidelines, FY 2007 will reflect no
property tax increase to the average homeowner.
In FY 2007 the average homeowner will pay $477.17 in city property taxes, a 5.44% reduction from FY
2006 and less than the standard benchmark of $485.74. In FY 2008 the City portion of property taxes will
return to $485.79 if the City Council adopts the policy of no property tax increase for the average
homeowner.
Homestead Property Tax Credit History
~ State of Iowa Funded 100% of the
* 2002-2003 Homestead Property Tax Credit
n:=::> State of Iowa Funded 85% of the
* 2003-2004 Homestead Property Tax Credit
~ State of Iowa Funded 81% of the
* 2004-2005 Homestead Property Tax Credit
~ State of Iowa Funded 78% of the
* 2005-2006 Homestead Property Tax Credit
n:=::> Assumed Homestead will be 100%
* 2006-2007 Funded by the State of Iowa
FY 2007 Policy Guidelines
Page I 6
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
FY 2002 "City" Property Tax $2,910.25 -2.77% -$ 82.83
FY 2003 "City" Property Tax' $3,186.27 +9.48% +$276.03
FY 2004 "City" Property Tax $3,278.41 + 2.89% +$ 92.14
FY 2005 "City" Property Tax' $3,349.90 + 2.18% +$ 71.49
FY 2006 "City" Property Tax (1) $3,152.52 - 5.89% -$197.38
PROPOSED
FY 2007 "City" Property Tax'(2) $3,475.27 +10.24% +$322.75
Average FY 1989-2007 + 1.95% +$ 51.83
PROJECTION ..
FY 2008 "City" Property Tax $3,576.04 + 2.90% +$ 100.77
FY 2009 "City" Property Tax' $3,646.01 + 1.96% +$ 69.97
FY 2010 "City" Property Tax $3,768.36 + 3.36% +$ 122.35
FY 2011 "City" Property Tax' $3,886.06 + 3.12% +$117.70
. Denotes year of State-issued equalization orders
(1) The FY 2006 property tax calculation takes into account the 3% valuation decrease for commercial
property as determined by the reappraisal.
(2) If the City Council was not reducing the rate in FY 2007, the impact on Commercial Property would be a
12.23% increase as opposed to the 10.24% increase reflected. This is due to a 10% equalization order on
Commercial Property from the State of Iowa.
FY 2007 Policy Guidelines
Page I 7
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
FY 2006 "City" Property Tax(1) $5,814.61 +15.46% +$ 778.61
PROPOSED
FY 2007 "City" Property Tax $5,877.08 + 1.07% +$ 62.47
Average FY 1989.FY 2007 - 0.73% -$ 57.78
PROJECTION**
FY 2008 "City" Property Tax $5,996.14 + 2.03% +$ 119.06
FY 2009 "City" Property Tax $6,113.46 + 1.96% +$117.32
FY 2010 "City" Property Tax $6,318.61 + 3.36% +$ 205.15
FY 2011 "City" Property Tax $6,515.97 + 3.12% +$ 197.36
(1 )The FY 2006 property tax calculation takes into account the 1 9.9% valuation increase for industrial
property as determined by the reappraisal.
FY 2007 Policy Guidelines
Page 18
History of Increases in Property Tax Askings
Fiscal
Year
"City" Property
Tax AskinQs (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
$16,192,215
$17,249,279
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
FY 2007
Estimate
Average FY 1989-2007
'Without TIF Accounting change.
% Chanae
in Tax
Askinas
-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%
+ .7%
+ .5%
+2.5%
+ 1.2%
- 1.1%
+6.5%
+ 1.81%
Impact on Tax Askings and Average Residential Property
Present Impact
on Homeowner
-11.4%
- .9%
+3.8%
+3.6%
+5.0%
+ .3%
+2.4%
- .9%
- .4%
- .7%
.0%
- .2%
.0%
.0%
-5.0%
.0%
.0%
+ 1.7%
- 5.4%
- .42%
To maintain the current level of service based on the previous assumptions would
require the following property tax asking increases:
Year
FY 2006
FY 2007
FY 2008
FY 2009
FY 2010
FY 2011
"City" Property
Tax Askinas (000)
$16,192
$17,249
$17,951
$18,668
$19,680
$20,701
% Increase
% I $ Impact on Avg.
Residential Property.
+ 6.53%
+ 4.07%
+ 4.00%
+ 5.42%
+ 5.19%
-5.44% / -$ 27.44
+2.37% I +$11.31
+2.73% / +$13.35
+3.70% I +$18.59
+3.91 % I +$20.34
FY 2007 Policy Guidelines
Page 19
Guideline
The recommended guideline is no tax increase for the average residential property
owner by lowering the rate in FY 2007 to give the average homeowner back $8.62 of
property taxes to offset FY 2005 and FY 2006, and to leave unchanged the percent of
annual gaming revenues going into the operating budget at 62.72 percent.
Note: One percent increase in the tax rate will generate approximately $172,493.
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 2007 Policy Guidelines
Page 20
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 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 2005-06 taxable value for calculating the debt limit is $2,775,778,478,
which indicates a total General Obligation debt capacity of $138,788.924.
Outstanding G.O. debt (including tax increment debt) on June 30, 2006 will be
$35,452,520 (25.5 percent) leaving an available debt capacity of $103,336,404
(74.5 percent). It should be noted that none of the City of Dubuque's
outstanding debt is abated with property taxes, but from other revenues.
As we approach the preparation of the FY 2007-2011 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 2007 Policy Guidelines
Page 21
Guideline
There are many high priority capital improvement projects, which need to be
constructed during the FY 2007-2011 period. Most of these projects will be
possible without borrowing the money (Le., selling bonds) to help finance them.
However, debt may be required on 3 major capital projects, that being the
Drainage Basin Master Plan, Sanitary Sewer Fund, and Water Fund. In
determining whether a project should be financed in total or in part from bond
funds the City Council must consider and balance: (a) the community impact of
not doing the project (poor streets, deteriorated park buildings, sewer problems,
higher operating costs); (b) possible operating budget cuts to offset higher debt
service payments; (c) anticipated interest rate; and (d) the impact on the tax rate
and taxpayer of issuing the bonds.
24. ROAD USE TAX FUND
Discussion
Actual Road Use Tax Fund receipts are as follows:
FY 1985 - $2,069,065
FY 1986 - $2,207,467
FY 1987 - $2,259,436
FY 1988 - $2,379,592
FY 1989 - $2,617,183
FY 1990 - $3,037,587
FY 1991 - $3,122,835
FY 1992 - $3,119,087
FY 1993 - $3,121,357
FY 1994 - $3,343,678
FY 1995 - $3,484,524
FY 1996 - $3,841,921
FY 1997 - $3,977,528
FY 1998 - $4,072,296
FY 1999 - $4,415,192
FY 2000 - $4,671,656
FY 2001 - $4,628,072
FY 2002 - $4,620,514
FY 2003 - $4,696,399
FY 2004 - $4,806,295
FY 2005 - $4,798,667
The FY 2006 budget was based on receiving $4,874,467 in Road Use Tax funds.
In FY 2006, 78.3 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 2007 Policy Guidelines
Page 22
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 percent of street special assessments and (b) the maintenance and
repair of streets. Twenty percent will be used for: (a) the upkeep of City-owned
property such as sidewalks, steps, storm sewers, walls, curbs, traffic signals and
signs, bridges and buildings and facilities (e.g., Airport, Five Flags Center,
Library, Law Enforcement Center, City Hall, fire stations, parks and swimming
pools); (b) Transit equipment such as buses; (c) riverfront and wetland
development; and (d) economic development projects.
28. NET CASH PROCEEDS (SURPLUS DISTRIBUTION) FROM THE DUBUQUE
RACING ASSOCIATION
The contract with the Dubuque Racing Association calls for distribution at the
end of its fiscal year, November 30th, of 40 percent (this was 50 percent, but
changed with the new lease agreement on April 1, 2004) of its net cash
FY 2007 Policy Guidelines
Page 23
operating funds to the City of Dubuque. In mid-December, the City will receive
an un-audited estimate of proceeds to be distributed. These proceeds 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 2007 projections of operating surplus have
been anticipated as resources to support the Fiscal Year 2007 capital
improvement projects. This level will be maintained for the Fiscal Year 2008
surplus for the FY 2008 resource estimate and then reduced by 5 percent for the
January 2009 projected surplus for FY 2009, 10 percent for FY 2010, and 15
percent for FY 2011 resources.
Guideline
In Fiscal Year 2007, 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
FY 2007 Policy Guidelines
Page 24
The amount of total gaming receipts from taxes and rent committed annually in
support of the annual operating budget has historically been one-third of the total
gaming tax and lease revenues. It was felt that a fiscally sound policy was to
commit two thirds of the gaming revenues to the capital budget, thereby
providing a cushion for future years, when gaming revenues could fluctuate with
the local economy. Should gaming revenues begin to decline, the capital budget
projects would be eliminated, deferred or funded from some other source if they
were a high priority.
The City has always tried to minimize dependence on gaming revenues in the
operating budget. This was maintained over years, while still meeting the
property tax guideline of no increase for the average residential property.
However, FY 2004 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 )1,% 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 37.28% capital and 62.72% operating in FY 2006. FY 2007
remains the same as FY 2006.