Fiscal Year 2015 Budget Correction Copyright 2014
City of Dubuque Action Items # 5.
ITEM TITLE: Fiscal Year 2015 Budget Correction
SUMMARY: City Manager submitting a list of Fiscal Year 2015 Capital Improvement
Projects selected for possible elimination, substitution and/or later
reconsideration through the Fiscal Year 2017 budget process.
SUGGESTED DISPOSITION: Suggested Disposition: Receive and File
ATTACHMENTS:
Description Type
❑ Fiscal Year 2015 Budget Correction-MVM Memo City Manager Memo
❑ Staff Memo Staff Memo
THE CITY OF Dubuque
UB
E 1 erica .1
11
Masterpiece on the Mississippi 2007-2012-2013
TO: The Honorable Mayor and City Council Members
FROM: Michael C. Van Milligen, City Manager
SUBJECT: Fiscal Year 2015 Budget Correction
DATE: February 12, 2015
The Fiscal Year 2016 budget recommendation presented to the City Council on
February 2, 2015 already considers a 9.17% downturn in the Dubuque Racing
Association lease payments and the City Council will hold a public hearing on that
Fiscal Year 2016 recommendation on March 12, 2015. This information is related to the
current Fiscal Year 2015 budget. As occurred in February 2014, the City Council needs
to consider a mid-budget year adjustment.
The hiring freeze and the travel restrictions related to employee continuing education
that was instituted in February 2014, has been continued through June 30, 2016.
The Fiscal Year 2016 budget recommendations already take into account the revenue
shortfalls, but these Fiscal Year 2015 budget revenue shortfalls must be addressed. It
is anticipated that the Capital Improvement Budget will have $24,343 less in revenues
than anticipated and an increase in expenses of $65,000 which results in a total capital
shortfall of $89,343. The General Fund Operating Budget will have $1,779,963 less in
revenues and $229,176 in increased expense which results in a total operating deficit of
$210091139.
1 will be recommending increasing rental inspection fees in the current fiscal year, but
delaying the increase in the rental licensing fees until January 2016. This will end the
general fund subsidy of the rental licensing and inspection program over the next two
years.
There is $347,239 in capital projects that have been identified to be cancelled to fund
the remainder of the general fund operating budget shortfall.
The hiring freeze, travel freeze, local option sales tax revenue above budget, DRA
Distribution above budget, canceled capital projects, Housing Inspection fee increases,
reduction in contribution to Every Child I Every Promise and airport fuel savings totals
$2,832,997. Then there would be no operating or capital deficit remaining and
$734,515 will be used to increase the general fund reserve in Fiscal Year 2015.
At this time, this is just informational as the City Council will be requested to set for
public hearing the FY 15 Second Budget Amendment on April 6, 2015, for a public
hearing to be held on April 20, 2015, where the final decision on eliminating projects,
reducing expenses and increasing revenues will be made.
/ �� �� .
Mich el C. Van Milligen
MCVM:jh
Attachment
cc: Barry Lindahl, City Attorney
Cindy Steinhauser, Assistant City Manager
Teri Goodmann, Assistant City Manager
Jenny Larson, Budget Director
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THE CITY ODubuque
AI-AmericII a Ciry
DUBi&E r
Masterpiece on the Mississippi 2007-2012-2013
TO: Michael C. Van Milligen, City Manager
FROM: Jennifer Larson, Budget Director
SUBJECT: Fiscal Year 2015 Budget Correction
DATE: February 12, 2015
The Fiscal Year 2016 budget recommendation presented to the City Council on
February 2, 2015 already considers a 9.17% downturn in the Dubuque Racing
Association lease payments. This information is related to the current Fiscal Year 2015
budget. As occurred in February 2014, the City Council needs to consider a mid-budget
year adjustment.
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 $5,188,570 in Fiscal Year 2015. This
is a cumulative reduction of$24,202,645 over that eight year period.
DRA Rent
(FY 2007 - 2016)
10.000.ODO '3,7 8 9,753,4111
9.000.000
8,OOO,DDO
15,820,283
7,000700D 5,343,130
6,001,193 6,000,001
6,000,00 D 5,345,816 5,450,052
5,188,670
6,000.000 ■Rent
4,0a0,DDD
3,00o,DOD
2,000,00D
1,aaD,DDD
FY 200T FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2015 FY 2016
Actual Actual Actual Actual Actual Actual Actual Actual Budget Revised Budget
The Fiscal Year 2015 revised projections are based on nine months of actual
experience and gaming revenues are down 10% from the original projections. The
impact of ending greyhound racing offsets a large deficit that the Dubuque Racing
Association (DRA) would have experienced otherwise. In FY 2015, the DRA will have
$3,575,000 in additional net income due to the ending of greyhound racing; however a
payment of$1 million is required to the Iowa Greyhound Association; a payment of
$464,000 is required for Mystique cash flow; and a payment of$883,370 is required as
additional charitable distribution as part of the five year smoothing that was previously
approved.
The State of Illinois passed a Video Gaming Act on July 13, 2009 which legalized the
use of Video Gaming Terminals in liquor licensed establishments including bars,
restaurants, truck stops and certain fraternal and veterans' organizations. In the part of
Illinois that impacts the Dubuque market, the first year of operation of video gaming
terminals generated $1 million in revenue monthly. The use of video gaming terminals
has now grown to $9 million monthly which has caused a reduction to the gaming
market in Dubuque. The Mystique Casino and Diamond Jo Casino average monthly
revenue is $8.7 million. This is a similar impact as if a casino the size of the Mystique
Casino and the Diamond Jo Casino combined was built half-way between Dubuque and
Rockford.
The recession has also impacted the gaming market. The revised DRA gaming
projections include minimal growth in revenues over the next five years with the growth
rate remaining at 1% through 2020.
The hotel acquisition by the Dubuque Racing Association has helped to make the
Mystique Casino a more competitive gaming option and is expected to generate
$400,000 in profit in calendar year 2015.
The issue to deal with tonight relates to the current Fiscal Year 2015 budget. The
Dubuque Racing Association annual distribution payment will be $249,742 more than
projections. These funds are dedicated to capital improvements; however this
additional amount above budget will be used to increase the general fund reserve. The
projections for Fiscal Year 2015 DRA lease revenues are less than anticipated when
this budget was prepared in late 2013. The DRA lease revenues are budgeted 97%
operating and 3% capital in FY 2015. The Fiscal Year 2015 impact of the reduced DRA
lease revenues is a $787,088 reduction to General Fund Operating Budget and a
$24,343 reduction to the Capital Improvement Budget.
Another area in the Fiscal Year 2015 budget that is not meetingy revenue budget
projections includes property leases. The 5.85 acres by the 16 Street detention basin
has not been leased which will result in an $87,875 shortfall in revenue. In addition, the
property lease for the ABC Building was inadvertently entered as $455,894 instead of
$45,894 during the FY2015 budget process, which resulted in a revenue shortfall of
$410,000.
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Other revenue shortfalls include investment income due to continued low interest rates
(-$140,000) and building permits due to a slower construction season than budgeted
(-$145,000).
The 2013 Property Tax Reform Legislation has impacted the City's tax increment
financing districts. Beginning in FY2017, the new State legislation requires a rollback, or
assessment limitations order, on multi-residential property which will eventually equal
the residential rollback. This loss in tax revenue of$453,252 from multi-residential
property when fully implemented in FY2022 will not be backfilled by the State. Most of
the City's multi-residential property is located in the Greater Downtown Urban Renewal
Area. In addition, a property revaluation of commercial and industrial property was
conducted and the appraising firm applied size discounts to large office buildings, large
factories and distribution buildings due to the limited number of buyers. Most of
Dubuque's large buildings are located within urban renewal areas so this property
revaluation greatly reduced the taxable value of these properties by $25.3 million
($762,303 in revenue). The taxable value in the Greater Downtown Urban Renewal
Area was reduced $22,142,511 which resulted in reduced tax increment financing
revenue of$666,122. The taxable value in Dubuque Industrial Urban Renewal Area was
reduced $3,197,137 which resulted in reduced tax increment financing revenue of
$96,181 . The reduction in revenue in the Greater Downtown TIF urban renewal area
has resulted in reduced revenues to make debt payments and it will be necessary for
the general fund to support $63,458 in FY 2015, $78,242 in FY 2016 and $93,868 in FY
2017 of debt service payments.
Water usage and water department expenses vary from year to year based on several
factors, especially the weather. Winter weather affects the number of water main breaks
that must be repaired. Water usage is dramatically impacted by above or below average
rainfall and temperature in spring and summer. Calendar year 2014 was the coldest
year on record and did not have even one day that reached 90 degrees. When actual
usage does not meet the usage projections, revenue projections are not met. There
was a reduction of 4% in water usage in Fiscal Year 2014 and it is projected that there
will be an additional reduction of 2% in water usage in Fiscal 2015. Although there have
been water rate increases, the actual revenue from those increases has been lower
than projected and revenue is not meeting expenses. Sanitary sewer revenue is based
on water usage so those projections and revenues are directly impacted by water.
Beginning in FY2010, auditors began reclassifying some water fund capital
expenditures as operating expenditures, which required a $1 million shift from capital to
operating expenditures. The City's water fund also has outstanding revenue bonds with
covenants requiring debt service coverage of 1 .25 times the annual debt service
payment. The sewer fund has outstanding State Revolving Fund revenue loans that
have bond covenants that require debt service coverage of 1 .10 times the annual debt
service payment. The debt service coverage for both funds must be calculated on an
accrual basis rather than cash basis, making it much more difficult to project because
the City budgets and prepares projections on a cash basis.
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It will be necessary to recommend a series of significant Water rate increases over the
next several years to address cash flow issues and meet the water bond covenant
requirement in Fiscal Year 2016. In addition, the administrative overhead that is paid by
the Water fund to administrative departments will need to be reduced beginning in
Fiscal Year 2015. This will result in a reduction of general fund revenue of$210,000 in
FY 2015.
The City has three Family Self-Sufficiency Coordinators in the Housing and Community
Development Department. The Fiscal Year 2015 budget included general property tax
funding for the first six months of the fiscal year for two Family Self-Sufficiency
Coordinators in the Housing and Community Development Department assuming that
the City would be awarded three grants from HUD, one grant for the entire fiscal year
and two grants for the last six months of the fiscal year. All three of these positions
were funded with a FSS Coordinator grant and administrative funds through the Federal
Housing and Urban Development Department in Fiscal Year 2014. During HUD's Fiscal
Year 2014, funding for salaries of program coordinators, HUD combined the funding
availability for Housing Choice Voucher and Public Housing FSS Coordinators. Limited
funds were available with HUD noting that they will only fund applicants currently
administering an FSS Program that previously had received a grant. Only if funding
remained after the awards of currently funded positions, would HUD consider funding
for new positions not previously funded. In Fiscal Year 2015, the City was only awarded
one HUD grant for FSS Coordinators.
All Public Housing Authorities (PHA) must enter into five-year contracts with new
families on an ongoing basis. The contract spells out the terms and conditions
governing participation and the responsibilities of both the PHA and the
individual/family. The Housing Department employs three FSS Coordinators to work
with 127 individuals/families. Ninety-four percent (94%) of the outstanding FSS
contracts do not expire until Calendar Year 2016 or later.
The objective of the FSS program is to enable participating low-income
individuals/families to increase their earned income and reduce their dependency on
welfare assistance and rental subsidies. Under the FSS program, individuals/families
are provided opportunities for education, job training, transportation, child care,
employment, financial literacy, counseling and other forms of assistance, while living in
assisted housing units, so they can obtain skills necessary to achieve self-sufficiency.
As required by the FSS statute and regulations, each FSS program reflects local needs
and resources. An FSS program coordinator ensures that program participants are
linked to the supportive services they need to achieve self-sufficiency. In addition to
working directly with families, an FSS Program Coordinator is responsible for building
partnerships with employers and service providers in the community to help participants
obtain jobs and services. FSS Program Coordinators must ensure that the services
included in contracts of participation of program participants are provided on a regular,
ongoing and satisfactory basis, that participants are fulfilling their responsibilities under
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the contracts and that FSS escrow accounts are established and properly maintained
for eligible families.
Despite many barriers and variables, the majority of families begin to earn FSS escrow
credits during the term of their FSS contracts based on increases in their earned income
after entering the FSS program. The FSS program provides critical tools that can be
used by communities to help families develop new skills that will lead to economic self-
sufficiency. Many families participating in FSS have achieved stable employment which
has made it possible for them to become homeowners or move to other non-assisted
rental housing. HUD funding in future years will rely on the number of families with
escrow accounts as a performance measure. In Fiscal Year 2015, it is necessary to use
general property tax funds of$66,873 to fund the two FSS Coordinators that did not
receive a HUD grant in FY 2015. It will also be necessary to continue general property
tax funding of the two FSS Coordinators through FY 2016. This is especially important
now that the City is operating in a voluntary contract agreement with the Department of
Housing and Urban Development.
Other increased costs in Fiscal Year 2015 include increased Washington Neighborhood
police patrol ($30,000); cost of the franchise fee hearing which will occur this spring
($85,000); and installation of additional street security cameras ($65,000).
The Fiscal Year 2016 budget recommendations already take into account the revenue
shortfalls, but these Fiscal Year 2015 budget revenue shortfalls must be addressed. It
is anticipated that the Capital Improvement Budget will have $24,343 less in revenues
than anticipated and an increase in expenses of$65,000 which results in a total capital
shortfall of$89,343. The General Fund Operating Budget will have $1 ,779,963 less in
revenues and $229,176 in increased expense which results in a total operating deficit of
$2,009,139.
The following is the recommended solution:
1 . Operating Budget
The City Manager will administratively continue the hiring freeze on most general
fund positions, excluding sworn public safety positions, positions in the
Emergency Communications Center, the Leisure Services Recreation Supervisor
position and the Arts and Cultural Affairs 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. No sworn public safety
positions are frozen, but the lag time in going through the lengthy civil service
process to fill sworn public safety positions will provide a savings in FY 2015.
The hiring freeze and other vacancy savings are anticipated to save $1 ,111 ,037
in Fiscal Year 2015. This hiring freeze will be extended thru June 30, 2016 and
will be reevaluated during the Fiscal Year 2017 budget process.
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The frozen positions as of February 9, 2015 are as follows:
Department Position FTE Type
City Manager's Office Management Intern 0.60 PT
City Manager's Office Secretary 1.00 FT
Engineenng Traffic Engineering Assistant 1.00 FT
Information Services Information Services Help Desk 1.00 FT
Library Library Aide 0.50 PT
Library Library Assistant 0.50 PT
Library Library Assistant 0.75 PT
Library Library Assistant 0.75 PT
Library Library Clerks 0.18 PT
Park Assistant Horticulturalist 1.00 FT
Park Maintenance Worker 1.00 FT
Park Park Ranger/Maintenance Worker 1.00 FT
Park/Public Works Assistant Horticulturalist 1.00 FT
Park/Recreation Custodian 0.20 PT
Police Records Clerk 1.00 FT
Water Secretary 0.50 PT
TOTAL 11.98 FTEs
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 FY15 totaling $115,163.
The Fiscal Year 2016 travel budget will also remain frozen.
Local option sales tax revenue is expected to exceed budget by $132,709. Of
this amount, $66,354 will be used towards the general fund operating shortfall
and $66,354 will be used to fund the capital improvement budget deficit.
Revenue shortfalls in FY 2015 and 2016 will require increases in rental license
and inspection fees beginning in FY 2015, the current budget year, ending the
subsidy of the rental inspection program by General Fund property taxes. In FY
2015 the increases in inspection fees will generate $88,395 in additional
revenue. The housing inspection fee increases as well as new fees that are
being recommended are as follows:
Current Recommended
Fee Fee
Certificate of Structural Compliance New Fee $40.00
Inspection for New Rental Properties
Annual Rental License Late Penalty New Fee $25.00
No Show Ins ection Fe2e $50.00 $50.00
e for
Re-inspection Fe " and $25.00 $70.00
Subsequent re-inspections
Dwelling Unit Inspection Fee New Fee $70.00
Rooming Unit Inspection Fee New Fee 1 $70.00
Confirmed Complaint Inspection Fee New Fee $85.00
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Every Child I Every Promise has an annual budget of$25,000 to help fund grant
programs and local match on grants. The current balance of these funds in FY
2015 is $100,000. This balance of$100,000 will be used to help fund the
operating shortfall. The FY 2016 budget for Every Child I Every Promise will be
cut by 10% with a recommended budget of$22,500
The Airport has estimated a one-time savings from aviation fuel of$50,000 due
to the declining costs of fuel purchases this year. This fuel savings will offset
some of the general fund operating shortfall.
There is $347,239 in capital improvement projects that have been identified to be
canceled to fund the remainder of the operating budget shortfall.
The hiring freeze, travel freeze, local option sales tax revenue above budget,
DRA Distribution above budget, canceled capital projects, Housing Inspection fee
increases, reduction in contribution to Every Child I Every Promise and airport
fuel savings totals $2,832,997. There is no operating or capital deficit remaining
and $734,515 will be used to increase the general fund reserve in Fiscal Year
2015.
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.
The following projects are being recommended for elimination to be reconsidered
for funding through the Fiscal Year 2017 budget process:
Project Reduction
175 Birthday $3,390
Accessibility Barriers $19,537
Airport GIS Improvements $9,372
Cedar Cross Road Improvements $100,000
City Owned Sidewalk Program $50,000
Comiskey Entry Sign - Signage $7,000
Comiskey Lights $100,000
Downtown ADA Improvements Assistance $2,893
Dubuque Schools — Replace Play Equipment $30,000
Eagle Point Park Overlay Tennis Court Lot - Construction $20,040
Eagle Point Stone $15,000
Eagle Point Stone $5,626
EPP - Riverfront Pavilion - Construction $7,435
EPP - Riverfront Pavilion - Consulting Engineers $37,565
Erosion Control Study $22,672
Federal Building Renovation $1 ,414
Fire Station #4 Improvements $8,222
Flood Plain Buyout $7,379
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Project Reduction
Flora/Sutton Renovate Electrical Controllers and Disconnects $10,000
Flora/Sutton Replace Filter Tanks $60,000
Flora/Sutton Shade Fabric Replacement $17,000
Grand River Center Concrete Maintenance $13,045
Greenhouse - Landscaping MFC Planters $9,800
Ice Harbor Maintenance/Dredging $25,121
ITS Improvements - Liebert Smart Row System $124,000
ITS Traffic Control Equipment $40,000
Maintenance of Vacant and Abandoned Buildings $26,524
Municipal Service Center Maintenance $5,000
Municipal Service Center Security Camera $19,834
North Grandview Estates Road $44,000
Painting of Street Lights $10,000
Park Drinking Fountains - Consultant Engineers $9,957
Police Mobile Data Terminals $32,026
Police Storage Area Network $9,328
Port of Dubuque Amenities Maintenance $5,000
Port of Dubuque Marina Navigation Lights $15,000
Replace Security Lights - All Parks $10,000
Safe Routes to School $24,655
Sustainability Initiative $1 ,031
Terminal Building Concession Equip $25,090
Usha Park Development $1 ,995
Grand Total $985,951
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
Catfish Creek Hike/Bike Study $5,400
Comiskey Entry Sign $7,000
Comiskey Park Building Security Alarm $10,000
Eagle Point Park Clear Trees on Bluff $15,000
Eagle Point Park Paint Bridge $9,902
Eagle Point Park Riverfront Pavilion $50,000
Environment and Sustainability
Management System $1 ,663
Fiber Optic - Miscellaneous $45,555
Finance Plus Upgrade $17,000
Five Flags Paint Arena Ceiling $79,311
Flora Park Roof Brick Pavilion $10,000
Flora/Sutton Pool Deck Grate $10,000
Flora/Sutton Water Playgrounds $15,000
GIS Enhancements $3,082
GIS System Implementation $9,977
GIS Training $6,750
Grand River Center Outdoor Furniture $21 ,037
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Project Balance
Grand River Center River Room Cool $25,000
Stud
Hilltop Park $10,136
Intersection Preemption $3,722
Library Book Drop Repairs $15,500
Library HVAC Handling Units $18,454
Library Integrated System $16,069
Library Sanitary Line $2,847
Marshall Park Pool Repair $18,721
Multicultural Family Center Maintenance $5,000
Neighborhood Grants $1 ,274
Riverwalk Security Cameras $16,093
Trails/Parking Lots Seal Coat $15,000
Total $464,493
The previous actions will resolve the Fiscal Year 2015 current year revenue
shortfalls. As I mentioned, the administrative hiring freeze will be carried into
Fiscal Year 2016 and will be reevaluated during the Fiscal Year 2017 budget
process.
The City Council will be requested to set for public hearing the FY 15 Second Budget
Amendment on April 6, 2015 for a public hearing to be held on April 20, 2015, where the
final decision on eliminating projects will be made. No approval is needed of the hiring
freeze at this time, as it will be implemented administratively.
JML
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