Fiscal Year 2014 Budget CorrectionMasterpiece on the Mississippi
TO: The Honorable Mayor and City Council Members
FROM: Michael C. Van Milligen, City Manager
SUBJECT: Fiscal Year 2014 Budget Correction
DATE: February 13, 2014
Dubuque
band
AI- America City
1
2007 • 2012 • 2013
The recommended Fiscal Year 2015 budget recommendation already considered a
downturn in two important revenue sources, Dubuque Racing Association lease
payments and local option sales taxes. The Fiscal Year 2015 budget recommendation
projects a 5.8% decline in DRA lease payments, a 58.8% decline in DRA Distribution,
and a 9.1% decline in local option sales tax. This recommendation is related to the
current Fiscal Year 2014 budget.
The decline in DRA lease revenues is a long -term trend, reducing from a high of
$9,757,458 in Fiscal Year 2007 to the projection of $6,000,001 in Fiscal Year 2015.
$10,000,000
$9, 000,000
$8, 000,000
$7, 000,000
$6, 000,000
$5, 000,000
$4, 000,000
$3,000,000
$2, 000,000
$1,000,000
DRA Rent
(FY 2007 - 2015)
0,757 458 $9,753,410
$8,406,929
$6,820 283
$6,343,130
$5,997,888 $6,00-' -193 $6,000 091-
$5,447 917
2007 2008 2009
2010 2011 2012 2013 2014
2015
• Rent
The City is working with the DRA on a Master Plan for Schmitt Island, working to
eliminate the continued financial drain of pari - mutuel greyhound dog racing, and
involved with other activities to improve the gaming revenues at Mystique Casino. There
are other threats to future revenue growth at Mystique Casino with the introduction of
video gaming terminals (VGT) in taverns in Illinois, as this has become an over $100
million business, and the possibility of additional competition with the Iowa Racing and
Gaming Commission considering an application for a casino in Cedar Rapids.
Even though the local option sales tax revenue is down, I have less concern about this
revenue source. Sales tax has been a long -term reliable source of revenue and I
anticipate this continuing.
$9,000,000
$8,000,000
$7,000,000
$6,000,000
$5,000,000
$4,000,000
$3,000,000
$2,000,000
$1,000,000
CO
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Local Option Sales Tax
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2008
2009
2010
2011
2012
2013 2014 2015
The issue to deal with tonight relates to the current Fiscal Year 2014 budget. The
Dubuque Racing Association annual distribution payment was $684,427 short of
projections. This only impacts the City's Capital Improvement Budget, because these
funds are dedicated to capital improvements. The projections for Fiscal Year 2014 DRA
lease revenues and local option sales tax are less than anticipated when this budget
was prepared in late 2012. The DRA lease revenues are budgeted 90% operating and
10% capital in FY 2014. The Local Option Sales Tax revenue is budgeted 50%
operating and 50% capital. The Fiscal Year 2014 impact of the reduced Local Option
Sales Tax and DRA lease revenues is a $555,531 reduction to Capital Improvement and
a $1,199,780 reduction to the General Fund Operating Budget.
2
I believe both of these revenues are being impacted by the coldest winter in almost 40
years. Another area of concern in this year's budget is caused by the use of road salt to
combat this year's winter conditions. To begin this year, the City had almost 15,000
tons of salt available. This is thanks to the foresight of the City Council when a few
years ago when 50 year riverfront leases were expiring, the City did not lease back all of
the City -owned industrial riverfront property to private concerns. The City held back a
few acres to create a salt storage pad for City salt. This allowed the City to buy salt
direct from salt mines in Louisiana at volume discount prices and then ship it to
Dubuque and store large volumes.
In a typical winter, the City uses about 8,000 tons of salt. The most the City has ever
used in one winter was in Fiscal Year 2008 when the City used 12,000 tons of salt.
Going into this winter, the City had stored 15,000 tons of salt. There is the possibility
the City will use all of this salt.
With the City's new storage capabilities, the preference is to enter a winter with 12,000
tons of salt. Between the Fiscal Year 2014 and Fiscal Year 2015 budgets, the City has
enough funds budgeted ($472,500) to purchase 8,670 tons of salt. Depending on salt
usage the rest of the year (temperatures above freezing predicted all this week) the City
could need an additional $181,485 for salt purchases to replenish stockpiles.
The Section 8 Voucher program will have fewer vouchers than budgeted in FY 2014
due to the Federal sequestration which will result in less administrative fee revenue
received from HUD of approximately $51,677. This reduction in revenue will need to be
funded by the General Fund.
The Grand River Center Floor Settlement Remediation Project was completed in
November 2013 with a total project cost of $591,234. There were capital projects
totaling $363,500 that were canceled to help fund the project; however there is still a
project shortfall of $227,734 which will need to be funded by canceling additional capital
projects.
I stand by the Fiscal Year 2015 budget recommendations, but these Fiscal Year 2014
budget revenue shortfalls must be addressed. It is anticipated that the Capital
Improvement Budget will have $1,239,958 less in revenues than anticipated and an
increase in expenses of $227,734 which results in a total capital shortfall of $1,467,692.
The General Fund Operating Budget will have $1,251,457 less in revenues and
$181,485 in increased expense for salt purchases which results in a total operating
deficit of $1,432,942.
The following is the recommended solution:
1. Operating Budget
I will administratively initiate a hiring freeze on most general fund positions,
excluding sworn public safety positions, positions in the Emergency
3
Communications Center and the Leisure Services Recreation Supervisor
position. Other general fund positions will be evaluated by the City Manager on a
case -by -case basis as they become vacant, with there being few exceptions to
the freeze. Along with the lag time in going through the lengthy civil service
process to fill sworn public safety positions, this is anticipated to save $552,376
in Fiscal Year 2014. The need for additional funds will be accomplished through
the cancellation of more general fund CIP projects than are required to fill the
revenue issues related to Capital Improvement Projects. This hiring freeze will
be extended into part of Fiscal Year 2015; until it is determined FY15 revenue
projections are being met. How far into Fiscal Year 2015 will be determined by
the revenues.
Should this appear to be more of a long -term issue, it will need to be dealt with
using a more long -term solution through the Fiscal Year 2016 budget process.
The travel budget for property tax departments has been frozen unless the
conferences or education is needed to retain job certifications, the registration
has been already paid, the employee is on the Board of Directors or has agreed
to make a presentation. This is a one -time savings in FY14 totaling $140,563.
The Fiscal Year 2015 travel budget will remain intact.
There is equipment purchases budgeted in FY14 that will be canceled and
budgeted in a future budget year totaling $51,052.
The hiring freeze, vacancy savings, travel freeze and equipment cancelation
savings totals $743,991. The operating deficit remaining of $688,951 is
recommended to be funded by the cancelation of current year general fund
capital projects.
2. Capital Improvement Budget
The City needs to cancel some capital improvement projects that impact the
general fund. This does not include projects for water, sanitary sewer, storm
sewer or parking, or projects supported by tax increment financing. In fact, the
City would have the option of moving some projects from being funded by the
general fund to being funded with tax increment financing revenues, where
appropriate.
4
1. The following projects are being recommended for elimination to be reconsidered
for funding through the Fiscal Year 2016 budget process:
Project
Reduction
Eligible for
Alternative
Funding
(Type ?)
Recommending
for Alternative
Funding
(Yes or No)
Accessibility Barriers
$50,000
Yes
No
Bath House Improvements
$7,500
No
No
Cedar Cross Street Lighting
$16,001
No
No
Concrete Section Repairs
$23,504
No
No
Creekwood Park
$95,791
No
No
Crosswalk Warning Devices
$25,000
No
No
Curb Replacement
$10,000
No
No
Curb /Catch Basin
$10,824
No
No
Decorative Concrete
$20,000
No
No
Development Standards
$35,353
Yes
No
Development Standards
$15,000
Yes
No
DLEC Battery Back -Ups
$39,500
No
No
Downtown ADA Assistance
$5,000
GDTIF
No
Downtown Street Light Replacement
$26,329
GDTIF
No
Eagle Point Park Clear Trees on Bluff
$15,000
No
No
Eagle Point Park Paint Pavilions
$25,000
No
No
Eagle Point Park Retaining Wall
$75,000
No
No
Eagle Point Park Riverfront Pavilion
$94,282
No
No
Eagle Point Park Stonework
$15,000
No
No
Eagle Valley Park Development
$95,770
No
No
Ecological Restoration
$20,000
No
No
Federal Building Renovation
$40,000
GDTIF
No
Five Flags Seal Concrete Walkways
$4,000
No
No
Flora & Sutton Storage Building
$7,756
No
No
Flora Waterslide Pump
$10,000
No
No
GRC Wall Coverings
$7,263
GDTIF
No
Green Alley Project
$30,000
GDTIF
No
Greenhouse Addition
$85,173
No
No
Guard Rail Replacement
$20,000
No
No
Highway 20 Roses Plan
$21,000
No
No
Historic District Improvements
$4,673
GDTIF
No
Historical /Architectural Surveys
$11,983
No
No
Homeowner Grants Targeted
Neighborhood
$265,206
GDTIF
No
Homeowner Grants Targeted
Neighborhood
$28,151
GDTIF
No
LED Streetlight Retrofit
$5,000
No
No
5
Project
Reduction
Eligible for
Alternative
Funding
(Type ?)
Recommending
for Alternative
Funding
(Yes or No)
McAleece French Drains
$10,000
No
No
Mystique Community Ice Center A /C'
$75,226
No
No
Mystique Community Ice Center
Electrical Improvements'
$29,060
No
No
Mystique Community Ice Center
Generator'
$91,198
No
No
Mystique Community Ice Center Ice
Decking'
$6,392
No
No
Mystique Community Ice Center
Power Factor'
$10,099
No
No
Painting Street Lights /Signals
$3,238
No
No
Park Security Lights
$14,305
No
No
Pet Park
$94,308
No
No
Port Amenities Maintenance
$6,313
No
No
Port of Dubuque - Leasehold
$1,974
GDTIF
No
Port of Dubuque Outdoor Plaza2
$108,000
GDTIF
No
Portable Radar Speed Sign
$10,624
No
No
Re -caulk Pool Decks
$12,140
No
No
Renovate Recirculation Pumps
$10,000
No
No
Riverfront 2000 Plan
$5,000
GDTIF
No
Riverwalk Baskets - Irrigate
$12,000
No
No
School Zone Countdown Signals
$4,000
No
No
Skate Park
$70,000
No
No
Stone Retaining Walls
$49,752
No
No
Stone Retaining Walls
$11,218
No
No
Street Light Replacement
$15,000
No
No
Street Light /Signal Knockdown
$10,000
No
No
Sub - Divisions Sub Drains
$150,000
No
No
Surge and Grounding Improvements
$5,000
No
No
Surge Tank Repair
$15,000
No
No
Sustainability
$8,700
No
No
SW Arterial Capacity Improvements
$25,000
No
No
Traffic Operations Center Test Bench
$25,000
No
No
Westbrook Park Development
$96,178
No
No
Subtotal
$2,244,784
Completed Project Savings3
$145,379
Grand Total
$2,390,163
The Mystique Community Ice Center mprovements totaling $211,975 are no longer
required and were funded by debt payable from the Greater Downtown TIF District.
6
These funds are recommended to be reallocated to fund the budgeted improvements
to Comiskey Park totaling $211,831 which includes replacement of play equipment
($200,000) and repair of siding ($11,831).
2 The Port of Dubuque Outdoor Plaza has a total budget of $250,000, of which $142,000
is recommended to be used to fund the additional franchise rebates. The balance of
$108,000 is recommended to be canceled to help fund the capital budget shortfall.
3 In addition to the recommended project cuts, there are projects that have been
completed with realized savings of $145,379 to help fund the deficit in the capital
budget.
2. The following is a list of additional General Fund CIP projects that the City
Council could choose to substitute for any of the above recommended projects:
Project
Balance
Eligible for Alternative
Funding
10g Backbone
$65,000
No
900 MHz Safety Data Radio
$38,000
No
Accessibility Barriers
$19,537
No
Allison Henderson Exterior Improvement
$3,549
No
Americas River Fest Equipment
$909
Yes
Asbury Road Grinding
$30,000
No
Asphalt Milling Program
$48,389
No
Bath House Improvements
$1,780
No
Bi- Lingual Trail Signage
$14,595
No
Bridge Repairs /Maintenance
$199,280
No
Bunker Chemical Storage
$1,597
No
Bunker Replace Roof
$61,425
No
Catfish Creek Fiber
$6,122
No
Catfish Creek Hike /Bike Study
$5,400
No
Cedar Cross
$340,280
No
Grand River Center Chairs
$2,260
Yes
City Hall Annex Maintenance
$37,654
Yes
City Hall Remodeling
$299,977
Yes
City Wide Multifunction Replacement
$81,006
No
City Wide Multifunction Replacement
$175,900
No
Cold Storage Building Mezzanine
$7,097
No
Comiskey Play Equipment
$200,000
Yes
Comiskey Siding Repair
$11,831
Yes
Comiskey New Entry
$30,000
Yes
Comiskey New Entry Sign
$7,000
Yes
Comiskey Park Amenities
$58,808
Yes
Comiskey Park Building - Security Alarm
$10,000
Yes
Comiskey Park Door
$10,205
Yes
7
Project
Balance
Eligible for Alternative
Funding
Comiskey Sidewalk Lighting
$100,131
Yes
Corridor Study - Alternates
$200,000
Yes
Curb Ramp Program
$102,308
No
Dictaphone System Upgrade
$10,574
No
DLEC Telephone Upgrade
$28,704
No
Downtown Sign Replacement
$40,000
Yes
Eagle Point Park Clear Trees Bluff
$15,000
No
Eagle Point Park Stone
$20,750
No
Eagle Point Park Stone
$15,000
No
Electric Locks Restrooms
$30,000
No
Eagle Point Park Bridge Beam Support
$17,039
No
Eagle Point Park Overlay Lot Tennis Ct
$92,040
No
Eagle Point Park Paint Bridge
$12,080
No
Eagle Point Park Replace Walkway
$5,372
No
Eagle Point Park Retaining
$25,000
No
Eagle Point Park Riverfront Pavilion
$50,000
No
Erosion Control Study
$22,672
No
Fiber Optic Conduit
$9,227
No
Fiber Optic Conduit Miscellaneous
$44,101
No
Fiber Optic Connections - Private & Misc
$49,256
No
Fiber Optics To Airport
$300,000
No
Finance Plus Upgrade
$2,448
No
Floodwall Post Repair
$47,894
No
Five Flags Arena Light Fixtures
$170,903
Yes
Five Flags Arena Roof
$385,341
Yes
Flora Playground Equipment
$30,131
No
GIS System Implementation
$9,977
No
GIS Training
$6,750
No
GRC - Concrete
$32,800
Yes
GRC Maintenance
$14,274
No
GRC Replace Outdoor Furniture
$21,037
Yes
GRC River Room Cool Study
$25,000
Yes
Harbor Area Maintenance
$161,500
No
Harbor Area Maintenance
$58,528
No
Hilltop Park
$10,136
No
Historic Preservation Assistance
$5,000
No
Improvements To Fire Headquarters
$3,921
Yes
Improvements To Station 4
$68,401
No
Internet, Micros & Printer
$72,071
No
Intersection Preemption
$5,000
No
Intersection Preemption
$4,650
No
ITS Traffic Control Equipment
$102,829
No
Laserfiche Upgrade RIO
$27,889
No
8
Project
Balance
Eligible for Alternative
Funding
Library Attic Access
$24,600
Yes
Library Replace Sidwalks & Steps
$28,386
Yes
Lincoln Ave Spillway Repair
$6,408
No
Maint. Headquarters Restroom Rehab
$5,792
No
Maintenance Vacant /Abandoned
$101,241
No
Maintenance Vacant /Abandon Buildings
$50,000
No
Marshall Park -Pool Repair
$18,721
No
Miller Riverview Pave
$25,000
No
Miller Riverview Rip Rap
$7,726
No
Murphy Park Fence Bluff
$5,220
No
New Concept Snow Plow
$31,312
No
Northend Trail Lighting
$31,227
No
Outdoor Siren
$28,500
No
Paint Arena Ceiling
$79,311
Yes
Paint Ballrooms
$15,540
Yes
Park Drinking Fountains
$9,957
No
Park Security Lights
$5,000
No
Parking Lot Striping
$9,208
No
Pavement Marking
$31,690
No
Pennsylvania At Radford Intersection
$160,000
No
Plan Hwy 20 Roses
$15,000
No
Playground Improvements
$42,545
No
Police Computer POE
$58,831
No
Problem Properties Management
$69,938
No
Radio Tower Relocation
$142,642
No
Reconstruct Signals /JFK Wacker
$14,488
No
Reconstruct Signals /JFK- Wacker
$138,408
No
Recycling Containers
$10,000
No
Rehabilitation Rail Road Track
$49,703
No
Renovate Park Sidewalks
$19,050
No
Renovate Park Water System
$35,963
No
Riverfront Leasehold Improvements
$116,185
Yes
Riverwalk Security Cameras
$18,795
Yes
Safe Routes To School
$37,881
No
Security Cameras
$4,291
No
Sidewalk City Owned
$13,972
No
Sidewalk Financial Assistance
$12,451
No
Signal Intersection Reconstruction
$60,648
No
Signalization Program
$91,869
No
Slattery Center Renovation
$29,300
No
Smart Meters
$165,310
No
Software Upgrade E -Gov Plus
$6,521
No
Station #4 Improvement
$59,084
No
9
Project
Balance
Eligible for Alternative
Funding
Street Tree Program
$3,729
No
Theatre Tuck -point Exterior
$244,416
Yes
Theatre Tuck -point Exterior
$6,945
Yes
Tourism Signage
$24,853
No
Traffic Control Battery
$10,000
No
Traffic Controller Replacement
$4,306
No
Traffic Operations Center Video Software
$46,544
No
Traffic Operations Equipment Test
$59,795
No
Traffic Signal Fiber Optic
$93,877
No
Traffic Signal Interconnect
$52,570
No
Traffic Signal Master Arm
$81,101
No
Traffic Signal Video Detection
$6,154
No
Trails /Complete Streets
$47,000
No
University & Asbury Inters Improvements
$123,539
No
Veterans Renovate 32nd Storage
$14,884
No
Video Detection Camera Upgrade
$30,860
No
Total
$6,961,622
3. The previous actions will resolve the Fiscal Year 2014 current year revenue
shortfalls. As I mentioned, the administrative hiring freeze will be carried into
Fiscal Year 2015 until it is determined FY15 revenue projections are being met.
If it is determined that the future budget needs exceed anticipated revenues through the
Fiscal Year 2016 budget process in February, 2015, the City will need to resolve the
issue with a more long -term solution. This could include permanent expense
reductions. It could also include ways to increase revenues.
Three things could be considered to enhance revenues:
1. Create opportunities to increase retail sales and property tax revenues through
aggressive economic development and workforce development initiatives.
2. The City could intensify efforts to seek state legislation to increase the state gas
tax and to eliminate pari - mutuel greyhound dog racing. In the case of the gas
tax, the City would not only see the Southwest Arterial built sooner, along with
the associated development that will begin happening along that corridor, but the
City would receive approximately $1 million in additional annual revenues for
road use expenditures.
In the case of the elimination of pari - mutuel greyhound dog racing, a large tract
of land on Schmitt Island would open for development and the DRA would have
over $4 million in less expenditures now being used to subsidize the dog racing,
leading to investments that will make the facility more competitive for the gaming
dollars and leading to greater distribution revenues for the City and charities.
10
3. Increase the 3% Utility Franchise Fee from the current 3% to either 4% or 5 %,
the maximum allowed by State law. An increase to 4% would generate
approximately $750,000, equal to a 3.12% increase in property taxes to the
average homeowner, and an increase to 5% would generate approximately
$1,500,000, equal to a 6.24% increase in property taxes to the average
homeowner. The City Council could consider offering a rebate to sales tax
exempt entities on the franchise fee increase or not.
I want to especially thank the City of Dubuque employees who will need to bear an extra
burden as positions remain vacant longer and the citizens of Dubuque who, hopefully,
will only experience slight delays and reductions in service levels with this temporary
reduced staffing.
I respectfully request Mayor and City Council approval of the selection for possible
elimination, for later reconsideration through the Fiscal Year 2016 budget process, of
the Capital Improvements Projects. No approval is needed of the hiring freeze at this
time, as it will be implemented administratively. Any revenue enhancements would be
considered at a later date. City Council will be requested to set for public hearing the FY
14 Second Budget Amendment on April 7, 2014 for a public hearing to be held on April
21, 2014, where the final decision on eliminating projects will be made.
Mic ael C. Van Milligen
MCVM:jh
Attachments
cc: Barry Lindahl, City Attorney
Cindy Steinhauser, Assistant City Manager
Teri Goodmann, Assistant City Manager
Jenny Larson, Budget Director
Randy Peck, Personnel Director
Department Managers
11
Masterpiece on the Mississippi
TO: Michael C. Van Milligen, City Manager
FROM: Randy Peck, Personnel Manager
SUBJECT: Status of the Recruitment for General Fund Positions
DATE: February 13, 2014
Dubuque
klitd
All- AmericaCity
'' 0f
- 2007 • 2012 • 2013
Help Desk Data Analyst - This is a Civil Service position. A Civil Service test has not
been created and no recruitment has been started.
Traffic Engineering Assistant - Applicants have been interviewed; however no selection
has been made. It is my understanding that City Engineer Gus Psihoyos will be
reviewing the requirements of this position.
Foreman- This position is in Leisure Services. There is a Civil Service list for this
position and interviews will be held soon.
Recreation Program Supervisor - There is a Civil Service list for this position and
interviews have been scheduled. The first interview is February 13, 2014. Jantz Elliott
is filling in temporarily as the Recreation Program Supervisor.
Records Clerk - The test is being prepared. We have not started the recruitment for this
position.
Secretary — This vacancy is in the City Manager's office. The applications have been
reviewed but no interviews have been scheduled.
Arts & Cultural Affairs Coordinator - This is a part-time position. Interviews are being
held for this position.
I have also received notice that several full -time employees intend to re tire prior to July
1, 2014.
RP:Imh
Cc: Jenny Larson, Budget Director
Full -time Vacancies 7/1/13 - 1/31/14
Position
Department
Date of Vacancy
Date Filled
Target Date
to Fill
FY 14 Estimated
Salary Savings
Secretary
City Manager's Office
3/3/2014
vacant
4/1/2014
$3,741.00
Help Desk - Data Analyst
Information Services
before 7/1/13
vacant
6/1/2014
$42,506.00
Arts & Cultural Affairs Coordinator (Part -time)
Economic Development
11/2/2013
vacant
3/15/2014
$12,244.00
Confidential Account Clerk
Economic Development
before 7/1/13
1/13/2014
$24,795.00
Economic Development Director
Economic Development
before 7/1/13
10/7/2013
$36,595.00
Traffic Engineering Assistant
Engineering
before 7/1/13
vacant
4/1/2014
$62,023.00
Firefighter
Fire
7/9/2013
vacant
4/1/2014
$55,722.00
Community Development Specialist
Housing and Community Development
7/26/2013
7/29/2013
$0.00
Inspector I
Housing and Community Development
12/27/2013
vacant
6/1/2014
$31,464.00
Foreman
Leisure Services
7/31/2013
vacant
4/1/2014
$48,770.00
Recreation Program Supervisor
Leisure Services
before 7/1/13
filled temporarily
5/1/2014
$2,665.00
Custodian
Library
11/10/2013
12/29/2013
$6,548.00
Maintenanceworker
Library
11/1/2013
12/19/2013
$8,075.00
Planning Technician
Planning Services
before 7/1/13
8/14/2013
$7,573.00
Zoning Enforcement Officer
Planning Services
before 7/1/13
10/1/2013
$14,792.00
Police Officer '
Police
$367,806*
Records Clerk
Police
1/12/2014
vacant •
6/1/2014
$18,150.00
Records Supervisor
Police
8/8/2013
1/12/2014
$28,639.00
Equipment Operator I
Public Works
12/28/2013
vacant
3/1/2014
$10,254.00
ResoUrce Management Coordinator
Public Works
10/18/2013
vacant
6/1/2014
$46,841.00
Scale Operator .
Public Works
8/22/2013
' 3/1.5/2014
$31,849.00
Solid Waste Agency Administrator
Public Works
12/31/2013
vacant
4/1/2014
$22,115.00
Bus Operator
Transit
10/31/2013
1/20/2014
$0.00
Maintenance Electrician
WRRC
before 7/1/13
• vacant
6/30/2014
$63,515.00
Plant Mechanic
WRRC
2/17/2014
vacant
6/30/2014
$59,894.00
Plant Operator
WRRC
before 7/1/13
7/29/2013
$4,778.00
Plant Operator
WRRC
before 7/1/13
vacant
4/1/2014
$46,593.00
Plant Operator
WRRC
1/18/2014
vacant
4/1/2014
$11,947.00
'WRRC Assistant Plant Manager
WRRC -
before 7/1/13
vacant
6/30/2014.
$91,964'.00
*Based on having 5 positions open for one year
THE CITY OF
Dui
Masterpiece on the Mississippi
TO: Michael C. Van Milligen, City Manager
FROM: Jennifer Larson, Budget Director
SUBJECT: Utility Franchise Fees
DATE: February 13, 2014
INTRODUCTION
Dubuque
braid
AI- America City
'I'll®,
r
2007 • 2012 • 2013
The purpose of this memorandum is to provide information on revenue generated from
a utility franchise fee rate increase.
BACKGROUND
The City began collecting a 2% gas and electric utility franchise fee on December 1,
2003. The 2% Utility Franchise Fee displaced the County 1% Local Option Sales Tax
and the School District 1% Local Option Sales Tax on Dubuque resident's utility bills.
Dubuque citizens did not see an increase in their utility bills by the adoption of the 2%
Utility Franchise Fee because they previously paid 2% in Local Option Sales Taxes and
State law does not allow both to be collected.
On February 15, 2010, a public hearing was held on a 1% increase in the franchise fee
and the City Council unanimously approved the increase. The 1% increase in the
franchise fee was effective on June 1, 2010. Since June 1, 2010, the City has been
collecting a 3% utility franchise fee on gas and electric.
The gas service franchise fee is calculated by taking 3% of gross revenues from the
sale of natural gas and mixed gas within the City of Dubuque and the electric service
franchise fee is calculated by taking 3% of gross revenue generated from the sale of
electricity within the City of Dubuque.
Customers that are fully or partially sales -tax exempt are eligible to receive a utility
franchise fee rebate. Alliant Energy charges all customers the utility franchise fee and
the City then rebates the customers who are fully or partially sales -tax exempt. Black
Hills Energy does not charge the utility franchise fee to any of its customers that the
City advises are fully exempt from sales taxes and therefore exempt from the franchise
fee. However, the City provides a rebate to any customer who is only partially sales -tax
exempt.
DISCUSSION
The City of Dubuque collected $2,389,874 in gas and utility franchise fee revenue in FY
2013 net of utility franchise fee rebates. There is $2,398,411 budgeted in FY 2014 and
$2,543,675 in FY 2015 for utility franchise fees based on the current adopted 3% utility
franchise fee.
An increase of 1% in the Utility Franchise Fee would generate $750,000 and is
equivalent to a 3.12% increase in property taxes to the average homeowner. An
increase of 2% in the Utility Franchise Fee would generate $1,500,000 and is
equivalent to a 6.24% increase in property taxes to the average homeowner.
Although the City offers a utility franchise fee rebate to fully or partially sales -tax exempt
customers on the 3% utility franchise fee, the City Council could consider not offering a
rebate on any future increase of the utility franchise fee that is considered.
It is estimated that there was $378,000 in utility franchise fee rebates paid in FY 2013. It
is difficult to get an actual rebate number since gas customers that are fully exempt are
not charged the utility franchise fee.
ACTION STEP
This memorandum is for informational purposes.
JML
Attachments
cc: Barry Lindahl, City Attorney
Cindy Steinhauser, Assistant City Manager
Teri Goodmann, Assistant City Manager
THE CITY OF
DUB E MEMORANDUM
Masterpiece on the Mississippi
BARRY LINDAHL
CITY ATTORNEY
To: Michael C. Van Milligen
City Manager
DATE: February 13, 2014
RE: Increase of Gas and Electric Franchise Fees to 5% of Gross Revenue
City of Dubuque Code of Ordinances Requirements
The Blackhills and Interstate Power franchises have identical language on imposing a
franchise fee not to exceed 3 %:
The city council may, in its discretion after a public hearing, and upon an
affirmative vote of all of the members of the council, impose a franchise
fee not to exceed three percent (3 %) of the gross revenue of the company
generated from the sale of natural and mixed gas within the city; provided,
however, that the fee shall not be effective against the company unless
and until the city imposes a fee or tax of the same percentage on the
gross revenue of sales of energy within the city by all other energy
suppliers with which the city has in effect a franchise agreement allowing
such fee. Any such franchise fee imposed shall be a direct charge to
customers as required by the Iowa utilities board.
The franchise fees would have to be increased to 5% for all three energy franchisees.
Increasing the fee to 5% would require the franchisees to agree to such an amendment
to the franchise ordinances.
The Blackhills and Interstate Power ordinances do not indicate whether the public
hearing and unanimous vote requirements would apply to an increase to 5 %. However,
the Iowa Code does require a public hearing on such an amendment.
The Maquoketa Valley ordinance has no public hearing or unanimous vote requirement
but would still require the company to agreement to an amendment. Under state law, a
public hearing would be required.
OFFICE OF THE CITY ATTORNEY DUBUQUE, IOWA
SUITE 330, HARBOR VIEW PLACE, 300 MAIN STREET DUBUQUE, IA 52001 -6944
TELEPHONE (563) 583 -4113 / FAX (563) 583 -1040 / EMAIL balesq @cityofdubuque.org
Iowa Code Requirements
Iowa Code § 364.2(4)(a) requires a public hearing to amend a franchise ordinance. The
amendment does not become effective unless approved at an election. The proposal
may be submitted by the council on its own motion to the voters at any city election.
However, the city council may dispense with such election as to the amendment of an
electric light and power or gasworks franchise unless there is a valid petition requesting
submission of the proposal to the voters, or the party seeking such amendment
requests an election. If a majority of those voting approves the proposal, the city may
proceed as proposed.
The person asking for the amending of a franchise must pay the costs incurred in
holding the election, including the costs of the notice. A franchise is not finally effective
until an acceptance in writing has been filed with the council and payment of the costs
has been made. Iowa Code § 364.2(4)(b).
Franchise fees collected pursuant to an ordinance in effect on May 26, 2009, must be
deposited in the city's general fund and such fees collected in excess of the amounts
necessary to inspect, supervise, and otherwise regulate the franchise may be used by
the city for any other purpose authorized by law. Franchise fees collected pursuant to
an ordinance that is adopted or amended on or after May 26, 2009, to increase the
percentage rate at which franchise fees are assessed must be credited to the franchise
fee account within the city's general fund and used pursuant to § 384.3A. See below.
Before a city adopts or amends a franchise fee rate ordinance or franchise ordinance to
increase the percentage rate at which franchise fees are assessed, a revenue purpose
statement must be prepared specifying the purpose or purposes for which the revenue
collected from the increased rate will be expended. If property tax relief is listed as a
purpose, the revenue purpose statement must also include information regarding the
amount of the property tax relief to be provided with revenue collected from the
increased rate. The revenue purpose statement must be published as provided in
section 362.3. Iowa Code § 364.2(0(2).
If a city amends an ordinance imposing a franchise fee, the city shall promptly notify the
director of revenue of such action. Iowa Code § 364.2(0(3).
To summarize, an amendment to the three City energy ordinances increasing the
franchise fee to 5% would require the following steps for each franchisee:
1. Obtain preliminary consent of franchisee to franchise ordinance amendment;
2. Prepare and publish notice of public hearing on revenue purpose statement;
3. Prepare and publish notice of public hearing on franchise ordinance
amendment;
4. Hold public hearing on revenue purpose statement and approve statement;
5. Hold public hearing on amendment to franchise ordinance and adopt
amendment;
6. Dispense with election;
2
7. Hold special election if petition requesting election (would require separate
ballot issue for each franchise);
8. Obtain acceptance of amendment from franchisee;
9. Give notice of amendment to director of revenue.
384.3A Franchise fee account — use of franchise fee revenues.
1. A city that assesses a franchise fee pursuant to an ordinance that is adopted or
amended on or after May 26, 2009, to increase the percentage rate at which franchise
fees are assessed under section 364.2, subsection 4, paragraph "f', shall establish a
franchise fee account within the city's general fund. All revenues collected by a city
pursuant to such an ordinance shall be deposited in the account. Interest earned on
revenues deposited in the account shall remain in the account and be used for the
purposes specified in this section. Moneys in the account are not subject to transfer to
any other accounts in the city's general fund or to any other funds established by a city
unless such transfer is for a purpose specified in this section.
2. Moneys in the account shall be used for the purposes of inspecting, supervising, and
otherwise regulating each franchise approved by the city.
3. Moneys in the account in excess of the amount necessary for the purposes specified
in subsection 2 shall be expended for any of the following:
a. Property tax relief.
b. The repair, remediation, restoration, cleanup, replacement, and improvement of
existing public improvements and other publicly owned property, buildings, and
facilities.
c. Projects designed to prevent or mitigate future disasters as defined in section
29C.2.
d. Energy conservation measures for low- income homeowners, low- income energy
assistance programs, and weatherization programs.
e. Public safety, including the equipping of fire, police, emergency services,
sanitation, street, and civil defense departments.
f. The establishment, construction, reconstruction, repair, equipping, remodeling,
and extension of public works, public utilities, and public transportation systems.
g. The construction, reconstruction, or repair of streets, highways, bridges,
sidewalks, pedestrian underpasses and overpasses, street lighting fixtures, and
public grounds, and the acquisition of real estate needed for such purposes.
h. Property tax abatements, building permit fee abatements, and abatement of
other fees for property damaged by a disaster as defined in section 29C.2.
i. Economic development activities and projects.
BAL:tls
F: \USERS\isteckle \Lindahl\ Memos \MVM IncreaseOfGas& ElectricFranchiseFeesTo5 %OfGrossRevenue 021314.doc
3
RATES AND COMPARISONS
Franchise Fee Comparison for Iowa Cities with Franchise Fees
Rank City
7 Algona
7 Bellevue
7 Boyden
7 Central City
7 Clive
7 Des Moines
7 Durant
7 Elkader
7 Hastings
7 Hull
7 Inwood
7 Knoxville
7 Logan
7 Oelwein
7 Rock Valley
7 Shenandoah
7 Sioux Rapids
7 Windsor Heights
6 Akron
6 Early
6 Lamont
6 Lytton
6 Pleasant Hill
5 Albert City
5 Blanchard
5 Dubuque
5 Huxley
5 Indianola
5 Manchester
5 Mitchellville
5 Monticello
5 Norway
5 Oskaloosa
5 Sergeant Bluff
5 Storm Lake
5 Wellsburg
4 Exline
3 Anamosa
3 Ankeny
3 Armstrong
3 Cedar Rapids
3 Cherokee
3 Council Bluffs
3 Eldora
3 Muscatine
Franchise Fee
5% (gas)
5% (gas) and 5% (electric)
5% residential; 3% non - residential (gas and electric)
5% (gas) and 5% (electric)
5% (gas) and 5% (electric)
5% (gas) and 5% (electric)
5% (gas)
5% (gas)
5% (electric)
5% residential; 1.5% non - residential (gas and electric)
5% (gas and electric - residential); 3% (gas and electric - non residential)
5% (electric) and 5% (gas)
5% residential; 2% business; 0% public authority (gas and electric)
5% (gas) and 5% (electric)
5% (gas) and 5% (electric)
5% (gas) and 5% (electric)
5% (gas) and 5% (electric)
5% residential; 3% business; 0% schools; (gas & electric)
4% (gas)
4% (gas) and 3% (electric)
4% (gas)
4% (gas)
4% (gas) and 4% (electric)
3% (gas) and 3% (electric)
3% (electric)
3% (gas) and 3% (electric)
3% (gas) and 3% (electric)
3% in 2013; 4% in 2014; 5% in 2015 for all customer classes
(electric). 2% in 2012 and then 3% until 2032 (gas)
3% (gas) and 3% (electric)
3% (gas) and 3% (electric)
3% (gas) and 3% (electric)
3% (gas) and 3% (electric)
3% (gas) and 3% (electric)
3% (gas) residential - *effective October 1, 2013
4% (gas) residential - *effective October 1, 2014
5% (gas) residential - *effective October 1, 2015
1% (electric) non - residential - *effective October 1, 2013
2% (electric) non - residential - *effective October 1, 2014
3% (electric) non - residential - *effective October 1, 2015
1% (gas) non - residential - *effective October 1, 2013
2% (gas) non - residential - *effective October 1, 2014
3% (gas) non - residential - *effective October 1, 2015
3% (gas) and 3% (electric)
3% (gas) and 3% (electric)
2.5% (electric)
2% (gas) and 2% (electric)
2% (gas) and 2% (electric)
2% (gas) and 2% (electric)
2% (electric) and 2% (gas)
2% (gas) and 2% (electric)
2% (gas) and 2% (electric)
2% (gas) and 2% (electric)
2% (gas)
February 12, 2014
3 Perry
3 Rembrandt
3 Russell
3 Sioux City
3 Strawberry Point
3 Waterloo
3 Whitten
2 Iowa Falls
2 Ledyard
2 New Providence
1 Ackley
1 Asbury
1 Boone
1 Boxholm
1 Chariton
1 Coralville
1 Dyersville
1 Hubbard
1 Iowa City
1 Madrid
1 Marengo
1 Ogden
1 Prairieburg
1 Vinton
1 West Union
2% (gas) and 2% (electric)
2% (gas) and 2% (electric)
2% (electric) - *effective July 1, 2014
2% (gas) and 2% (electric)
2% (gas)
2% (gas) and 2% (electric)
3% (gas) and 3% (electric) - *effective July 1, 2014
2% (gas) and 2% (electric)
1.5% (gas) and 1.5% (electric)
1.5% (electric)
1.5% (gas) and 1.5% (electric)
1% (electric)
1% (gas) and 1% (electric)
1% (gas)
1% (gas)
1% (gas) and 1% (electric)
1% (gas) and 1% (electric)
1% (electric) and 1% (gas)
1% (gas) and 1% (electric)
1% (gas) and 1% (electric)
1% (gas) and 1% (electric)
1% (gas) and 1% (electric)
1% (gas)
1% (electric)
1% (gas)
1% (electric)
Sources: Iowa League of Cities and Iowa Utilities Board
February 12, 2014