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.
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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
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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
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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
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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
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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.