Fiscal Year 2014 Budget Policy GuidelinesTHE CITY OF
Dui
Masterpiece on the Mississippi
TO: The Honorable Mayor and City Council Members
FROM: Michael C. Van Milligen, City Manager
SUBJECT: Fiscal Year 2014 Budget Guidelines
DATE: January 14, 2013
Dubuque
kital
All- America City
II 111!
2012
The presentation of the Fiscal Year 2014 Budget Guidelines are taking on a different
appearance than they have in past years. The impact of the Federal Affordable Care
Act, implementation of state legislative changes to the Tax Increment Financing
Program and the need to further review and calculate this year's assessed valuations,
means that when you adopt this year's budget guidelines, they will not deal with a
proposed property tax rate. That will be dealt with through the budget process. In fact,
in the end, each fiscal year that is the manner in which the property tax issue is
resolved, so, from that respect, the budget process remains the same.
I will caution you that the effect of the Federal Affordable Care Act (Item K), increased
employee pension costs mandated by the State of Iowa (Item R -2 -a), increases in
health care costs (Item R -2 -c) and the impact of several significant capital improvement
projects will be felt in the recommended budget.
believe that as the budget recommendation is shaping up, it will advance the City
Council goals and priorities in a responsible manner, while sustaining the progress that
is being made to achieve Economic Prosperity, Environmental /Ecological Integrity and
Social /Cultural Vibrancy.
Budget Director Jennifer Larson is recommending adoption of the Fiscal Year 2014
Budget Guidelines.
I concur with the recommendation and respectfully request Mayor and City Council
approval.
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Michael C. Van Milligen
MCVM:jh
Attachment
cc: Barry Lindahl, City Attorney
Cindy Steinhauser, Assistant City Manager
Teri Goodmann, Assistant City Manager
Jennifer Larson, Budget Director
2
Masterpiece on the Mississippi
TO: Michael C. Van Milligen, City Manager
FROM: Jennifer Larson, Budget Director
SUBJECT: Budget and Fiscal Policy Guidelines for Fiscal Year 2014
DATE: January 14, 2013
Dubuque
bierd
All-America City
1
2007
I am recommending adoption of the Fiscal Year 2014 Budget Policy Guidelines. The
guidelines reflect City Council direction given as part of the August 27 and 28, 2012,
goal setting sessions.
The budget guidelines are developed and adopted by City Council during the budgeting
process in order to provide targets or parameters within which the budget
recommendation will be formulated. The final budget presented by the City Manager
may not meet all of these targets due to changing conditions and updated information
during budget preparation. To the extent the recommended budget varies from the
guidelines, an explanation will be provided in the printed budget document.
The Fiscal Year 2014 Budget Policy Guidelines do not address the recommended
property tax rate as it has in past. The impact of the Federal Affordable Care Act,
implementation of state legislative changes to the Tax Increment Program and the need
to further review and calculate this year's assessed valuations has not made it possible
to project a property tax rate at this time.
Some highlights of the document are:
➢ Gaming revenues generated from lease payments from the DRA have been
increased slightly ($6,490) based on revised projections from the DRA. The
following is a ten year history of DRA lease payments to the City of Dubuque:
FY 2014 $ 6,253,228 estimate
FY 2013 $ 6,246,737 budget
FY 2012 $ 5,997,888
FY 2011 $ 6,343,130
FY 2010 $ 6,820,283
FY 2009 $ 8,406,930
FY 2008 $ 9,753,410
FY 2007 $ 9,757,458
FY 2006 $ 8,749,391
FY 2005 $ 6,429,621
The Diamond Jo fixed payment remains at $500,000 based on the revised
parking agreement.
➢ The split of gaming revenues from taxes and the DRA lease (not distributions) in
FY 2014 is split between operating and capital budgets at 90% / 10% which
remains unchanged from FY 2013.
➢ Sales tax receipts are projected to increase 12.95% ($616,103) over FY 2013
budget and 13.88% over FY 2012 actual of $4,017,091 based on FY 2013
revised revenue estimate of $4,574,602 which includes a reconciliation payment
from the State of Iowa of $781,877 received in November and then increase at
an annual rate of 2.0 percent per year. The estimates received from the State of
Iowa show a 5.1% increase in the first two payments estimated for FY 2014.
➢ Building Permits remain at $550,000 in FY 2014 based on the continuation of the
current level of construction.
➢ Federal Transportation Administration (FTA) transit operating assistance is
anticipated to increase 4.1 percent or $38,305 from FY 2013 budget based on
the revised FY 2013 budget received from the FTA.
➢ Gas franchise fees have been projected to increase 10.0 percent over FY12
actual of $600,429 based on a two year average of FY 2011 and FY 2012. Also,
Electric franchise fees have been projected to increase 5.4 percent over FY12
actual of $1,605,526 based on a two year average of FY 2011 and FY 2012. The
franchise fee increases at an annual rate of 2.5 percent per year from FY 2015
thru FY 2018.
➢ Industrial riverfront property lease revenue is projected to increase by $797,835
in FY 2014 due to lease negotiations of old expiring leases and leases to new
tenants on sites that are vacant.
➢ The Municipal Fire and Police Retirement System of Iowa Board of Trustees
have increased the City contribution for Police and Fire retirement from 26.12
percent to 30.12 percent ( +15.31 % or an increase of $535,362 in General Fund).
Also, the Iowa Public Employee Retirement System (IPERS) increased the City
contribution from 8.67 percent to 8.93 percent ( +3.0% or an increase of $35,939
in General Fund) and the employee contribution from 5.78% to 5.95% (which did
not affect the City's portion of the budget). The IPERS rate is anticipated to
increase 7 percent each succeeding year according to IPERS. Total pension cost
in FY14 increased $571,301 in the General Fund or a 2.50% property tax impact
for the average homeowner.
➢ In FY 2014 there is a 2.5% employee wage increase at a cost of $1,131,736 to
the General Fund or a 4.95% property tax impact for the average homeowner.
➢ The City portion of health insurance expense will increase from $835 per month
per contract to $1,015 per month per contract (based on 553 contracts) which is
2
a 21.6% increase in health insurance reserves for an additional cost of $803,275
to the General Fund in FY 2014 or a 3.52% property tax impact for the average
homeowner.
➢ The Affordable Care Act is expected to increase employee expense in Fiscal
Year 2014 by $100,648 and in Fiscal Year 2015 by $249,828, with increases
each year thereafter.
➢ Motor vehicle fuel (excluding Transit) is estimated to increase 26.3 percent
( +$168,776) over FY 2013 budget based on a three year average of actuals, then
2.5 percent per year beyond.
➢ Transit motor vehicle fuel, and low and high sulfur diesel fuel expense is
estimated to increase 15.37 percent ( +$40,686) over FY 2013 budget based on a
three year average of actuals, then 2.5 percent per year beyond.
The increase in property tax support for Transit from FY 2013 to FY 2014 is
$136,310. The following is a ten year history of the Transit subsidy:
FY 2014 $1,180,481 estimate
FY 2013 $1,044,171 budget
FY 2012 $ 717,611
FY 2011 $1,078,726
FY 2010 $1,161,393
FY 2009 $1,253,638
FY 2008 $1,070,053
FY 2007 $ 923,384
FY 2006 $ 710,453
FY 2005 $ 617,048
FY 2004 $ 513,259
➢ FY 2013 is the first year that eligible retirees with at least twenty years of
continuous service in a full -time position or retired as a result of a disability and
are eligible for pension payments from the pension system can receive payment
of their sick leave balance with a maximum payment of one - hundred twenty sick
days payable bi- weekly over a five year period. The sick leave payout expense
budget in the General Fund in FY 2013 was $161,358 as compared to FY 2014
of $116,728 based on qualifying employees officially giving notice of retirement.
➢ Beginning in FY 2013, the Cable TV Fund no longer funds Police and Fire public
education and has reduced funding to the Information Services Department due
to reduced revenues from the cable franchise. This is due to Mediacom's
conversion from a Dubuque franchise to a state franchise in October 2009 which
changed the timing and calculation of the franchise fee payments
➢ Greater Dubuque Development Corporation support of $577,613 is budgeted to
be paid from Dubuque Industrial Center Land Sales in FY 2013 and FY 2014 and
beyond
3
➢ The Enterprise Funds have contributed to the administrative overhead of the City
operation, but the General Fund has always carried most of the financial burden.
In FY 2013, a multi -year process to more equitably distribute those costs across
all funds was implemented.
Preliminary citizen participation opportunities will be available. There will be six City
Council Work Sessions prior to the adoption of the FY 2014 budget before the state
mandated deadline of March 15, 2013.
JML
Attachment
cc: Barry Lindahl, City Attorney
Cindy Steinhauser, Assistant City Manager
Teri Goodmann, Assistant City Manager
Jennifer Larson, Budget Director
Ken TeKippe, Finance Director
4
BUDGET AND FISCAL POLICY GUIDELINES
FOR FY 2014
OPERATING BUDGET GUIDELINES
The Policy Guidelines are developed and adopted by City Council during 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.
A. CITIZEN PARTICIPATION
Guideline
To encourage citizen participation in the budget process, City Council will hold multiple
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 was provided for citizen input prior to formulation of the City Manager's
recommended budget and will be provided again prior to final Council adoption, both
at City Council budget work sessions and at the required budget public hearing.
B. 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 2014 Policy Guidelines
Page 2
C. TWO TYPES OF BUDGET DOCUMENTS TO BE PREPARED
Guideline
The recommended City operating budget for Fiscal Year 2014 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 2014 Budget. It is anticipated these documents will be available on Friday
February 1, 2013.
The Recommended City Council Policy Budget includes the following information for
each department: Highlights of Prior Year's Accomplishments and Future Year's
Initiatives, a financial summary, a summary of improvement packages requested and
recommended, significant line items, capital improvement projects in the current year
and those recommended over the next five years, organizational chart for larger
departments, major goals, objectives and performance measures for each cost center
within that department, and line item expense and revenue financial summaries. The
purpose of these documents are to focus the attention of the City Council and the
public on policy decisions involving what services the City government will provide,
who will pay for them and the implications of such decisions. They will emphasize
objectives, accomplishments and associated costs for the budget being recommended
by the City Manager.
The Citizens Guide section of the Recommended FY 2014 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.
D. 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.
E. 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
FY 2014 Policy Guidelines
Page 3
services requested by individual citizens. The City must consider the ability of citizens
to pay for services in setting service levels and priorities.
F. 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. As often as reasonably possible, 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?
G. 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.
H. USE OF VOLUNTEERS
Discussion
Out of the respect for citizens that must pay taxes, the City must seek to expand
resources by continuing to get citizens directly involved in supplementing service
delivery capability. Citizens are encouraged to assume tasks previously performed or
provided by City government. This may require the City to change the approach to
service delivery, such as, providing organizational skills, training, coordinating staff,
office space, meeting space, equipment, supplies and materials, but not directly
providing the more expensive full -time staff. Activities where citizens can continue to
take an active role include: Library, Recreation, Parks, Five Flags Center, Transit, and
Police.
Guideline
In the future, the maintenance of City services may well depend on volunteer citizen
staffs. In FY 2014, efforts shall continue to identify and implement areas of City
government where (a) volunteers can be utilized to supplement City employees to
maintain service levels (i.e., Library, Recreation, Parks, Transit, Police) or (b) services
can be "spun off" to non - government groups and sponsors.
FY 2014 Policy Guidelines
Page 4
I. 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.
J. SALARY INCREASES OVER THE AMOUNT BUDGETED TO BE FINANCED FROM
BUDGET REDUCTIONS IN THE DEPARTMENT(S) OF THE BENEFITING
EMPLOYEES
Discussion
The recommended budget will include salary amounts for all City employees.
However, past experience shows that budgeted amounts are often exceeded by fact
finder and /or arbitrator awards. Such "neutrals" do not take into account the overall
financial capabilities and needs of the community and the fact that the budget is a
carefully balanced and fragile thing. Such awards have caused budgets to be
overdrawn, needed budgeted expenditures to be deferred, working balances to be
expended and, in general, have reduced the financial condition or health of the City
government. To protect the financial integrity of the City government, it is
recommended that the cost of any salary adjustment over the amount provided in the
budget (that is, not financed in the budget) come from reductions in the budget of the
department(s) of the benefiting employees. The City has five collective bargaining
agreements. The current contracts expire as follows:
Bargaining Unit
Contract
Expiration
Date
Teamsters Local Union No 421
Teamsters Local Union No 421 Bus Operators
Dubuque Professional Firefighters Association
Dubuque Police Protective Association
International Union of Operating Engineers
Guideline
June 30, 2014
June 30, 2014
June 30, 2014
June 30, 2014
June 30, 2014
Salary increases over the amount budgeted for salaries shall be financed from
operating budget reductions in the department(s) of the benefiting employees.
FY 2014 Policy Guidelines
Page 5
K. THE AFFORDABLE CARE ACT
Guideline
The Affordable Care Act is a health care law that was signed into law on March 23,
2010 that aims to improve the current health care system by increasing access to
health coverage for Americans and introducing new protections for people who have
health insurance.
Effective February 1, 2014, Employers with more than 50 full -time equivalent
employees must provide affordable "minimum essential coverage" to full -time
equivalent employees. The definition of a full -time equivalent employee under the
Affordable Care Act is any employee that works 30 hours per week or more on
average over a twelve month period (1,660 hours or more). The monitoring period for
part -time employees begins January 1 of each year. If a part -time employee meets or
exceeds 30 hours per week on average during that twelve month period, the City must
provide health insurance effective February 1. January 1, 2013 through December 31,
2013 is the first monitoring period required with the first provision of health insurance
date being February 1, 2014.
The Affordable Care Act is expected to increase employee expense in Fiscal Year
2014 by $100,648 and in Fiscal Year 2015 by $249,828, with incremental increases
each year thereafter.
L. 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.
M. USER CHARGES
Discussion
User charges or fees represent a significant portion of the income generated to
support the operating budget. It is the policy that user charges or fees be established
when possible so those who benefit from a service or activity also help pay for it. This
is easy in some cases and municipal utility funds have been established for certain
activities, which are intended to be self - supporting. Examples of utility funds include
Water User Fund, Sewer User Fund, Stormwater User Fund, Refuse Collection Fund,
and Parking Fund. In other cases, a user charge is made after the Council
determines to what extent an activity is to be self - supporting. Examples of this
arrangement are fees for swimming, golf and recreation programs and certain
inspection programs.
FY 2014 Policy Guidelines
Page 6
FY 2014 will be the sixth fiscal year that the Stormwater User Fund is fully funded by
stormwater use fees. The General Fund will continue to provide funding for the
stormwater fee subsidies which provide a 50% subsidy for the stormwater fee charged
to property tax exempt properties and low -to- moderate income residents and a 75%
subsidy for residential farms.
Guideline
User fees and charges should be established where possible so that those who utilize
or directly benefit from a service, activity or facility also help pay for it.
User fees and charges for each utility fund (Water User Fund, Sewer User Fund,
Stormwater User Fund, Refuse Collection Fund, and Parking Fund) shall be set at a
level that fully supports the total direct and indirect cost of the activity, including the
cost of annual depreciation of capital assets and financing for future capital
improvement projects.
The following chart shows activities with user charges and to what extent the activity is
self - supporting:
FY 2010 FY 2011 FY 2012 FY 2013
ACTUAL ACTUAL ACTUAL BUDGETED
DEPARTMENT /DIVISION PERCENT PERCENT PERCENT PERCENT
Leisure Services Department
Recreation Division
Adult Athletics* 59.1 57.3 56.0 57.5
McAleece Concessions 142.4 155.3 155.9 145.6
Children's Activities 46.9 48.7 45.2 65.0
Therapeutic Recreation 13.1 14.5 15.5 17.8
Recreation Classes 26.2 47.8 52.5 33.2
Swimming* 50.9 50.2 56.3 50.1
Golf* Surplus to Golf Devel' Fund 106.5 100.1 105.7 101.5
Park Division 12.2 11.0 11.0 12.7
Library Department excl' Gift Trusts 5.0 3.9 3.4 3.8
Airport Departmentw /abateddebt 83.6 90.5 90.2 65.3
Building Services Division
Inspections 71.9 81.3 124.6 88.0
Planning Services Department 28.1 32.6 30.1 38.6
Health Services Department
Food/Environmental Insp. 69.9 64.8 64.9 59.1
Animal Control * ** 59.5 57.1 60.0 55.3
Housing Services Department
General Housing Inspection 62.2 57.4 68.8 55.7
Federal Building Maint. 104.2 106.1 98.7 73.0
* Includes an amount to help cover indirect costs (administration).
FY 2014 Policy Guidelines
Page 7
Prior to FY 2013, the General fund has been subsidizing a portion of the utility funds
use of administrative services such as Engineering administration, Engineering Project
Management, Finance accounting services, Economic Development, Planning
Services, Workforce Development, City Clerk services, Legal services, City Manager's
Office including Budget, Geographic Information Systems, Sustainability,
Neighborhood Development, Arts and Cultural Affairs and Personnel. Prior to FY
2013, the Engineering department estimated the amount of time spent on projects and
allocated that time to an Internal Service Fund which is then allocated to the various
capital improvement projects that the personnel work on. The remaining time not
allocated to the Internal Service Fund was considered administrative and has been
charged to the General Fund. In addition, administrative departments such as the City
Manager's Office, Legal, Planning, Economic Development, City Clerk's Office and
Workforce Development recharged expenses based upon each enterprise fund's
percent of the City -wide operating budget, excluding debt service. The accounting
activity of the Finance Department has not been recharged to the other funds with
exception of payroll and loan processing, parking tickets and landfill billing.
Beginning in FY 2013, additional overhead recharges to the utility funds is being
phased in over several years. Engineering administrative and project management
expenses that are not recharged to capital projects will be split evenly between the
Water, Sewer, Stormwater and General Funds. Finance accounting expenses and all
other administrative departments such as Economic Development, Planning,
Workforce Development, City Clerk, Legal Services and City Manager's Office will be
split evenly between Water, Sewer, Stormwater, Refuse Collection and General
Funds, with overhead costs being shared by the Landfill and Parking. This will be fully
implemented over time.
When the overhead recharges are fully implemented, the Enterprise Funds will split
the cost of administrative overhead excluding Engineering as follows:
Water 16.67%
Sewer 16.67%
Stormwater 16.67%
Refuse 16.67%
Parking 8.33%
Landfill 8.33%
Engineering Administration and Engineering Project Management will be split evenly
between General Fund (25 %), Water (25 %), Sewer (25 %) and Stormwater (25 %).
N. 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 minimized.
FY 2014 Policy Guidelines
Page 8
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 minimized. Also, any matching funds
required for capital grants will be identified.
O. GENERAL FUND OPERATING RESERVE OR WORKING BALANCE
Discussion
An operating reserve or working balance is an amount of cash, which must be carried
into a fiscal year to pay operating costs until tax money, or other anticipated revenue
comes in. Without a working balance there would not be sufficient cash in the fund to
meet its obligations and money would have to be borrowed. Working balances are
not available for funding a budget; they are required for cash flow (i.e., to be able to
pay bills before taxes are collected).
The rule of thumb the state recognizes for determining a reasonable amount for a
working balance is (a) anticipated revenues for the first three months of the fiscal year
less anticipated expenditures or (b) 5 percent of the total General Fund operating
budget (excluding fringes and tort liability expense). However, in discussions with
Moody's Investor Service, a factor of 10 percent was recommended for "A" rated
cities. This is due to the fact that a large portion of revenue sources are beyond the
City's control and therefore uncertain. In the case of Dubuque, 10% represents
approximately $4,363,273.
Guideline
The guideline of the City of Dubuque is to maintain a General Fund working balance
or operating reserve of 10 percent of the total General Fund Operating budget
requirements or approximately $4,363,273 for FY 2014. In FY 2014, several hundred
thousands of dollars will be set aside in DRA Distribution funds for unexpected
expenditures. If these funds are not needed for unexpected expenditures in FY 2014,
the balance will be added to the General Fund Uncommitted Reserve, along with a
portion of any surplus in the General Fund at the close of Fiscal Year 2014.
Previously, there was a one -time General Fund operating reserve of one million
dollars implemented in FY 2010, FY 2011, FY 2012 and FY 2013 for health insurance
claims exceeding expectations and the possibility of needing to boost the health
insurance reserve. The Health Insurance reserve is expected to be fully funded in FY
2013 and transfers from the General Fund should not be required in the future. It is
anticipated that some of the one million dollars in FY 2013 for health insurance claims
exceeding expectations will be added to the general fund reserve.
FY 2014 Policy Guidelines
Page 9
This increase in uncommitted reserves over the next several years helps the City to
maintain its very attractive Aa1 bond rating achieving lower interest rates on borrowing
costs.
P. USE OF UNANTICIPATED, UN- OBLIGATED, NONRECURRING INCOME
Discussion
Sometimes income is received that was not anticipated and was not budgeted. Often
this money is not recurring and reflects something, which happened on a one -time
basis to generate the "windfall ".
Nonrecurring income must not be spent for recurring expenses. To do so causes a
funding shortfall the next budget year before even starting budget preparation.
Nonrecurring expenditures would include capital improvements and equipment
purchases.
Guideline
Nonrecurring un- obligated income shall be spent only for nonrecurring expenses.
Capital improvement projects and major equipment purchases tend to be nonrecurring
expenditures.
Q. USE OF "UNENCUMBERED FUND BALANCES"
Discussion
Historically a budget is not spent 100% by the end of the year and a small
unencumbered balance remains on June 30th. In addition, income sometimes
exceeds revenue estimates resulting in some unanticipated balances at the end of the
year. These amounts of un- obligated, year -end balances are in turn "carried over"
into the new fiscal year to help finance it.
The FY 2012 -13 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 2014 through FY 2018.
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 2013 -14 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 2014 Policy Guidelines
Page 10
R. PROPERTY TAX DISCUSSION
1. Assumptions - Resources
a. Unencumbered funds or cash balances of $200,000 will be available in FY
2014 and each succeeding year to support the operating budget.
b. Sales tax funds are set by resolution to be used 50 percent in the General Fund
for property tax relief. Sales tax receipts are projected to increase 12.95%
($616,103) over FY 2013 budget and 13.88% over FY 2012 actual of
$4,017,091 based on FY 2013 revised revenue estimate of $4,574,602 which
includes a reconciliation payment from the State of Iowa of $781,877 received
in November and then increase at an annual rate of 2.0 percent per year. The
estimates received from the State of Iowa show a 5.1% increase in the first two
payments estimated for FY 2014.
c. Hotel /motel tax receipts are projected to increase 3.5 percent ($66,137) over
FY 2012 actual receipts of $1,889,648, and then increase at an annual rate of 3
percent per year.
d. Federal Transportation Administration (FTA) transit operating assistance is
anticipated to increase 4.1 percent or $38,305 from FY 2013 budget based on
the revised FY 2013 budget received from the FTA.
e. Miscellaneous revenue has been estimated at 2 percent growth per year over
budgeted FY 2013.
f. Building Permits remain at $550,000 in FY 2014 based on the continuation of
the current level of construction.
g.
Gaming revenues generated from lease payments from the DRA have been
increased slightly ($6,490) based on revised projections from the DRA. The
following is a ten year history of DRA lease payments to the City of Dubuque:
FY 2014 $ 6,253,228 estimate
FY 2013 $ 6,246,737 budget
FY 2012 $ 5,997,888
FY 2011 $ 6,343,130
FY 2010 $ 6,820,283
FY 2009 $ 8,406,930
FY 2008 $ 9,753,410
FY 2007 $ 9,757,458
FY 2006 $ 8,749,391
FY 2005 $ 6,429,621
The Diamond Jo fixed payment remains at $500,000 based on the revised
parking agreement.
FY 2014 Policy Guidelines
Page 11
h. Gaming revenues from taxes and the DRA lease (not distributions) remains at a
split of 90% / 10% in FY 2014. The operating portion of the split includes the
debt service required on the 2002 general obligation bonds for the America's
River Project that was previously considered as part of the capital portion of the
DRA lease. Debt obligations are considered a continuing annual expense and
are more accurately reflected as part of the operating portion of the DRA lease.
The Diamond Jo Patio lease ($25,000) and the Diamond Jo parking privileges
($500,000 in FY 2014) have not been included in the split with gaming
revenues. This revenue is allocated to the operating budget.
i. The residential rollback factor will increase from 50.752 percent to 52.817
percent or a 4.07 percent increase for FY 2014. The rollback has been
estimated to increase 3.50% each year from Fiscal Years 2014 thru 2018. No
equalization orders were estimated for Fiscal Years 2014 and beyond due to
the City Assessor voluntarily increasing assessments to equal the two year sale
average.
The increase in the residential rollback factor increases the value that each
residence is taxed on. This increased taxable value for the average homeowner
($130,367 assessed value in FY 2013 and 2014) results in more taxes to be
paid per $1,000 of assessed value. In an effort to keep property taxes low to
the average homeowner, the City calculates the property tax impact to the
average residential property based on the residential rollback factor and
property tax rate. In a year that the residential rollback factor increases, the City
recommends a lower property tax rate than what would be recommended had
the rollback factor remained the same. Commercial and Industrial taxpayers
normally are taxed at 100 percent of assessed value and benefit from the lower
tax rate that is recommended by the City when the residential rollback factor
increases.
The residential rollback in Fiscal Year 1987 was 75.6481 percent as compared
to 52.817 percent in Fiscal Year 2014. The rollback percent had steadily
decreased since FY 1987, which has resulted in less taxable value and an
increase in the City's tax rate. However, that trend began reversing in FY 2009
when the rollback reached a low of 44.0803 percent. If the rollback had
remained at 75.6481 percent in FY 2013, the City's tax rate would have been
$7.09 per $1,000 of assessed value instead of $10.78 in FY 2013.
In addition, the State of Iowa eliminated the Machinery and Equipment Tax
Replacement in FY 2003 (- $200,000); Personal Property Tax Replacement in
FY 2004 (- $350,000); Municipal Assistance in FY 2004 (- $300,000); Liquor
Sales Revenue in FY 2004 (- $250,000); and Bank Franchise Tax in FY 2005 (-
$145,000). The combination of the decreased residential rollback, State funding
cuts and increased expenses has forced the City's tax rate to increase since
FY 2014 Policy Guidelines
Page 12
j.
1987 when the citizens passed a referendum to establish a one percent local
option sales tax with 50% of the revenue gong to property tax relief.
FY 2014 will reflect this increased assessed value for the average homeowner.
Assessed valuations were increased 2 percent per year beyond FY 2014.
k. Gas franchise fees have been projected to increase 10.0 percent over FY12
actual of $600,429 based on a two year average of FY 2011 and FY 2012.
Also, Electric franchise fees have been projected to increase 5.4 percent over
FY12 actual of $1,605,526 based on a two year average of FY 2011 and FY
2012. The franchise fee increases at an annual rate of 2.5 percent per year
from FY 2015 thru FY 2018.
The franchise fee charged on gas and electric bills increased from 2% to 3% in
FY 2011. While State law allows a 5% fee, the City of Dubuque's two utility
franchise fee agreements limits the fee to 3 %.
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 2015, with the gaming revenue (from taxes and the
DRA lease) split at 90.0% operating budget and 10.0% capital budget based on
note "g" above.
m. FY 2014 reflects the sixth year that payment in lieu of taxes is charged to the
Water and Water Pollution Control funds for Police and Fire Protection. In FY
2014, the Water Pollution Control fund is charged 0.43% of building value and
the Water fund is charged 0.62% of building value, for payment in lieu of taxes
for Police and Fire Protection. This revenue is reflected in the General Fund
and is used for general property tax relief.
n. Industrial riverfront property lease revenue is projected to increase by $797,835
in FY 2014 due to lease negotiations of old expiring leases and leases to new
tenants on sites that are vacant.
2. Assumptions — Requirements
a. The Municipal Fire and Police Retirement System of Iowa Board of Trustees
have increased the City contribution for Police and Fire retirement from 26.12
percent to 30.12 percent ( +15.31 % or an increase of $535,362 in General
Fund). Also, the Iowa Public Employee Retirement System (IPERS) increased
the City contribution from 8.67 percent to 8.93 percent ( +3.0% or an increase of
$35,939 in General Fund) and the employee contribution from 5.78% to 5.95%
(which did not affect the City's portion of the budget). The IPERS rate is
anticipated to increase 7 percent each succeeding year according to IPERS.
Total pension cost in FY14 increased $571,301 in the General Fund or a 2.50%
property tax impact for the average homeowner.
FY 2014 Policy Guidelines
Page 13
b. In FY 2014 there is a 2.5% employee wage increase at a cost of $1,131,736 to
the General Fund or a 4.95% property tax impact for the average homeowner.
c. The City portion of health insurance expense will increase from $835 per month
per contract to $1,015 per month per contract (based on 553 contracts) which is
a 21.6% increase in health insurance reserves for an additional cost of
$803,275 to the General Fund in FY 2014 or a 3.52% property tax impact for
the average homeowner. In the last few years, the City Council has boosted the
general fund reserves and in FY 2011 and FY 2012, some of the General Fund
reserves went to bolster the Health Insurance Reserve since the City of
Dubuque is self- insured actual expenses are paid each year with the City only
having stop -loss coverage for major claims. It is projected that future transfers
from the General Fund will not be needed. Estimates for FY 14 -18 have been
increased by 10 percent per year.
d. FY 2013 is the first year that eligible retirees with at least twenty years of
continuous service in a full -time position or retired as a result of a disability and
are eligible for pension payments from the pension system can receive
payment of their sick leave balance with a maximum payment of one - hundred
twenty sick days payable bi- weekly over a five year period. The sick leave
payout expense budget in the General Fund in FY 2013 was $161,358 as
compared to FY 2014 of $116,728 based on qualifying employees officially
giving notice of retirement.
e. General operating supplies and services are estimated to increase 2 percent
over actual in FY 2012. A 2.5 percent increase is estimated in succeeding
years.
f. Electrical energy expense is estimated to have no increase over FY 2012 actual
expense, then 2.5 percent per year beyond.
g.
Natural gas expense is estimated to increase 3.0 percent over FY 2012 actual,
then 2.5 percent per year beyond.
h. The Convention and Visitors Bureau contract will continue at 50 percent of
actual hotel /motel tax receipts, less a $35,000 loan repayment which will be
paid in full in FY 2014.
i. Equipment costs for FY 2014 are estimated to decrease 27.08 percent under
FY 2013 budget, then increase 5 percent per year beyond.
j.
Debt service is estimated based on the tax - supported unabated General
Obligation bond sale for fire truck and ambulance replacements in FY 2010.
k. Unemployment expense in the General Fund decreased slightly from $70,204
in FY 2013 to $68,800 in FY 2014 based on past years actual experience.
FY 2014 Policy Guidelines
Page 14
I. Motor vehicle fuel (excluding Transit) is estimated to increase 26.3 percent
( +$168,776) over FY 2013 budget based on a three year average of actuals,
then 2.5 percent per year beyond.
m. Transit motor vehicle fuel, and low and high sulfur diesel fuel expense is
estimated to increase 15.37 percent ( +$40,686) over FY 2013 budget based on
a three year average of actuals, then 2.5 percent per year beyond.
The increase in property tax support for Transit from FY 2013 to FY 2014 is
$136,310. The following is a ten year history of the Transit subsidy:
FY 2014 $1,180,481 estimate
FY 2013 $1,044,171 budget
FY 2012 $ 717,611
FY 2011 $1,078,726
FY 2010 $1,161,393
FY 2009 $1,253,638
FY 2008 $1,070,053
FY 2007 $ 923,384
FY 2006 $ 710,453
FY 2005 $ 617,048
FY 2004 $ 513,259
n. Postage rates for FY 2014 are estimated to increase 5.0 percent over FY 2012
actual expense. A 5.0 percent increase is estimated in succeeding years.
o. Insurance costs are estimated to change as follows: Workers Compensation is
increasing 26.2 percent based on actual history, General Liability is increasing
3.7 percent and damage claims is decreasing 15 percent, Property insurance is
increasing 29.8 percent and Boiler Insurance is decreasing 1.0 percent.
P.
The Section 8 Housing subsidy payment from the General Fund increased from
$161,326 in FY 2013 to $210,820 in FY 2014. In FY 2011, the City approved
reducing the number of allowed Section 8 Housing Vouchers from 1,060 to 900
vouchers. This reduction in vouchers was estimated to reduce Section 8
administrative fees from HUD by $100,000 per year. However, in the transition,
the number of vouchers dropped to 817 vouchers. HUD has based the Section
8 administrative fees for FY 2014 on the lower number of vouchers held in FY
2013 which has decreased the amount of revenue received by the Section 8
program in FY 2014. The City is in the process of increasing the Section 8
Housing Vouchers back to 1,060.
q. Beginning in FY 2013, the Cable TV Fund no longer funds Police and Fire
public education and has reduced funding to the Information Services
Department due to reduced revenues from the cable franchise. This is due to
Mediacom's conversion from a Dubuque franchise to a state franchise in
October 2009 which changed the timing and calculation of the franchise fee
FY 2014 Policy Guidelines
Page 15
payments.
r. Greater Dubuque Development Corporation support of $577,613 is budgeted to
be paid mostly from Dubuque Industrial Center Land Sales in FY 2013 and FY
2014 and beyond.
s. The Enterprise Funds have contributed to the administrative overhead of the
City operation, but the General Fund has always carried most of the financial
burden. In FY 2013, a multi -year process to more equitably distribute those
costs across all funds was implemented.
FY 2014 Policy Guidelines
Page 16
IMPACT ON AVERAGE RESIDENTIAL PROPERTY - EXAMPLE
ACTUAL - PAST HISTORY
FY 1989 "City" Property Tax
FY 1990 "City" Property Tax
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 2004
FY 2005
FY 2005
FY 2006
FY 2006
FY 2007
FY 2007
FY 2008
FY 2008
FY 2009
FY 2009
FY 2010
FY 2010
FY 2011
FY 2011
FY 2012
FY 2012
FY 2013
FY 2013
"City" Property Tax*
"City" Property Tax
"City" Property Tax*
"City" Property Tax
"City" Property Tax*
"City" Property Tax
"City" Property Tax*
"City" Property Tax
"City" Property Tax*
"City" Property Tax
"City" Property Tax
"City" Property Tax
"City" Property Tax*
"City" Property Tax
With Homestead Adj.
"City" Property Tax*
With Homestead Adj.*
"City" Property Tax(1)
With Homestead Adj. (1)
"City" Property Tax *(2)
With Homestead Adj.*
"City" Property Tax
With Homestead Adj.
"City" Property Tax
With Homestead Adj.
"City" Property Tax
With Homestead Adj.
"City" Property Tax
With Homestead Adj. (3)
"City" Property
With Homestead Adj. (3)
"City" Property
With Homestead Adj. (3)
CITY TAX
CALCULATION
$ 453.99
$ 449.94
$ 466.92
$ 483.63
$ 508.73
$ 510.40
$ 522.65
$ 518.10
$ 515.91
$ 512.25
$ 512.25
$ 511.38
$ 511.38
$ 511.38
$ 485.79
$ 485.79
$ 493.26
$ 485.93
$ 495.21
$ 494.27
$ 504.62
$ 485.79
$ 496.93
$ 496.93
$ 510.45
$ 524.53
$ 538.07
$ 538.07
$ 550.97
$ 564.59
$ 582.10
$ 611.19
$ 629.78
$ 661.25
$ 672.76
Average FY 1989 -FY 2013 with Homestead Adj.
Average FY 1989 -FY 2013 without Homestead Adj. + 0.44% + $ 2.47
ACTUAL
PERCENT
CHANGE
- 11.40%
- 0.89%
+ 3.77%
+ 3.58%
+ 5.19%
+ 0.30%
+ 2.43%
0.87%
0.42%
0.71%
0.00%
0.17%
0.00%
0.00%
5.00%
+ 1.54%
+ 0.40%
+ 1.90%
1.52%
+ 2.72%
+ 5.41%
+ 2.40%
+ 5.65%
+ 8.19%
+ 6.82%
CHANGE IF
HTC 100%
FUNDED
0.00%
+ 0.03%
+ t72%
1.72%
0.00%
+ 2.76%
+ 0.00%
+ 2.47%
+ 5.00%
+ 5.00%
DOLLAR
CHANGE
- $ 58.39
- $ 4.04
+$ 16.98
+$ 16.71
+$ 25.10
+$ 1.51
+$ 12.41
- $ 4.54
- $ 2.19
- $ 3.66
$ 0.00
- $ 0.87
$ 0.00
$ 0.00
-$ 25.58
$ 0.00
+$ 7.46
+$ 0.14
+$ 1.95
+$ 8.34
+$ 9.41
-$ 8.48
-$ 7.69
$ 0.00
+$13.52
+$14.08
+$27.62
+$ 0.00
+$12.90
+$13.62
+$31.13
+$29.09
+$47.68
+$31.47
+$42.98
+ 1.17% + $ 6.42
FY 2014 Policy Guidelines
Page 17
Denotes year of State - issued equalization orders.
A Impact to the average homeowner if the State funds the Homestead Property Tax Credit at 62 %.
(1) The FY 2006 property tax calculation takes into account the 6.2% valuation increase for the average
residential homeowner as determined by the reappraisal.
(2) Offsets the impact of the State reduced Homestead Property Tax Credit in FY 2005 & 2006.
(3) The City adopted a budget in FY 2011 and 2012 that provided no increase to the average homeowner. The
State of Iowa under funded the Homestead Property Tax Credit in both years costing the average homeowner an
additional $17.51 in FY 2011 and $18.59 in FY 2012. This provided no additional revenues to the City, as this
money would have come to the City from the State if they appropriated the proper amount of funds.
* 2002 -2003
* 2003 -2004
* 2004 -2005
* 2005 -2006
* 2006 -2007
* 2007 -2008
* 2008 -2009
* 2009 -2010
* 2010 -2011
* 2011 -2012
* 2012 -2013
State of Iowa Homestead Property Tax Credit History
°n> Funded 100% of the Homestead Property Tax Credit
°n> Funded 85% of the Homestead Property Tax Credit
Funded 81 % of the Homestead Property Tax Credit
°n> Funded 78% of the Homestead Property Tax Credit
Funded 77% of the Homestead Property Tax Credit
o=> Funded 73% of the Homestead Property Tax Credit
°n> Funded 72% of the Homestead Property Tax Credit
°=> Funded 72% of the Homestead Property Tax Credit
Funded 64% of the Homestead Property Tax Credit
°n> Funded 62% of the Homestead Property Tax Credit
°=> Funded 78% of the Homestead Property Tax Credit
Assumed Homestead will be 100% Funded by the
State of Iowa as proposed in Governor Branstad's
2013 -2014 budget proposal submitted on January 15, 2013
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 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.
FY 2014 Policy Guidelines
Page 18
IMPACT ON COMMERCIAL PROPERTY - EXAMPLE
CITY TAX PERCENT DOLLAR
ACTUAL - PAST HISTORY CALCULATION CHANGE CHANGE
FY 1989 "City" Property Tax $2,106.42 - 15.43% -$ 384.19
FY 1990 "City" Property Tax $2,086.50 - .95% - $ 19.92
FY 1991 "City" Property Tax* $2,189.48 + 4.94% +$ 102.98
FY 1992 "City" Property Tax $2,280.18 + 4.14% +$ 90.70
FY 1993 "City" Property Tax* $2,231.05 - 2.15% -$ 49.13
FY 1994 "City" Property Tax $2,250.15 + 0.86% +$ 19.10
FY 1995 "City" Property Tax* $2,439.60 + 8.42% +$ 189.45
FY 1996 "City" Property Tax $2,439.60 + 0.00% +$ 0.00
FY 1997 "City" Property Tax* $2,659.36 + 9.01 % +$ 219.76
FY 1998 "City" Property Tax $2,738.43 + 2.97% +$ 79.07
FY 1999 "City" Property Tax* $2,952.03 + 7.80% +$ 213.60
FY 2000 "City" Property Tax $2,934.21 - 0.60% -$ 17.82
FY 2001 "City" Property Tax $2,993.00 + 2.01 % +$ 58.86
FY 2002 "City" Property Tax $2,910.25 - 2.77% -$ 82.84
FY 2003 "City" Property Tax* $3,186.27 + 9.48% +$ 276.03
FY 2004 "City" Property Tax $3,278.41 + 2.89% +$ 92.15
FY 2005 "City" Property Tax* $3,349.90 + 2.18% +$ 71.48
FY 2006 "City" Property Tax (1) $3,152.52 - 5.89% -$ 197.38
FY 2007 "City" Property Tax* $3,538.03 +12.23% +$ 385.50
FY 2008 "City" Property Tax $3,668.64 + 4.26% +$ 150.62
FY 2009 "City" Property Tax* $3,524.48 - 3.63% -$ 133.94
FY 2010 "City" Property Tax $3,524.48 - 0.85% -$ 30.23
FY 2011 "City" Property Tax $3,585.16 + 1.72% +$ 60.68
FY 2012 "City" Property Tax $3,736.64 + 4.23% +$ 151.48
FY 2013 "City" Property Tax $3,855.96 + 3.19% +$ 119.32
Average FY 1989 -2013 + 1.92% +$ 54.61
* Denotes year of State - issued equalization orders
(1) The FY 2006 property tax calculation takes into account the 3% valuation decrease for commercial property
as determined by the reappraisal.
FY 2014 Policy Guidelines
Page 19
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
FY 1997 "City" Property Tax
FY 1998 "City" Property Tax
FY 1999 "City" Property Tax
FY 2000 "City" Property Tax
FY 2001 "City" Property Tax
FY 2002 "City" Property Tax
FY 2003 "City" Property Tax
FY 2004 "City" Property Tax
FY 2005 "City" Property Tax
FY 2006 "City" Property Tax(1)
FY 2007 "City" Property Tax
FY 2008 "City" Property Tax
FY 2009 "City" Property Tax
FY 2010 "City" Property Tax
FY 2011 "City" Property Tax
FY 2012 "City" Property Tax
FY 2013 "City" Property Tax
Average FY 1989 -FY 2013
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
$5,690.75
$5,700.56
$5,536.70
$5,358.00
$5,533.00
$5,380.42
$5,106.00
$5,136.50
$5,036.00
$5,814.61
$5,983.21
$6,184.95
$5,976.44
$5,909.69
$6,011.44
$6,265.43
$6,465.48
PERCENT
CHANGE
- 15.40%
- .90%
+ 4.90%
+ 4.10%
- 2.20%
+ 0.90%
- 6.50%
+ 0.00%
- 3.40%
+ .17%
- 2.87%
- 3.23%
+ 3.28%
- 2.77%
- 5.10%
+ .60%
- 1.96%
+15.46%
+ 2.90%
+ 3.37%
- 3.37%
- 1.12%
- 1.72%
+ 4.23%
+ 3.19%
- 0.30%
DOLLAR
CHANGE
- $1,074.65
- $ 55.80
+$ 288.45
+$ 254.05
- $ 137.60
+$ 53.50
- $ 411.90
+$ 0.00
- $ 200.30
+$ 9.81
- $ 163.86
- $ 178.70
+$ 175.55
- $ 153.13
- $ 274.40
+$ 30.50
- $ 100.50
+$ 778.61
+$ 168.60
+$ 201.74
- $ 208.51
- $ 66.75
+$ 10115
+$ 254.00
+$ 200.04
- $ 20.38
(1)The FY 2006 property tax calculation takes into account the 19.9% valuation increase for industrial property as
determined by the reappraisal.
FY 2014 Policy Guidelines
Page 20
History of Increases in Property Tax Askings
% Change
Fiscal "City" Property in Tax
Year Tax Askings Askings
FY 1989 $10,918,759 -12.0% Sales Tax
initiated
FY 1990 $10,895,321 - 0.2%
FY 1991 $11,553,468 + 6.0%
FY 1992 $12,249,056 + 6.0%
FY 1993 $12,846,296 + 4.9%
FY 1994 $13,300,756 + 3.5%
FY 1995 $13,715,850 + 3.1%
FY 1996 $14,076,320 + 2.6%
FY 1997 $14,418,735 + 2.4%
FY 1998 $14,837,670* + 2.9%
FY 1999 $15,332,806* + 3.3%
FY 2000 $15,285,754 - 0.3%
FY 2001 $15,574,467 + 1.9%
FY 2002 $15,686,579 + 0.7%
FY 2003 $15,771,203 + 0.5%
FY 2004 $16,171,540 + 2.5%
FY 2005 $16,372,735 + 1.2%
FY 2006 $16,192,215 - 1.1%
FY 2007 $17,179,994 + 6.1%
FY 2008 $18,184,037 + 5.8%
FY 2009 $18,736,759 + 3.0%
FY 2010 $19,095,444 + 1.9%
FY 2011 $19,878,962 + 4.1 %
FY 2012 $21,284,751 + 7.1%
FY 2013 $22,758,753 + 6.9%
Present Impact on
Homeowner**
-11.4%
- 0.9%
+ 3.8%
+ 3.6%
+ 5.0%
+ 0.3%
+ 2.4%
- 0.9%
- 0.4%
- 0.7%
0.0%
- 0.2%
0.0%
0.0%
- 5.0%
0.0%
0.0%
+ 1.7%
- 1.7%
0.0%
+2.8%
0.0%
+2.5%
+5.0%
+5.0%
Average FY 1989 -2013 + 2.51% +0.44%
*Without TIF Accounting change. * *Does not reflect State unfunded portion of Homestead Credit.
^ Impact to the average homeowner if the State funds the Homestead Property Tax Credit at 78 %.
The Diamond Jo expansion opened on December 2, 2008 tracking fairly closely to the need
to increase property tax revenues with the corresponding decreases in the Dubuque Racing
Association lease payments.
FY 2014 Policy Guidelines
Page 21
Impact on Tax Askings and Average Residential Property
The following is a historical City tax rate comparison:
Fiscal "City" % Change
Year Tax Rate in Tax Rate
FY 1987 14.5819
FY 1988 13.9500 -4.33%
FY 1989 11.8007 -15.41%
FY 1990 11.6891 -0.95%
FY 1991 12.2660 4.94%
FY 1992 12.7741 4.14%
FY 1993 12.4989 -2.15%
FY 1994 12.6059 0.86%
FY 1995 11.7821 -6.54%
FY 1996 11.7821 0.00%
FY 1997 11.3815 -3.40%
FY 1998 11.4011 0.17%
FY 1999 11.0734 -2.87%
FY 2000 10.7160 -3.23%
FY 2001 11.0671 3.28%
FY 2002 10.7608 -2.77%
FY 2003 10.2120 -5.10%
FY 2004 10.2730 0.60%
FY 2005 10.0720 -1.96%
FY 2006 9.6991 -3.70%
FY 2007 9.9803 2.90%
FY 2008 10.3169 3.37%
FY 2009 9.9690 -3.37%
FY 2010 9.8577 -1.12%
FY 2011 10.0274 1.72%
FY 2012 10.4511 4.22%
FY 2013 10.7848 3.19%
Average FY 1987 -2013 -1.06%
Guideline
As described in the City Manager's transmittal memo, there will not be a property tax
guideline recommended at this stage in the process.
Note: One percent increase in the tax rate will generate approximately $234,146.
FY 2014 Policy Guidelines
Page 22
CIP BUDGET GUIDELINES
S. 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.
T. 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.
U. RENOVATION AND MAINTENANCE
Guideline
Capital improvement expenditures should concentrate on renovating and maintaining
existing facilities to preserve prior community investment.
V. 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.
W. 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
FY 2014 Policy Guidelines
Page 23
sharing to develop joint -use facilities and cost sharing to improve roads and bridges
are examples.
X. 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.
On October, 15, 2012, the City Council adopted a formal Debt Management Policy for
the City of Dubuque. While this debt management policy just put into writing what the
City of Dubuque was already doing in practice, there were some changes to those
policies. The most significant components of the Debt Management Policy include an
internal policy of maintaining the City's general obligation outstanding debt at no more
than 95% (except as a result of disasters) of the limit prescribed by the State
constitution as of June 30th of each year; City will not use short -term borrowing to
finance operating needs except in the case of an extreme financial emergency which
is beyond its control or reasonable ability to forecast. Recognizing that bond issuance
costs (bond counsel, bond rating, and financial management fees) add to the total
interest costs of financing, bond financing should not be used if the aggregate cost of
projects to be financed by the bond issue does not exceed $500,000; City will consider
long -term financing for the construction, acquisition, maintenance, replacement, or
expansion of physical assets (including land) only if they have a useful life of at least
six years; City shall strive to repay 20 percent of the principal amount of its general
obligation debt within five years and at least 40 percent within ten years. The City
shall strive to repay 40 percent of the principal amount of its revenue debt within ten
years. Total annual debt service payments on all outstanding debt of the City shall not
exceed 25% of total annual receipts across all of the City's funds. As of June 30,
2013, it is projected the City will be at 17 %; and it shall be the goal of the City to
establish an internal reserve equal to maximum annual debt service on future general
obligation bonds issued that are to be abated by revenues and not paid from ad-
valorem property taxes in the debt service fund starting with debt issued after July 1,
2013. This reserve shall be established by the fund or revenue source that expects to
abate the levy, and shall be carried in said fund or revenue source on the balance
sheet as a restricted reserve. This reserve does not exist now, except where required
by bond covenants. This internal reserve would be implemented by adding the cost of
the reserve to each debt issuance.
The FY 2012 -13 assessable values for calculating the statutory debt limit is
$3,633,353,076, which indicates a total General Obligation debt capacity of
$181,667,654. Outstanding G.O. debt (including tax increment debt, TIF rebate
remaining payments and general fund lease agreement) on June 30, 2013 will be
$143,385,856 (78.93 percent of the statutory debt limit) leaving an available debt
FY 2014 Policy Guidelines
Page 24
capacity of $38,281,798 (21.07 percent). It should be noted that most of the City of
Dubuque's outstanding debt is not paid with property taxes (except TIF), but is abated
from other revenues, except for one issuance for the replacement of a Fire Pumper
truck in the amount of $1,410,000 with debt service of $120,820 in FY 2013. Included
in the debt is $24,091,119 of property tax rebates to businesses creating and retaining
jobs and investing in their businesses. There is anticipated to be additional debt of
$5,830,565 to be issued in FY 2014 that is subject to the statutory debt limit of
$183,621,403 in Fiscal Year 2014. As of June 30, 2014, the City is estimated to be at
75.39 percent of the debt limit, down from 78.93 percent in FY 2013 because the
amount of debt retired in FY 2014 exceeds the amount of additional debt issued in FY
2014 and the statutory debt limit increases each year with the amount of increased
assessed value.
Statutory Debt Limit
Fiscal Year
Statutory Debt
Limit
Amount of Debt
Subject to Statutory
Debt Limit
% Debt Limit
Used
2012
$177,667,991
$142,682,292
80.31 %
2013
$181,667,654
$143,385,856
78.93%
2014
$183,621,403
$138,432,564
75.39%
The City also has debt that is not subject to the statutory debt limit. This debt includes
revenue bonds. Outstanding revenue bonds payable by water, sewer and stormwater
fees on June 30, 2013 will have a balance of $88,243,243. The total City
indebtedness as of June 30, 2013 is $231,629,099. The total City indebtedness as of
June 30, 2012 was $229,155,092. With anticipated debt of $5,830,565 in FY 2014
minus debt being retired, the estimate for total City indebtedness as of June 30, 2014
is $224,088,351. The City is using debt to accomplish the projects that need to be
done and to take advantage of the attractiveness of interest rates in the current
market.
Part of the City's FY 2013 debt was in the form of a grant from the Iowa Finance
Authority and the Iowa Department of Natural Resources. Through a new state
program, the interest rate was lowered on the Water and Resource Recovery Center
State Revolving Loan Fund debt allowing the City to borrow $9.4 million more at the
same debt service cost to construct permeable pavers in over forty alleys.
During the FY 2013 budget process, a projection of the statutory debt limit usage was
presented at the public hearing to adopt the Fiscal Year 2013 budget. The following
was the projection that was previously shown:
FY13
FY14
FY15
FY16
FY17
FY18
86.15%
84.89%
81.90%
77.16%
74.55%
71.32%
FY 2014 Policy Guidelines
Page 25
These statutory debt limit usage projections have changed slightly due to being
advised that the $4.5 million dollar Iowa Finance Authority loan for the Caradco project
in the Historic Millwork District is subject to the City's statutory debt limit due to the
debt being issued by the City instead of by the developer; utility extensions were not
requested by property owners for previously annexed areas and therefore the debt
was not issued; and the Bee Branch Creek Restoration project has other grant funding
opportunities that may allow less debt in the future such as the new State of Iowa
Flood Mitigation Program, an application for an Economic Development Administration
grant and Federal Surface Transportation Program Enhancement funds from
Dubuque Metropolitan Area Transportation Study.
The revised projection of the statutory debt limit usage is as follows:
FY13
FY14
FY15
FY16
FY17
FY18
78.93%
75.39%
75.44%
63.88%
53.09%
46.15%
As we approach the preparation of the FY 2014 -2018 Capital Improvement Program
(CIP) the problem is not the city's capacity to borrow money but (a) how to identify,
limit and prioritize projects which justify the interest payments and (b) how to balance
high priority projects against their impact on the property tax rate. In the past twelve
months the City has successfully issued bonds at interest rates less than 3 percent.
Guideline
There are many high priority capital improvement projects, which need to be
constructed during the FY 2014 -2018 period. The reductions in DRA rent and
distribution over the years has increased the need to borrow for projects. As in the
past, debt will be required on several major capital projects, that being the Drainage
Basin Master Plan, Airport Improvements, Park Improvements, Sidewalk and Street
Improvements, Sanitary Sewer Fund, Parking Fund and Water Fund. In FY 2014-
2018 borrowings will also include smaller projects and equipment replacements such
as Park developments and Police software. These smaller borrowings will be for a
term not exceeding the life of the asset and not less than six years in accordance to
the Debt Management Policy. Alternative sources of funds will always be evaluated
(i.e. State Revolving Loan Funds) to maintain the lowest debt service costs.
The City is applying for State and Federal grants to minimize the amount of local dollars
needed for City projects. Since February 2009, the City and its partners have received
$101,624,201. The following is a list of recent grants received by the City only:
Grant
Project
Award
Amount
Community Development Block Grant
Caradco Building
$ 8,900,000
State of Good Repairs Grant
Intermodal Facility
$ 8,000,000
Transportation Investment Generating
Millwork District Complete
$ 5,600,000
FY 2014 Policy Guidelines
Page 26
Grant
Project
Award
Amount
Economic Recovery (TIGER)
Streets
State Revolving Loan Fund Green Project
Upper Bee Branch
$4,400,000
State of Iowa I -JOBS
Lower Bee Branch
$ 3,950,000
Lead Paint Grant
Lead Paint Removal
$ 3,090,000
U.S. Department of Transportation State of
Good Repair
Bus Replacements
$ 2,300,000
Vision Iowa RECAT
Bee Branch Restoration
$2,250,000
U.S. Economic Development Administration
Central Parking Ramp
$ 1,500,000
Iowa Finance Authority Workforce Housing
Loan
Caradco Building
$ 1,500,000
U.S. Department of Transportation Clean
Fuels
Bus Replacement
$ 1,500,000
Iowa Power Fund
Smarter City Initiative
$ 1,400,000
FEMA Public Assistance
North Fork Sanitary
Improvements
$ 1,004,229
U.S. Housing and Urban Development
Green and Healthy Homes
$ 1,000,000
State Revolving Loan Fund Green Project
Smart Water Meters
$ 1,000,000
NSB Grant
Bee Branch Trails
$1,000,000
Energy Efficiency Conservation Block Grant
Comprehensive Strategy
$ 574,700
State of Iowa I -JOBS
Southwest Arterial
$ 558,967
Homeless Prevention Funds
Homeless Prevention
$ 502,294
State Competitive EECBG
US 52 Traffic Flow
Optimization
$ 500,000
Neighborhood Stabilization Program
Purchase of Foreclosed
Homes
$ 444,000
Federal Transit Administration
3 Bus Replacements
$ 384,939
Justice Assistance Grant
Police Initiatives
$ 360,320
Federal Highway Infrastructure
1 Bus Replacement
$ 349,000
State Revolving Loan Funds
North Fork Catfish Creek
Stormwater and Sanitary
$ 337,000
Community Development Block Grant
Formula Funds
Homeownership
Rehabs /Green Alleys
$ 328,269
Iowa Clean Air Attainment Program (ICAAP)
Grant
The Jule Medical Loop
$ 300,160
Public Transit Infrastructure Grant
ARC Transfer Center
$ 289,375
AmeriCorps Grant
Various Programs
$ 186,201
MRT Grant
Bee Branch Trails
$ 100,000
Federal Firefighters Assistance Grant
Smoke
Detectors /Extinguishers
$ 78,549
State Energy Program
18`" & Central Energy
Improvements
$ 69,831
Iowa Community Cultural Grant
Arts Coordinator Salary
$ 13,021
Total
$53,770,855
FY 2014 Policy Guidelines
Page 27
Y. ROAD USE TAX FUND
Discussion
Actual Road Use Tax Fund receipts are as follows:
FY 1985 - $2,069,065
FY 1986 - $2,207,467
FY 1987 - $2,259,436
FY 1988 - $2,379,592
FY 1989 - $2,617,183
FY 1990 - $3,037,587
FY 1991 - $3,122,835
FY 1992 - $3,119,087
FY 1993 - $3,121,357
FY 1994 - $3,343,678
FY 1995 - $3,484,524
FY 1996 - $3,841,921
FY 1997 - $3,977,528
FY 1998 - $4,072,296
FY 1999 - $4,415,192
FY 2000 - $4,671,656
FY 2001 - $4,628,072
FY 2002 - $4,620,514
FY 2003 - $4,696,399
FY 2004 - $4,806,295
FY 2005 - $4,798,667
FY 2006 - $4,831,935
FY 2007 - $4,809,990
FY 2008 - $4,944,336
FY 2009 - $4,788,633
FY 2010 - $5,105,327
FY 2011 - $5,253,650
FY 2012 - $5,469,256
The FY 2013 budget was based on receiving $5,263,848 in Road Use Tax funds. In
FY 2013, 100 percent of the Road Use Tax income is in the operating budget.
Guideline
It is preferable to shift Road Use Tax funds to the capital budget for street
maintenance and repair to reduce the need to borrow funds for routine street
maintenance and improvements. This shift cannot occur until such time as there are
increased revenues or reduced expense that would allow this shift without a property
tax impact.
Z. COMMERCIAL AND INDUSTRIAL DEVELOPMENT
Guideline
Current City, commercial and industrial development efforts should be continued to (a)
preserve current jobs and create new job opportunities and (b) enlarge and diversify
the economic base. Financing these efforts and programs should continue to be a
high priority.
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AA. HOUSING
Guideline
In order to maintain an adequate supply of safe and decent housing, the City should
strive to preserve existing single family and rental housing and provide opportunities
for development of new housing, particularly owner occupied, within the City's
corporate limits for all citizens, particularly for people of low and moderate income.
Workforce rental housing is becoming increasingly important and the City provides
assistance for building rehabilitations.
BB. 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.
CC. NET CASH PROCEEDS (SURPLUS DISTRIBUTION) FROM THE DUBUQUE
RACING ASSOCIATION
The contract with the Dubuque Racing Association calls for distribution at the end of
its fiscal year, December 31st, of 50 percent of its net cash operating funds to the City
of Dubuque. In early- February, the City receives payment of proceeds to be
distributed. These proceeds are then allocated for capital improvements, with the
highest priority given to reducing the City's annual borrowing.
The Dubuque Racing Association provides the City with projections of future
distributions since gaming is a highly volatile industry the estimates are discounted
prior to including them in the City's Five Year CIP.
One hundred percent of the February 2014 projections of operating surplus have been
anticipated as resources to support the Fiscal Year 2014 capital improvement
projects. This level will be maintained for the Fiscal Year 2015 surplus for the FY
2015 resource estimate and then reduced by 5 percent for the February 2016
projected surplus for FY 2016, 10 percent for FY 2017, and 15 percent for FY 2018
resources.
FY 2014 Policy Guidelines
Page 29
Guideline
In Fiscal Year 2014, 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.
DD. 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.
EE. USE OF GAMING RELATED RECEIPTS
Guideline
On April 1, 2004, a new lease took effect with the Dubuque Racing Association for
lease of the Dubuque Greyhound Park and Casino. This new lease was negotiated
after the FY 2005 budget was approved and raised the lease payment from %% of
coin -in to 1% of coin -in. This new lease and the expansion of gaming at Dubuque
Greyhound Park and Casino, from 600 gaming positions to 1,000 gaming positions,
effective August 1, 2005, provided additional revenues to the City of Dubuque.
In FY 2004 the split of gaming taxes and rents between operating and capital budgets
was 50% operating and 50% capital. In FY 2005 this split was changed to 75%
operating and 25% capital. In FY 2009 the split was 76% operating and 24% capital.
In FY 2010, the budget was changed to reflect the actual split of 85% operating and
15% capital. The operating portion of the split now includes the debt service required
on the 2002 general obligation bonds for the America's River Project that was
previously considered as part of the capital portion of the DRA lease. Debt obligations
are considered a continuing annual expense and are more accurately reflected as part
of the operating portion of the DRA lease.
In FY 2011, the budget was changed to reflect a split of gaming taxes and rents
between operating and capital budgets of 86.5% operating and 13.5% capital. FY
2013 changed the split to 90.0% operating and 10.0% capital and FY 2014 remains at
this level.
FY 2014 Policy Guidelines
Page 30
The Diamond Jo expanded to a land based barge casino facility and increased to
1,100 slots on December 1, 2008. This expansion was projected to decrease the
Mystique gaming market and correspondingly the coin -in by just over 21 percent.
Based on the projected market share loss, the City did not receive a distribution of
cash flows from the Dubuque Racing Association (DRA) in Fiscal Years 2009 and
2010.
DRA distributions restarted in FY 2011 instead of the projected year of FY 2012.
The reduction in the DRA's market share and the downturn in the local economy
impact the City's lease payment from the DRA. The current lease requires the DRA to
pay the City 1 percent of coin in from slot machines and 4.8 percent of gross revenue
from table games. In FY 2009, the City's estimated lease payments through FY 2013
were reduced $7.1 million based on projections from the DRA. In FY 2010, gaming
revenues generated from lease payments from the DRA were decreased an additional
$4.8 million through FY 2014 based on revised projections from the DRA. In FY 2011,
the City's estimated lease payments through FY 2015 were reduced $1 million based
on updated projections from the DRA. In FY 2012, the City's estimated lease
payments through FY 2016 were reduced an additional $3.2 million based on revised
projections from the DRA. In FY 2013, The City's estimated lease payments through
FY 2017 were reduced an additional $2.9 million based on revised projections from
the DRA.
In FY 2014, it is estimated that the City's lease payments through FY 2018 will remain
at the FY 2013 level and not be reduced based on the updated projections from the
DRA. From FY 2009 thru FY 2018, the City's lease payments have been reduced $19
million.
The reduction in coin -in is estimated to be 32% instead of the 21 % originally projected
due to the expansion of the Diamond Jo Casino as well as the economic downtown
which was not projected.
The 50¢ per patron tax previously received from the Diamond Jo was replaced by a
$500,000 fixed payment based on their revised parking agreement. The riverboat
related tax on bets remains at the FY 2013 budget level of $379,501.