Loading...
2015 Fiscal Year Budget GuidelinesMasterpiece on the Mississippi TO: The Honorable Mayor and City Council Members FROM: Michael C. Van Milligen, City Manager SUBJECT: Fiscal Year 2015 Budget Guidelines DATE: January 3, 2014 Dubuque band AI- America City 1 2007 • 2012 • 2013 Budget Director Jennifer Larson is recommending adoption of the Fiscal Year 2015 Budget Guidelines. The Fiscal Year 2015 Budget and Fiscal Policy Guidelines recommended property tax rate of $11.03 per thousand dollars of assessed valuation is unchanged from the current Fiscal Year 2014 property tax rate. The Fiscal Year 2015 budget guidelines call for a property tax decrease for industrial properties (- 7.23 %) and commercial properties (- 1.15 %) and a 3.23% property tax increase for the average Dubuque homeowner. There was an equalization order from the Iowa Department of Revenue of 8% for commercial property and 10% for agricultural property in Fiscal Year 2015. The Iowa Department of Revenue is responsible for "equalizing" assessments every two years. Commercial and Industrial taxpayers previously were taxed at 100 percent of assessed value; however due to legislative changes in FY 2013 a 95 percent rollback factor will be applied in FY 2015 and a 90 percent rollback factor will be applied in FY 2016 and beyond. The State of Iowa will backfill the loss in property tax revenue from the rollback and the backfill 100 percent in FY 2015 through FY 2017 and then the backfill will be capped at the FY 2017 level in FY 2018 and beyond. The FY 2015 State backfill for property tax loss is estimated to be $701,570. FY 2015 is the first year that commercial, industrial and railroad properties are eligible for a Business Property Tax Credit. The Business Property Tax Credit will be deducted from the property taxes owed and the credit is funded by the State of Iowa. Eligible businesses must file an application with the Assessor's office to receive the credit with a deadline of January 15, 2014 for applications to be considered for FY 2015. The average commercial and industrial properties ($386,139 Commercial / $599,500 Industrial) will receive a Business Property Tax Credit for the City share of their property taxes of $148 in FY 2015. Since 1989, the average Dubuque industrial taxpayer has averaged an annual decrease in costs in the City portion of their property tax of 0.48 %, or a decrease of about $41.40 a year. Since 1989, the average Dubuque commercial taxpayer has averaged an annual increase in costs in the City portion of their property tax of 1.64 %, or about $47.34 a year. Since 1989, the average Dubuque homeowner has averaged an annual increase in costs in the City portion of their property tax of less than 1.3 %, or about $7.37 a year. If the State had been fully funding the Homestead Tax Credit, the increase would have averaged about $4.35 a year. The Fiscal Year 1987 (just prior to implementation of the 1% local option sales tax where 50% was dedicated to property tax relief) property tax rate of $14.58 per thousand dollars of assessed valuation was 24.39% higher than the Fiscal Year 2015 recommended property tax rate of $11.03. The Fiscal Year 2015 recommended property tax rate of $11.03 would still maintain Dubuque as having the second lowest City property tax rate of the ten cities in the State of Iowa with a population over 50,000, assuming none of the cities change their property tax rates. The highest- ranked city (Council Bluffs at $17.75) is 61 % higher than Dubuque's rate, and the average of the other 9 cities ($15.71) is 42% higher than Dubuque. Health insurance cost will have a significant impact on the FY 2015 property tax. The City portion of health insurance expense will increase from $1,015 per month per contract to $1,190 per month per contract (based on 553 contracts) which is a 17.24% increase in health insurance cost for an additional cost of $825,122 to the General Fund in FY 2015. In the last few years, the City Council has boosted the general fund reserves and in FY 2011, FY 2012, FY 2013 and FY 2014, 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. The split of gaming revenues from taxes and the DRA lease (not distributions) in FY 2015 is split between operating and capital budgets at 100% operating and 0% capital which is a change from 90.0% operating and 10.0% capital in FY 2014. This 10% margin was to cushion the City operating fund when there was a downturn in gaming revenue. That downturn has arrived with the lease payments decreasing from a high of $9,757,458 in FY 2007 down to the current projection of $6,023,925 in FY 2015. A significant impact of the FY 2015 change is the reduction of funds that now go to the City's five -year capital improvement program. Over the next five years there will be $3,542,875 less available for capital improvement program projects because the money now goes to the general fund operating budget. 2 The Fiscal Year 2015 recommended property tax rate of $11.03 includes $200,000 for recurring improvement package requests and some funds for non - recurring improvement package requests. I 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. I concur with the recommendation and respectfully request Mayor and City Council approval. 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 3 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 2015 DATE: January 3, 2014 Dubuque band AI- America City 1 2007 • 2012 • 2013 I am recommending adoption of the Fiscal Year 2015 Budget Policy Guidelines. The guidelines reflect City Council direction given as part of the August 20 and 21, 2013, 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 2015 Budget and Fiscal Policy Guidelines recommended property tax rate of $11.03 per thousand dollars of assessed valuation is unchanged from the current Fiscal Year 2014 property tax rate. The Fiscal Year 2015 budget guidelines call for a property tax decrease for industrial properties (- 7.23 %) and commercial properties (- 1.15 %) and a 3.23% property tax increase for the average Dubuque homeowner. There was an equalization order from the Iowa Department of Revenue of 8% for commercial property and 10% for agricultural property in Fiscal Year 2015. The Iowa Department of Revenue is responsible for "equalizing" assessments every two years. Commercial and Industrial taxpayers previously were taxed at 100 percent of assessed value; however due to legislative changes in FY 2013 a 95 percent rollback factor will be applied in FY 2015 and a 90 percent rollback factor will be applied in FY 2016 and beyond. The State of Iowa will backfill the loss in property tax revenue from the rollback and the backfill 100 percent in FY 2015 through FY 2017 and then the backfill will be capped at the FY 2017 level in FY 2018 and beyond. The FY 2015 State backfill for property tax loss is estimated to be $701,570. FY 2015 is the first year that commercial, industrial and railroad properties are eligible for a Business Property Tax Credit. The Business Property Tax Credit will be deducted from the property taxes owed and the credit is funded by the State of Iowa. Eligible businesses must file an application with the Assessor's office to receive the credit with a deadline of January 15, 2014 for applications to be considered for FY 2015. The average commercial and industrial properties ($386,139 Commercial / $599,500 Industrial) will receive a Business Property Tax Credit for the City share of their property taxes of $148 in FY 2015. Since 1989, the average Dubuque industrial taxpayer has averaged an annual decrease in costs in the City portion of their property tax of 0.48 %, or a decrease of about $41.40 a year. Since 1989, the average Dubuque commercial taxpayer has averaged an annual increase in costs in the City portion of their property tax of 1.64 %, or about $47.34 a year. Since 1989, the average Dubuque homeowner has averaged an annual increase in costs in the City portion of their property tax of less than 1.3 %, or about $7.37 a year. If the State had been fully funding the Homestead Tax Credit, the increase would have averaged about $4.35 a year. The Fiscal Year 1987 (just prior to implementation of the 1% local option sales tax where 50% was dedicated to property tax relief) property tax rate of $14.58 per thousand dollars of assessed valuation was 24.39% higher than the Fiscal Year 2015 recommended property tax rate of $11.03. ul City Tax Rate • City Tax Rate $16 3 ai rn V� O 01 N N N ,..1 00 00 $14 ri r.1 ,-I V} 1 Vf e-1 `"i M C o N o w 0 0 VF VF .,-I .-I-I .-I N .-I N `"I N N M M n .-I q in. $10 ' N 0 a1 V� N Vl a1 T .-i V} fl]. L} Vl $8 ' $6 $4 $2 $- 1 1 1 1 1 1 1 1 1 1 1 1 , 1 1 1 1 1 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 The Fiscal Year 2015 Budget and Fiscal Policy Guidelines recommended property tax rate of $11.03 would still maintain Dubuque as having the second lowest City property tax rate of the ten cities in the State of Iowa with a population over 50,000, assuming none of the cities change their property tax rates. 2 FY 2014 Property Tax Rates vs. Dubuque FY 2015 a) $20- $18 - � $16- a) • $14 - a) N $12 -$10.86 $11.03 O $10 - o o $8- L $6 - a) Q- $4 - a) • $2 - x so co 1— $12.68 $16.78 $16.81 $17.49 $17.59 $17.75 $15.22 $15.71 $16.20 _ � a) w E a ❑ Q = �' •= = O Cedar Rapids 0 0- a) > ca 0 0 cz O 0 0 a`) rt Des Moines Council Bluffs In FY15, Dubuque would be the SECOND LOWEST in the state for the city portion of property tax rate, if no other city changes their rate. The highest- ranked city (Council Bluffs) would be 61 % higher than Dubuque's rate, and the average of the other 9 cities would be 42% higher than Dubuque. It is highly unlikely that other cities will not increase their property tax rate in FY 2015. Health insurance cost will have a significant impact on the FY 2015 property tax. The City portion of health insurance expense will increase from $1,015 per month per contract to $1,190 per month per contract (based on 553 contracts) which is a 17.24% increase in health insurance cost for an additional cost of $825,122 to the General Fund in FY 2015, which would be a 3.24% property tax increase for the average homeowner without other mitigating factors unrelated to health insurance. In the last few years, the City Council has boosted the general fund reserves and in FY 2011, FY 2012, FY 2013 and FY 2014, 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. This level of taxation includes $200,000 for recurring improvement package requests and some funding for non - recurring improvement package requests in the FY 2015 budget recommendation. Some highlights of the document are: 3 ➢ Gaming revenues generated from lease payments from the DRA have been decreased significantly (- $253,227) based on revised projections from the DRA. The DRA is actually projecting less revenue to the City than this amount, but it is believed that the DRA is taking appropriate actions to mitigate this decrease. The following is a ten year history of DRA lease payments to the City of Dubuque: FY 2015 $ 6,000,001 estimate FY 2014 $ 6,253,228 budget FY 2013 $ 6,001,193 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 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 2015 is split between operating and capital budgets at 100% operating and 100% capital which is a change from 90.0% operating and 10.0% capital in FY 2014. This 10% margin was to cushion the City operating fund when there was a downturn in gaming revenue. That downturn has arrived with the lease payments decreasing from a high of $9,757,458 in FY 2007 down to the current projection of $6,023,925 in FY 2015. It is appropriate to make the adjustment now because the five year projection of the City property tax rate is as follows: FY 2015 +0.00% increase FY 2016 +0.97% increase FY 2017 +0.31 % increase FY 2018 +1.58% increase FY 2019 +1.30% increase ➢ Commercial and Industrial taxpayers previously were taxed at 100 percent of assessed value; however due to legislative changes in FY 2013 a 95 percent rollback factor will be applied in FY 2015 and a 90 percent rollback factor will be applies in FY 2016 and beyond. The State of Iowa will backfill the loss in property tax revenue from the rollback and the backfill 100 percent in FY 2015 through FY 2017 and then the backfill will be capped at the FY 2017 level in FY 2018 and beyond. The FY 2015 State backfill for property tax loss is estimated to be $701,570. ➢ Sales tax receipts are projected to decrease 9.18% (- $419,935) under FY 2014 budget and 4.46% under FY 2013 actual of $4,348,716 based on FY 2014 revised revenue estimate of $4,094,516 which includes a reconciliation payment from the State of Iowa of $146,044 received in November and then increase at 4 an annual rate of 2.0 percent per year. The estimates received from the State of Iowa show a 1.26% decrease in the first two payments estimated for FY 2015. ➢ Building Permits is anticipated to decrease 5.4 percent or $30,000 in FY 2015 based on a decrease in the level of construction. ➢ Federal Transportation Administration (FTA) transit operating assistance is anticipated to increase 4.6 percent or $41,596 from FY 2014 budget based on the revised FY 2014 budget received from the FTA. ➢ Gas franchise fees have been projected to increase 6.5 percent over FY13 actual of $638,853 based on the growth percentage from FY12 to FY13 ( +$20,042 over FY14 Budget). Also, Electric franchise fees have been projected to increase 6.5 percent over FY13 actual of $1,707,013 based on the growth percentage from FY 2012 and FY 2013 ( +$125,222 over FY14 Budget). There is also an increase in franchise fees rebates projected of $144,900 which reduces the projected increase in revenue. The franchise fee increases at an annual rate of 2 percent per year from FY 2016 thru FY 2019. ➢ Industrial and riverfront property lease revenue is projected to increase by $839,550 in FY 2015 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 30.12 percent to 30.41 percent ( +0.96% or an increase of $39,406 in General Fund). The Municipal Fire and Police Retirement City contribution is expected to decrease 8.71 % in FY16; 8.03% in FY17; 2.35% in FY18 and 4.69% in FY19. Also, the Iowa Public Employee Retirement System (IPERS City contribution remains at 8.93 percent and the employee contribution remains at 5.95% in FY 2015. The IPERS rate is anticipated to increase 1 percent each succeeding year according to IPERS. ➢ The City portion of health insurance expense will increase from $1,015 per month per contract to $1,190 per month per contract (based on 553 contracts) which is a 17.24% increase in health insurance reserves for an additional cost of $825,122 to the General Fund in FY 2015, which would be a 3.24% property tax increase for the average homeowner without other mitigating factors unrelated to health insurance. ➢ The Affordable Care Act is expected to increase employee expense in Fiscal Year 2015 by $200,332 and in Fiscal Year 2016 by $487,239, with increases each year thereafter. ➢ Motor vehicle fuel (excluding Transit) is estimated to remain at the FY 2014 budget with the exception of adding $35,000 for the Port of Dubuque Marina, then 2.0 percent per year beyond. 5 ➢ Transit motor vehicle fuel, and low and high sulfur diesel fuel expense is estimated to increase 16.25 percent ( +$49,613) over FY 2014 budget based on two additional routes running for four quarters, then 2.0 percent per year beyond. Transit motor vehicle maintenance is estimated to increase 173.39 percent ( +$262,764) over FY 2014 budget based on the actual maintenance schedule for the buses as the warranties expire on the new buses, then 2.0 percent per year and beyond. The increase in property tax support for Transit from FY 2014 to FY 2015 is $223,359. The following is a ten year history of the Transit subsidy: FY 2015 $1,056,661 estimate FY 2014 $ 833,302 budget FY 2013 $1,044,171 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 2013 was 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 2014 was $116,728 as compared to FY 2015 of $174,925 based on qualifying employees officially giving notice of retirement. ➢ The Section 8 Housing subsidy payment from the General Fund increased from $210,820 in FY 2014 to $354,845 in FY 2015. 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 803 vouchers. HUD has based the Section 8 administrative fees for FY 2015 on the lower number of vouchers held in FY 2014 which has decreased the amount of revenue received by the Section 8 program in FY 2015. The City is in the process of increasing the Section 8 Housing Vouchers back to 1,060, as ordered by HUD, however the Federal sequestration has not only delayed that increase, but the City is only authorized to use a small amount of the vouchers turned back each month by people leaving the program. ➢ The Cable TV Fund no longer funds Police and Fire public education, Information Services, Health Services, Building Services, Legal Services, and City Manager's Office due to reduced revenues from the cable franchise. This is due to 6 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 2014 and FY 2015 and beyond. ➢ 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. The remaining overhead recharge will be increased ten percent each year for ten years until reaching the total overhead recharge percentage. In FY15 the administrative overhead was increased ten percent or an increase of $431,951. Preliminary citizen participation opportunities will be available. There will be six City Council Work Sessions prior to the adoption of the FY 2015 budget before the state mandated deadline of March 15, 2014. 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 7 BUDGET AND FISCAL POLICY GUIDELINES FOR FY 2015 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 2015 Policy Guidelines Page 2 C. TWO TYPES OF BUDGET DOCUMENTS TO BE PREPARED Guideline The recommended City operating budget for Fiscal Year 2015 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 2015 Budget. It is anticipated these documents will be available on Friday January 31, 2014. 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 2015 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 2015 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 2015, 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 2015 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 120 Teamsters Local Union No 120 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 2015 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. 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). There is a twelve month monitoring period for part -time employees. 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. On July 2, 2013, the Treasury Department announced that it will postpone the employer shared responsibility mandate for one year. Based on the initial requirements of the Affordable Health Care Act, the Fiscal Year 2014 budget provided for insurance coverage effective February 1, 2014 for several part -time employees. In addition the Fiscal Year 2014 budget provided for making several part -time positions full -time on June 1, 2014. Due to the delay of the employer shared responsibility mandate for the Affordable Health Care Act, the City will delay providing insurance coverage for eligible part -time employees and delay making eligible part -time positions full -time until January 1, 2015. The Standard Measurement Period will be delayed from January 1, 2013 through December 31, 2013 to December 1, 2013 through November 30, 2014 with the first provision of health insurance date being January 1, 2015. The Affordable Care Act is expected to increase employee expense in Fiscal Year 2015 by $200,332 and in Fiscal Year 2016 by $487,239, 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. FY 2015 Policy Guidelines Page 6 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 2015 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. FY 2015 Policy Guidelines Page 7 The following chart shows activities with user charges and to what extent the activity is self - supporting: FY 2012 FY 2013 FY 2014 FY 2015 ACTUAL ACTUAL BUDGETED RECOMM'D DEPARTMENT /DIVISION PERCENT PERCENT PERCENT PERCENT Leisure Services Department Recreation Division Adult Athletics* 56.0 58.4 56.9 46.9 McAleece Concessions 155.9 139.0 150.4 124.8 Children's Activities 45.2 37.4 39.5 35.2 Therapeutic Recreation 15.5 12.6 16.0 11.9 Recreation Classes 52.5 39.8 17.2 19.9 Swimming* 56.3 47.2 51.4 49.6 Golf' Surplus to Golf Devel' Fund 105.7 106.9 98.5 97.8 Park Division 10.7 11.3 10.6 12.2 Library Department excl' Gift Trusts 4.3 4.2 3.5 3.5 Airport Departmentw /abateddebt 88.8 87.4 83.9 82.8 Building Services Division Inspections 124.6 73.3 85.8 79.7 Planning Services Department 31.3 33.3 43.7 47.1 Health Services Department Food/Environmental Insp. 64.9 66.3 57.5 58.5 Animal Control * ** 60.0 58.4 54.4 61.2 Housing Services Department General Housing Inspection 68.8 66.2 54.5 57.8 Federal Building Maint. 101.0 98.7 100.0 89.8 * Includes an amount to help cover indirect costs (administration). While the Enterprise Funds have contributed to administrative overhead, the majority has been paid by the General Fund. This is not reasonable and unduly impacts property taxes causing a subsidy to the Enterprise Funds. 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% FY 2015 Policy Guidelines Page 8 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. 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 $4,376,926. The City of Dubuque has historically adopted a general fund reserve policy as part of the Fiscal and Budget Policy Guidelines which is adopted each year as part of the budget process. During Fiscal Year 2013, the City adopted a formal Fund Reserve Policy. According to the policy for the General Fund, the City will maintain a minimum FY 2015 Policy Guidelines Page 9 fund balance of at least 10 percent of the sum of (a) annual operating expenditures not including interfund transfers in the General Fund less (b) the amounts levied in the Trust and Agency fund and the Tort Liability Fund ( "Net General Fund Operating Cost "). The City may increase the minimum fund balance by a portion of any operating surplus above the carryover balance of $200,000 that remains in the General Fund at the close of each fiscal year. The City may continue to add to the General Fund minimum balance when additional funds are available until 20 percent of Net General Fund Operating Cost is reached. 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 $4,376,926 for FY 2015. 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 and $500,000 in FY 2014 for health insurance claims exceeding expectations and the possibility of needing to boost the health insurance reserve. Departments' health insurance contribution was increased during FY 2013 which used $500,000 of the one million dollar reserve and it is anticipated that the departments' health insurance contribution will be increased again in FY 2014 which will use the remaining balance of the one -time reserve. The Health Insurance reserve is expected to be fully funded in FY 2015 and additional contributions from departments will not be required in the future. 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. FY 2015 Policy Guidelines Page 10 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 2013 -14 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 2015 through FY 2019. 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 2014 -15 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. R. PROPERTY TAX DISCUSSION 1. Assumptions - Resources a. Unencumbered funds or cash balances of $200,000 will be available in FY 2015 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 decrease 9.18% (- $419,935) under FY 2014 budget and 4.46% under FY 2013 actual of $4,348,716 based on FY 2014 revised revenue estimate of $4,094,516 which includes a reconciliation payment from the State of Iowa of $146,044 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 1.26% decrease in the first two payments estimated for FY 2015. c. Hotel /motel tax receipts are projected to increase 5.2 percent ($101,711) over FY 2013 actual receipts of $1,940,314, and then increase at an annual rate of 3 percent per year. d. Federal Transportation Administration (FTA) transit operating assistance is anticipated to increase 4.6 percent or $41,596 from FY 2014 budget based on the revised FY 2014 budget received from the FTA. FY 2015 Policy Guidelines Page 11 e. Miscellaneous revenue has been estimated at 2 percent growth per year over budgeted FY 2014. f. Building Permits is anticipated to decrease 5.4 percent or $30,000 in FY 2015 based on a decrease in the level of construction. g. Gaming revenues generated from lease payments from the DRA have been decreased significantly (- $253,227) based on revised projections from the DRA. The DRA is actually projecting less revenue to the City than this amount, but it is believed that the DRA is taking appropriate actions to mitigate this decrease. The following is a ten year history of DRA lease payments to the City of Dubuque: FY 2015 $ 6,000,001 estimate FY 2014 $ 6,253,228 budget FY 2013 $ 6,001,193 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 The Diamond Jo fixed payment remains at $500,000 based on the revised parking agreement. h. The split of gaming revenues from taxes and the DRA lease (not distributions) in FY 2015 is split between operating and capital budgets at 100.0% / 0.0% which is a change from 90.0% operating and 10.0% capital in FY 2014. This 10% margin was to cushion the City operating fund when there was a downturn in gaming revenue. That downturn has arrived with the lease payments decreasing from a high of $9,757,458 in FY 2007 down to the current projection of $6,023,925 in FY 2015. It is appropriate to make the adjustment now because the five year projection of the City property tax rate is as follows: FY 2015 +0.00% increase FY 2016 +0.97% increase FY 2017 +0.31% increase FY 2018 +1.58% increase FY 2019 +1.30% increase A significant impact of the change is the reduction of funds that now go to the City's five -year capital improvement program. Over the next five years there will be $3,542,875 less available for capital improvement program projects because the money now goes to the general fund operating budget. FY 2015 Policy Guidelines Page 12 The Diamond Jo Patio lease ($25,000) and the Diamond Jo parking privileges ($500,000 in FY 2015) 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 52.817 percent to 54.400 percent or a 3.00 percent increase for FY 2015. The rollback has been estimated to increase 2.50% each year from Fiscal Years 2015 thru 2019. There was an equalization order from the Iowa Department of Revenue of 8% for commercial property and 10% for agricultural property tax in Fiscal Year 2015. The Iowa Department of Revenue is responsible for "equalizing" assessments every two years. 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 2014 and 2015) 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 previously were taxed at 100 percent of assessed value; however due to legislative changes in FY 2013 a 95 percent rollback factor will be applied in FY 2015 and a 90 percent rollback factor will be applied in FY 2016 and beyond. The State of Iowa will backfill the loss in property tax revenue from the rollback and the backfill 100 percent in FY 2015 through FY 2017 and then the backfill will be capped at the FY 2017 level in FY 2018 and beyond. The FY 2015 State backfill for property tax loss is estimated to be $701,570. The residential rollback in Fiscal Year 1987 was 75.6481 percent as compared to 54.400 percent in Fiscal Year 2015. 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 2014, the City's tax rate would have been $7.53 per $1,000 of assessed value instead of $11.02 in FY 2014. FY 2015 is the first year that commercial, industrial and railroad properties are eligible for a Business Property Tax Credit. The Business Property Tax Credit will be deducted from the property taxes owed and the credit is funded by the State of Iowa. Eligible businesses must file an application with the Assessor's office to receive the credit with a deadline of January 15, 2014 for applications to be considered for FY 2015. The calculation of the credit is dependent on the number of applications that were received and approved statewide versus the amount that was appropriated for the fiscal year, the levy rates for each parcel FY 2015 Policy Guidelines Page 13 j. and the difference in the commercial /industrial rollback compared to residential rollback. In FY 2015, the Iowa Legislature has appropriated $50 million for FY15; $100 million for FY16; and $125 million for FY17 and thereafter. The estimated initial amount of value that will be used to compute the credit in FY 2015 is $33,000. The basic formula is the value multiplied by the difference in rollbacks of commercial and residential property then divided by one thousand and then multiplied by the corresponding levy rate. The average commercial and industrial properties ($386,139 Commercial / $599,500 Industrial) will receive a Business Property Tax Credit for the City share of their property taxes of $148 in FY 2015. 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 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 2015 will reflect an increase of 5.83 percent in taxable value for residential; an increase of 4.93 percent in taxable value for commercial; and an increase of 0.36 percent in taxable value for industrial. Overall taxable value increased 3.39 percent after deducting Tax Increment Financing values. Assessed valuations were increased 2 percent per year beyond FY 2015. k. Gas franchise fees have been projected to increase 6.5 percent over FY13 actual of $638,853 based on the growth percentage from FY12 to FY13 ( +$20,042 over FY14 Budget). Also, Electric franchise fees have been projected to increase 6.5 percent over FY13 actual of $1,707,013 based on the growth percentage from FY 2012 and FY 2013 ( +$125,222 over FY14 Budget). There is also an increase in franchise fees rebates projected of $144,900 which reduces the projected increase in revenue. The franchise fee increases at an annual rate of 2 percent per year from FY 2016 thru FY 2019. 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 2015 reflects the seventh year that payment in lieu of taxes is charged to the Water and Water Pollution Control funds for Police and Fire Protection. In FY 2015 Policy Guidelines Page 14 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 and riverfront property lease revenue is projected to increase by $839,550 in FY 2015 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 30.12 percent to 30.41 percent ( +0.96% or an increase of $39,406 in General Fund). The Municipal Fire and Police Retirement City contribution is expected to decrease 8.71 % in FY16; 8.03% in FY17; 2.35% in FY18 and 4.69% in FY19. Also, the Iowa Public Employee Retirement System (IPERS City contribution remains at 8.93 percent and the employee contribution remains at 5.95% in FY 2015. The IPERS rate is anticipated to increase 1 percent each succeeding year according to IPERS. b. The City portion of health insurance expense will increase from $1,015 per month per contract to $1,190 per month per contract (based on 553 contracts) which is a 17.24% increase in health insurance cost for an additional cost of $825,122 to the General Fund in FY 2015, which would be a 3.24% property tax increase for the average homeowner without other mitigating factors unrelated to health insurance. In the last few years, the City Council has boosted the general fund reserves and in FY 2011, FY 2012, FY 2013 and FY 2014, 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 increases in department health insurance contributions from the General Fund will not be needed. Estimates for FY 16 -19 have been increased by 10 percent per year. c. FY 2013 was 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 2014 was $116,728 as compared to FY 2015 of $174,925 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 2013. A 2 percent increase is estimated in succeeding years. FY 2015 Policy Guidelines Page 15 f. Electrical energy expense is estimated to have a 6.25 percent increase over FY 2013 actual expense, then 2 percent per year beyond. g. Natural gas expense is estimated to increase 9.5 percent over FY 2013 actual, then 2 percent per year beyond. h. The Dubuque Area Convention and Visitors Bureau contract will continue at 50 percent of actual hotel /motel tax receipts. i. Equipment costs for FY 2015 are estimated to increase 1.00 percent over FY 2014 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. k. Unemployment expense in the General Fund increased slightly from $68,800 in FY 2014 to $71,060 in FY 2015 based on past years actual experience. I. Motor vehicle fuel (excluding Transit) is estimated to remain at the FY 2014 budget with the exception of adding $35,000 for the Port of Dubuque Marina, then 2.0 percent per year beyond. m. Transit motor vehicle fuel, and low and high sulfur diesel fuel expense is estimated to increase 16.25 percent ( +$49,613) over FY 2014 budget based on two additional routes running for four quarters, then 2.0 percent per year beyond. Transit motor vehicle maintenance is estimated to increase 173.39 percent ( +$262,764) over FY 2014 budget based on the actual maintenance schedule for the buses as the warranties expire on the new buses, then 2.0 percent per year and beyond. The increase in property tax support for Transit from FY 2014 to FY 2015 is $223,359. The following is a ten year history of the Transit subsidy: FY 2015 $1,056,661 estimate FY 2014 $ 833,302 budget FY 2013 $1,044,171 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 2015 Policy Guidelines Page 16 n. Postage rates for FY 2015 are estimated to increase 5.0 percent over FY 2013 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 3.61 percent based on actual history, General Liability is increasing 6.64 percent and damage claims is decreasing 20.39 percent, Property insurance is increasing 55.89 percent and Boiler Insurance is unchanged. P. q. The Section 8 Housing subsidy payment from the General Fund increased from $210,820 in FY 2014 to $354,845 in FY 2015. 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 803 vouchers. HUD has based the Section 8 administrative fees for FY 2015 on the lower number of vouchers held in FY 2014 which has decreased the amount of revenue received by the Section 8 program in FY 2015. The City is in the process of increasing the Section 8 Housing Vouchers back to 1,060. The Cable TV Fund no longer funds Police and Fire public education, Information Services, Health Services, Building Services, Legal Services, and City Manager's Office 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. r. Greater Dubuque Development Corporation support of $577,613 is budgeted to be paid mostly from Dubuque Industrial Center Land Sales in FY 2014 and FY 2015 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. The remaining overhead recharge will be increased ten percent each year for ten years until reaching the total overhead recharge percentage. In FY15 the administrative overhead was increased ten percent or an increase of $431,951. FY 2015 Policy Guidelines Page 17 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 FY 2014 FY 2015 "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" Property "City" Property 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 $ 705.71 $ 728.48 Average FY 1989 -FY 2015 with Homestead Adj. Average FY 1989 -FY 2015 without Homestead Adj. + 0.71% + $ 4.35 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% + 4.90% + 3.23% 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 +$32.95 +$22.77 + 1.39% + $ 8.00 FY 2015 Policy Guidelines Page 18 CITY TAX PERCENT DOLLAR PROJECTION ** CALCULATION CHANGE CHANGE FY 2016 "City" Property Tax* $ 755.31 + 3.68% +$ 26.83 FY 2017 "City" Property Tax $ 777.96 +3.00% +$ 22.65 FY 2018 "City" Property Tax* $ 811.42 +4.30% +$ 33.46 FY 2019 "City" Property Tax $ 843.89 +4.00% +$ 32.47 * 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 $18.59 in FY 2012 and $11.51 in FY 2013. 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 2013 -2014 State of Iowa Homestead Property Tax Credit History Funded 100% of the Homestead Property Tax Credit Funded 85% of the Homestead Property Tax Credit Funded 81 % of the Homestead Property Tax Credit Funded 78% of the Homestead Property Tax Credit Funded 77% of the Homestead Property Tax Credit Funded 73% of the Homestead Property Tax Credit Funded 72% of the Homestead Property Tax Credit Funded 72% of the Homestead Property Tax Credit Funded 64% of the Homestead Property Tax Credit Funded 62% of the Homestead Property Tax Credit Funded 78% of the Homestead Property Tax Credit Funded 100% of the Homestead Property Tax Credit 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 2015 Policy Guidelines Page 19 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 FY 2014 "City" Property Tax $3,942.14 + 2.24% +$ 86.20 FY 2015 "City" Property Tax* $3,896.93 - 1.15% -$ 45.21 Average FY 1989 -2015 + 1.82% +$ 52.09 PROJECTION ** FY 2016 "City" Property Tax* FY 2017 "City" Property Tax FY 2018 "City" Property Tax* FY 2019 "City" Property Tax $3,640.37 $3,624.38 $3,693.15 $3,752.84 - 6.58% -$ 256.56 - 0.44% - $ 15.99 + 1.90% + $ 68.77 + 1.62% + $ 59.69 * 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) FY 2015 is the first year of the Business Property Tax Credit estimated at $148 and rollback to 95 %. FY 2016 the rollback is 90 %. FY 2015 Policy Guidelines Page 20 IMPACT ON INDUSTRIAL PROPERTY - EXAMPLE CITY TAX ACTUAL - PAST HISTORY CALCULATION FY 1989 "City" Property Tax $5,900.35 FY 1990 "City" Property Tax $5,844.55 FY 1991 "City" Property Tax $6,133.00 FY 1992 "City" Property Tax $6,387.05 FY 1993 "City" Property Tax $6,249.45 FY 1994 "City" Property Tax $6,302.95 FY 1995 "City" Property Tax $5,891.05 FY 1996 "City" Property Tax $5,891.05 FY 1997 "City" Property Tax $5,690.75 FY 1998 "City" Property Tax $5,700.56 FY 1999 "City" Property Tax $5,536.70 FY 2000 "City" Property Tax $5,358.00 FY 2001 "City" Property Tax $5,533.00 FY 2002 "City" Property Tax $5,380.42 FY 2003 "City" Property Tax $5,106.00 FY 2004 "City" Property Tax $5,136.50 FY 2005 "City" Property Tax $5,036.00 FY 2006 "City" Property Tax(1) $5,814.61 FY 2007 "City" Property Tax $5,983.21 FY 2008 "City" Property Tax $6,184.95 FY 2009 "City" Property Tax $5,976.44 FY 2010 "City" Property Tax $5,909.69 FY 2011 "City" Property Tax $6,011.44 FY 2012 "City" Property Tax $6,265.43 FY 2013 "City" Property Tax $6,465.48 FY 2014 "City" Property Tax $6,610.00 FY 2015 "City" Property Tax $6,131.80 Average FY 1989 -FY 2015 PROJECTION ** ACTUAL FY 2016 FY 2017 FY 2018 FY 2019 - PAST HISTORY "City" Property Tax "City" Property Tax "City" Property Tax "City" Property Tax 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% + 2.24% - 7.23% - 0.46% CITY TAX PERCENT CALCULATION CHANGE $5,778.23 -5.77% $5,768.91 -0.16% $5,871.66 +1.78% $5,959.62 +1.50% 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 66.75 101.75 254.00 200.04 144.53 478.20 31.23 DOLLAR CHANGE -$ 353.57 -$ 9.32 +$ 102.75 +$ 87.96 (1)The FY 2006 property tax calculation takes into account the 19.9% valuation increase for industrial property as determined by the reappraisal. 2) FY 2015 is the first year of the Business Property Tax Credit estimated at $148 and rollback to 95 %. FY 2016 the rollback is 90 %. FY 2015 Policy Guidelines Page 21 History of Increases in Property Tax Askings % Change Fiscal "City" Property in Tax Present Impact on Year Tax Askings Askings Homeowner"* FY 1989 $10,918,759 -12.0% Sales Tax -11.4% initiated FY 1990 $10,895,321 - 0.2% - 0.9% FY 1991 $11,553,468 + 6.0% + 3.8% FY 1992 $12,249,056 + 6.0% + 3.6% FY 1993 $12,846,296 + 4.9% + 5.0% FY 1994 $13,300,756 + 3.5% + 0.3% FY 1995 $13,715,850 + 3.1% + 2.4% FY 1996 $14,076,320 + 2.6% - 0.9% FY 1997 $14,418,735 + 2.4% - 0.4% FY 1998 $14,837,670* + 2.9% - 0.7% FY 1999 $15,332,806* + 3.3% 0.0% FY 2000 $15,285,754 - 0.3% - 0.2% FY 2001 $15,574,467 + 1.9% 0.0% FY 2002 $15,686,579 + 0.7% 0.0% FY 2003 $15,771,203 + 0.5% - 5.0% FY 2004 $16,171,540 + 2.5% 0.0% FY 2005 $16,372,735 + 1.2% 0.0% FY 2006 $16,192,215 - 1.1% + 1.7% FY 2007 $17,179,994 + 6.1 % - 1.7% FY 2008 $18,184,037 + 5.8% 0.0% FY 2009 $18,736,759 + 3.0% +2.8% FY 2010 $19,095,444 + 1.9% 0.0% FY 2011 $19,878,962 + 4.1 % +2.5% FY 2012 $21,284,751 + 7.1% +5.0% FY 2013 $22,758,753 + 6.9% +5.0% FY 2014 $23,197,623 + 1.9% +4.9% FY 2015 $25,527,366 +10.0% +3.2% Average FY 1989 -2015 + 2.77% +0.70% *Without TIF Accounting change. * *Does not reflect State unfunded portion of Homestead Credit. 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 2015 Policy Guidelines Page 22 Impact on Tax Askings and Average Residential Property To maintain the current level of service based on the previous assumptions would require the following property tax asking increases: "City" Property Year Tax Askinqs (000) FY 2014 $23,198 FY 2015 $25,527 + 10.04% FY 2016 $26,393 + 3.39% FY 2017 $26,940 + 2.07% FY 2018 $27,825 + 3.28% FY 2019 $28,828 + 3.60% Increase / $ Impact on Avg. Residential Property* Impact on Tax Askings and Average Residential Property The following is a historical City tax rate comparison: Fiscal Year FY 1987 FY 1988 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 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 "City" Tax Rate 14.5819 13.9500 11.8007 11.6891 12.2660 12.7741 12.4989 12.6059 11.7821 11.7821 11.3815 11.4011 11.0734 10.7160 11.0671 10.7608 10.2120 10.2730 10.0720 9.6991 9.9803 10.3169 9.9690 9.8577 10.0274 10.4511 10.7848 11.0259 FY 2015 11.2059 Average FY 1987 -2015 +3.23% / +$22.77 +3.68% / +$ 26.83 +3.00% / +$ 22.65 +4.30% / +$ 33.46 +4.00% / +$ 32.47 Change in Tax Rate -4.33% -15.41% -0.95% 4.94% 4.14% -2.15% 0.86% -6.54% 0.00% -3.40% 0.17% -2.87% -3.23% 3.28% -2.77% -5.10% 0.60% -1.96% -3.70% 2.90% 3.37% -3.37% -1.12% 1.72% 4.22% 3.19% 2.23% 0% -0.90% FY 2015 Policy Guidelines Page 23 PROJECTION** Fiscal "City" % Change Year Tax Rate in Tax Rate FY 2016 11.1333 +0.97% FY 2017 11.1680 +0.31% FY 2018 11.3449 +1.58% FY 2019 11.4921 +1.30% Guideline The recommended guideline is a 3.23 percent increase for the average residential property owner, which would be a zero percent increase in the property tax rate. Note: One percent increase in the tax rate will generate approximately $254,520. 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. FY 2015 Policy Guidelines Page 24 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 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 FY 2015 Policy Guidelines Page 25 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 2013 -14 assessable values for calculating the statutory debt limit is $3,672,428,057, which indicates a total General Obligation debt capacity of $183,621,403. Outstanding G.O. debt (including tax increment debt, TIF rebate remaining payments and general fund lease agreement) on June 30, 2014 will be $148,062,583 (80.63 percent of the statutory debt limit) leaving an available debt capacity of $35,558,820 (19.37 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 $117,280 in FY 2014. Included in the debt is $20,188,981 of property tax rebates to businesses creating and retaining jobs and investing in their businesses. Statutory Debt Limit Fiscal Year Statutory Debt Limit Amount of Debt Subject to Statutory Debt Limit % Debt Limit Used 2013 $181,667,654 $153,168,662 84.31% 2014 $183,621,403 $148,062,583 80.63% 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, 2014 will have a balance of $142,120,326. The total City indebtedness as of June 30, 2014 is $290,182,909. The total City indebtedness as of June 30, 2013 was $244,405,656. 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 2014 debt was in the form of a grant from the Iowa Flood Mitigation Program. Through a new state program, the City is able to issue $28.25 million in revenue bonds payable from the 5 percent State Sales Tax increment for projects in the Bee Branch Watershed allowing the City to complete the Bee Branch Creek Restoration, construct permeable alleys, replace the Bee Branch flood gates, complete North End Storm Sewers, construct a Flood Control Maintenance Facility, FY 2015 Policy Guidelines Page 26 install Water Plant Flood Control and complete 17th Street Storm Sewer over the next twenty years. During the FY 2014 budget process, a projection of the statutory debt limit usage was presented at the public hearing to adopt the Fiscal Year 2014 budget. The following was the projection that was previously shown: FY13 FY14 FY15 FY16 FY17 FY18 FY19 78.93% 75.39% 75.44% 63.88% 53.09% 46.15% 43.60% These statutory debt limit usage projections have changed slightly due to being advised that the $10 million dollar guarantee balance on the Roshek Building is subject to the City's statutory debt limit due; utility extensions were not requested by property owners for previously annexed areas and therefore the debt was not issued; and the Bee Branch Watershed project has secured funding through the State of Iowa Flood Mitigation Program which now includes general obligation borrowings for part of the local match. The revised projection of the statutory debt limit usage is as follows: FY13 FY14 FY15 FY16 FY17 FY18 FY19 84.31% 80.63% 75.73% 66.30% 60.18% 55.82% 58.46% As we approach the preparation of the FY 2015 -2019 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. Guideline There are many high priority capital improvement projects, which need to be constructed during the FY 2015 -2019 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 Bee Branch Watershed Project, Airport Improvements, Park Improvements, Sidewalk and Street Improvements, Sanitary Sewer Fund, Parking Fund and Water Fund. In FY 2015- 2019 borrowings will also include smaller projects and equipment replacements such as Park developments and Public Works equipment. 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. FY 2015 Policy Guidelines Page 27 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 $347,920,013. The following is a list of recent grants received by the City only: Grant Project Award Amount Iowa Department of Transportation Southwest Arterial $140,000,000 State of Iowa Flood Mitigation Program Bee Branch Creek Watershed $98,494,178 Community Development Block Grant Caradco Building $10,199,000 State of Good Repairs Grant Intermodal Facility $ 8,000,000 Transportation Investment Generating Economic Recovery (TIGER) Millwork District Complete Streets $ 5,600,000 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 Community Development Block Grant Linseed Oil Building $2,200,000 Federal Aviation Administration New Terminal Complex $1,987,313 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 Iowa Clean Air Attainment Program Smart Transit $ 614,105 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 Iowa Department of Transportation Traffic Safety Grant $ 478,750 Neighborhood Stabilization Program Purchase of Foreclosed Homes $ 444,000 Federal Environmental Protection Agency Brownfields Grant $ 400,000 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 $ 337,000 FY 2015 Policy Guidelines Page 28 Grant Project Award Amount Stormwater and Sanitary 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 Resource Enhancement and Protection Grant Northwest Arterial Trail $ 200,000 Iowa Clean Air Attainment Program Transit Shopping Circulator $ 187,836 Iowa Economic Department Administration Catfish Creek Management Plan $ 187,330 AmeriCorps Grant Various Programs $ 186,201 Iowa Department of Transportation Airport Entry Improvements $ 108,456 MRT Grant Bee Branch Trails $ 100,000 Federal Firefighters Assistance Grant Smoke Detectors /Extinguishers $ 78,549 Iowa Department of Natural Resources Various Improvements $ 79,374 State Energy Program 18`" & Central Energy Improvements $ 69,831 DuPont Lead Abatement Grant Lead Abatement $ 50,000 Iowa Community Cultural Grant Arts Coordinator Salary $ 13,021 Dr. Frank Henry Landes Preservation Fund for Iowa Update Design Guidelines $ 5,000 Historical Resource Development Program Digitize City Directories $ 2,970 Dubuque Old House Enthusiasts Digitize City Directories $ 1,500 Total $300,066,667 FY 2015 Policy Guidelines Page 29 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 FY 2013 - $5,521,744 The FY 2014 budget was based on receiving $5,550,506 in Road Use Tax funds. In FY 2014, 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. FY 2015 Policy Guidelines Page 30 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 2015 projections of operating surplus have been anticipated as resources to support the Fiscal Year 2015 capital improvement projects. This level will be maintained for the Fiscal Year 2016 surplus estimate and then reduced by 5 percent for FY 2017 resources, 10 percent for FY 2018, and 15 percent for FY 2019 resources. FY 2015 Policy Guidelines Page 31 Guideline In Fiscal Year 2015, 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. FY 2015 Policy Guidelines Page 32 In FY 2015, the budget was changed to reflect a split of gaming taxes and rents between operating and capital budgets of 100.0% operating and 0.0% capital. This 10% margin was to cushion the City operating fund when there was a downturn in gaming revenue. That downturn has arrived with the lease payments decreasing from a high of $9,757,458 in FY 2007 down to the current projection of $6,023,925 in FY 2014. It is appropriate to make the adjustment now because the five year projection of the City property tax rate is as follows: FY 2015 +0.03% increase FY 2017 +0.32% increase FY 2018 +1.58% increase FY 2019 +1.29% increase 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, the City's estimated lease payments through FY 2018 remained at the FY 2013 level based on the updated projections from the DRA. The DRA provided the City revised estimated lease payments for FY 2015 through FY 2019 which were reduced $3,232,961 from the prior year. From FY 2009 thru FY 2019, the City's lease payments have been reduced $19.3 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. FY 2015 Policy Guidelines Page 33 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 decreased from $379,501 in FY 2014 to $319,115 in FY 2015.