To: Mayor and City Council Members From: Chris Hillman, City Manager Date: August 8, 2014 Subject: FY Annual Operating Budget

Transcription

1 To: Mayor and City Council Members From: Chris Hillman, City Manager Date: August 8, 2014 Subject: FY Annual Operating Budget It is my privilege to present the FY City of Irving proposed budget. This budget represents months of work by a dedicated budget staff and department directors through a time of organizational transition. It continues Irving s fiscally sound and conservative approach to managing taxpayer dollars. The city continues to recover from the Great Recession as revenues are returning to pre-recessionary levels. This budget continues to restore proper financial accountability by increasing equipment replacement, and infrastructure maintenance and personnel costs to appropriate levels. Increased revenues, particularly property and sales taxes, provide the ability to restore infrastructure maintenance and fund some critical positions that had been held vacant. This budget is the first step in addressing the city s long-term operational and capital needs. We continue to develop a multi-year operational and capital strategy to address the many competing needs and challenges facing the city. A strong focus needs to be on maintaining and improving the city s current infrastructure, facilities, services and programs. The city is poised for tremendous growth in the next few years as new residential and commercial developments bring more residents, jobs, shopping, and recreation opportunities to the city. However, this new growth increases the demand for city services. This budget addresses these needs by increasing staffing in key areas without increasing the tax rate. For water, sewer and solid waste services, additional growth in the city, coupled with increasing passthrough and operating costs, necessitate revenue increases to maintain financial stability and address the operating and capital needs of our municipal utility services. The reconstruction and expansion of SH 183, SH 114 and Loop 12 by the State also will require significant time and resources from the city to ensure that our interests are protected and the project enhances the city s transportation infrastructure. We are a service organization. We have excellent employees, and our policy is to hire the best people at what they do. In order to hire the most talented and skilled workforce, the city needs to maintain competitive salaries and benefits. This allows us to attract and retain top-tier employees to ensure that we continue to deliver exceptional municipal services. This budget addresses that need with cost of CM - 1

2 living adjustments for all employees, pension plan adjustments and by continuing to fund the city s compensation plan. Strategic Plan The city has developed and implemented a strategic planning process guided by the City Council to identify the key goals of the council and develop strategies to realize those goals. The strategic plan is reviewed annually by council and staff, and new strategies are proposed and implemented as previous strategies are completed. This focus on strategic planning is an integral part of the annual budget process. We continue to follow and are committed to the efficiency models that helped us earn recognition as a 2012 Malcolm Baldridge National Quality Award Recipient. Financial Stability The city has maintained its AAA bond rating from both Moody s and Standard and Poor s throughout the recession and the corresponding decrease of several major revenue sources. Moreover, Irving is not considered a typical AAA city due to the below average median income of residents and below average median home values. Standard and Poor s and Moody s Investor Services attributed the top rating to Irving s large corporate tax base, strong financial management policies, formal investment and reserve policies, and healthy reserves in the General Fund and General Debt Service Fund. The financial impact of maintaining our AAA rating has resulted in an estimated annual savings in excess of $1 million in interest costs related to debt issued by the city. One of the city s main goals is to maintain the AAA rating through conservative financial policies. The proposed budget follows this policy by conservatively projecting revenues and expenditures and presenting a structurally balanced budget where operating costs are funded from operating revenues. FY Accomplishments Irving s capital improvements program team has completed several major capital projects in FY , including: Valley Ranch Library expansion Hunter Ferrell Road from MacArthur to Belt Line Loop 12/Grauwyler Sanitary Sewer basin improvements Nursery, Dewitt & Nichols alley water and wastewater improvements Nursery/RR sanitary sewer basin improvements Cabell Drive wastewater line replacement Master water plan improvements Britain, Milner & Windsor water and wastewater line replacements Tom Braniff water transmission line French Street drainage improvements This year, a public improvement district was created to construct the public infrastructure necessary for the development of a neighborhood containing 869 high-end single-family homes. The city has received numerous recognitions in the last year, as a result of continuations of policies and practices that enhance the governance of the city and our commitment to our employees. These recognitions include: Dallas Business Journal Healthiest Employer Award for three consecutive years ( ) American Heart Association Platinum Level Fit-Friendly Award ( ) CM - 2

3 Texas Comptroller's Transparency Award highest recognition for five consecutive years ( ) Economic Development Successes Irving continues to lead the Metroplex in attracting and retaining top corporations. In fact, 52 of the Fortune 500 companies have a corporate presence or are headquartered in Irving. Fortune 500 companies that headquarter in Irving cite rapid turnaround in planning and development service as a leading factor in selecting Irving. The city assists in economic development by providing sales tax and property tax rebates as incentives. For FY , the total amount of incentive payments is projected to be $10.38 million, a $720,000 decrease from the prior year. The decrease is the result of the final payment of the Olympus agreement being lower than prior-year payments. The amount of incentive payments are determined by the individual businesses meeting increases in taxable value, revenues generated or job growth specified in the individual agreements. The City of Irving continues to focus on projects that will facilitate economic development. According to the Greater Irving-Las Colinas Chamber of Commerce, major commercial retentions, relocations, and expansions continue to grow Irving s commercial and office development and expand Irving s job base. Significant projects announced for 2014 include: Relocation of 7-Eleven s North American headquarters to Irving Envoy Air (formerly American Eagle) headquarters relocation Crawford Electric Supply Company The Irving Music Factory entertainment venue project will begin construction in Kroger Texas expansion of their existing store at MacArthur Park into a Kroger Signature Market Hawaiian Falls corporate headquarters relocation Nokia Solutions Network retention of regional headquarters Cheddar s Casual Café corporate headquarters retention and relocation JDA software corporate relocation Cagney Global Logistics corporate headquarters relocation Switch Commerce corporate headquarters relocation Toyota of Irving retention Transportation Oriented Development (TOD) projects in the Las Colinas Urban Center: o The Northshore Development is under design. It will add over 66,000 sq. ft. of retail, restaurants, a boutique hotel and over 1,000 luxury residential to sites adjacent to the Convention Center. o The Water Street project, as proposed, features more than 55,000 sq. ft. of restaurant and retail, 316 luxury apartments and a signature park that maximizes access to Lake Carolyn. The City Council has approved $14.4 million in public infrastructure improvements through Tax Increment Financing (TIF) funds relating to this project in January 2013 and June Five DART light rail stations along the route connecting downtown Dallas with DFW International Airport have been completed with three additional stations planned to meet future demand. Light rail service to the airport began in August CM - 3

4 FY Overview Positive economic trends The city is currently seeing indications of sustained economic recovery. For example, hotel occupancy tax revenues, a leading economic indicator, are climbing, up 4.5% percent from FY and up 35% over the last five years. Other improvement indicators include: Property values have increased 6.7% from $ billion to $19.3 billion. Total taxable property values are above the $18.45 billion taxable valuation reached before the recession for the first time in six years. A large number of lots are being prepared for building permits as well as several new subdivisions that are in the platting stage. Staff estimates that between 2,500 and 3,000 new single family residences will be built over five years, a rate that is comparable to growth not seen since the 1950s and 1960s. Office rents are on the rise and vacancy rates are at three-year lows, at approximately 12% in most areas of the city. Sales tax revenues are up 11.7% for FY and are projected to continue increasing in the next fiscal year. The FY budget continues to follow a fiscally conservative course, while allowing for new and expanded programs that align with the Irving Strategic Plan. Irving is seeing a significant uptick in new construction, which is positive. However, the growth is straining current capacity (streets, infrastructure, water, solid waste, police, fire, etc.) requiring additional capital outlay and operating dollars to meet increasing service demand. FY Budget in Brief FY was the first year of recovery for property values in Irving with an increase in taxable values from $16.5 billion to $17.3 billion. FY values increased again to $ billion, a 4.4% increase. FY values reflect continued strong growth with an increase of 6.7% to $19.29 billion. Approximately $369 million or 30% of the increase is within the city s TIF districts. Budget Information at a Glance FY FY Property Values $ billion $19.29 billion Property Tax Rate $ $ Average Home Value $124,640 $131,018 Bond Rating AAA/Aaa AAA/Aaa Water Rate Increase None 6.2% Sanitation Rate Increase None 7.3% Drainage Rate Increase None None Number of Employees 2,232 2,257 Commercial property values increased by 10.55%, while business personal property increased by 1.9%. Residential values have increased by 6.7% from the previous year. The FY budget maintains a tax rate of $ for the fourth consecutive year. This rate is above the effective tax rate for FY of $ and below the rollback tax rate of $ Maintaining the current tax rate allows the city to realize the recovery of commercial values from prior years and provides funding for service enhancements, such as the SH 183 expansion project, street maintenance increases and expanding library material acquisitions. It also allows the city to maintain a competitive compensation plan, including the full year cost of market-based salary increases implemented in the prior year, health insurance benefits, pension plan adjustments in addition to contractual obligations and program enhancements requested during budget development. A rate increase for Water and Sewer rates of 6.2% is proposed to meet increased pass-through costs and increase service demand. Similarly, a sanitation rate increase of 7.3% is requested to fully fund CM - 4

5 additional personnel and equipment to address increased demand for services from expanding residential development. SH 183 Expansion State funding has been authorized and construction will begin in spring 2015 on the expansion of SH 183 from the east city limits of Irving westward to SH 121 in Euless. This is the largest construction project in Irving s history, costing $850 million with an estimated 3.5 years to complete. The project will also expand SH 114 in Irving and complete the diamond interchange of SH 183, SH 114 and Loop 12 around the former Texas Stadium site, encompassing 27.8 total miles of freeway expansion. Preparation for this project has been ongoing for many years, including the purchase of right-of-way and the relocation of water and sewer lines. Additional water, sewer, drainage, street, and signalization relocations will be necessary during construction as well as project administration, oversight, design and plan review, traffic management and re-routing during construction. A significant portion of this work will be done during the night and on weekends, necessitating additional overtime by city staff. This project will affect several departments and funds, and will require the addition of eight new positions. A summary of costs and funding sources for FY is in the chart below, but additional costs will be incurred over the duration of the project. Outside Personnel Overtime Equipment Services Total Street Bonds $356,650 $97,500 $205,500 $340,350 $1,000,000 MDU 41,100 41,100 Red Light Camera Fund 100, ,000 Water & Sewer CIP 76,722 75,000 70, , ,572 Total $433,372 $172,500 $276,000 $1,076,800 $1,958,672 Employee Pension Programs The city has addressed its pension liabilities for all three of its retirement funds Texas Municipal Retirement System (TMRS), Supplemental Benefit Program (SBP) and the Fire Fighters Relief and Retirement Fund (FRRF). In FY 2009, the city eliminated 70% cost-of-living adjustments (COLA s) for retirees with TMRS because the cost of maintaining the benefit would have exceeded limits set by the City of Irving Charter. In FY 2012, the city resumed contributions to the Supplemental Benefit Program (SBP), an alternative plan to Social Security managed by the city, in order to maintain adequate funding reserves for that program. The FY budget provides for the city to maintain a funding rate of 1.49%. In FY , the city addressed the funding of the city s Fire Fighter Retirement Fund (FRRF) by increasing the contribution rate from 12% to 15% at midyear. While the increase was necessary to address the funding gap in the fire pension program, the increased rate broke parity between Police, Fire and General Government pension contributions that had been in place for the last thirty years. The FY budget included a 50% ad hoc, or one-time, COLA for TMRS which raised the city s TMRS contribution rate from 10.61% to 11.15%. In 2014, Irving residents voted to increase the charter cap on pensions by 1% to 16.75% of total salaries. Management recommends re-establishing an automatic repeating 30% COLA for TMRS. This would raise the city s contribution rate to 14.16% for TMRS. Combined with the SBP rate of 1.49%, the total pension contribution would increase to 15.65%. The FRRF rate would also be increased to 15.65%, restoring parity between all government pension fund contributions. The projected cost for CM - 5

6 implementing the 30% COLA is $3.1 million for all operating funds. The increase in the FRRF rate is an additional $156,000. Health Insurance While the city has been proactive in managing the city s health costs and improving employee wellness, health insurance costs continue to be driven by increases in health care and prescription drug costs and changes in the health care market due to the continuing implementation of the Affordable Care Act. Cigna, the city s health care provider, initially projected a 12.7% increase in health care costs for FY Staff worked with Cigna to develop plan design changes to reduce the overall estimated increase in projected costs for health insurance. Five plan design changes are being recommended which will reduce the overall increase from 12.7% to 8.86%, a cost avoidance of over $700,000. The projected increase of 8.86% will increase health insurance costs city-wide by $1.66 million. Summary of Operating Expenditures for Major Operating Funds Adopted Proposed Fund/Program Budget Budget General Fund $ 182,743,513 $ 195,339,851 Water and Sewer 84,482,972 89,999,093 Solid Waste Services 11,265,042 12,839,467 Municipal Drainage Utility 5,131,467 5,263,647 HOT Revenue Funds ICVB 7,010,770 8,173,791 Arts Center 4,226,524 4,507,508 Main Street and Events 85,313 85,437 Heritage and Museum 184, ,369 Housing and Human Services 2,866,993 2,828,550 Total Major Funds $ 297,996,627 $ 319,218,713 General Fund Budget The General Fund is the city s main operating fund and contains the majority of the city s operations and departments. The FY budget for the General Fund is $195.3 million. This represents a $12.6 million increase over the FY adopted budget of $182.7 million or 6.9%. The largest component of the increase is $7.25 million associated with salary and benefit program increases for current employees and retirees. An additional $3.176 million is budgeted for non-personnel operating increases. The largest of these non-personnel increases is $1.29 million for additional contributions to the TIF fund due to increases in property values within the TIF, $1.1 million increased maintenance for the Motorola communications system, $295,000 in funding for the street overlay program, and an estimated $204,000 for the city taking over operations of the North Lake Natatorium. An additional $1.79 million is allocated for program enhancements. Increases in revenues have allowed for several held vacant positions to be filled and new positions have been proposed to meet identified needs for expanded services, especially those related to the SH 183 project. The FY General Fund budget is the first budget in six years that is above the FY budget of $183.3 million, which was the highest adopted budget prior to the recession. CM - 6

7 General Fund Expenditures by Classification FY Budget $195,339,851 Supplies $5.0 M 2.6% Utilities $6.5 M 3.3% Maintenance $9.3 M 4.8% Benefits $32.6 M 16.7% Outside Services $9.6 M 4.9% Miscellaneous $7.1 M 3.7% Contractual Rebates $8.5 M, 4.4% Transfers $6.6 M 3.3% Transfers to TIFs $5.6 M 2.9% Capital, $399,245, 0% Salaries and Wages $104.1 M 53.3% General Fund Revenues Approximately 75% of General Fund revenues come from property and sales taxes. For the FY budget, both of these drivers are showing significant increases. The remainder of general revenues are projected to be stable or slightly increasing. Property Tax Allocation to the General Fund is estimated to increase by $7.4 million, or 9.36%, for a total of $86.46 million for current year tax revenue to the General Fund. Allocation to debt service will decrease by $264,258. The proposed budget maintains the same tax rate of $ as prior year. The allocation of the tax rate between the General Fund and the Debt Service Fund is $ and $0.1423, respectively. TIF Districts The property tax revenues received by the city are gross revenues. The portions of the property tax revenue payable to the city s Tax Increment Financing (TIF) Districts and to developers based on incentive agreements are reflected in the budget as expenditures. With the creation of the Parkside Estates TIF District, the city now has five TIF districts. TIF #1 encompasses much of the Las Colinas development. TIF #2 is centered on Irving Boulevard from SH 183 to Loop 12 to encourage redevelopment. TIF 3, 4, and 5 are residential development TIFs that provided initial development capital through the issuance of certificates of obligation for the development of the Bridges of Las Colinas, Campion Hollows, and Parkside Estates neighborhoods, respectively. The bonds will be repaid CM - 7

8 through a combination of incremental property taxes paid into each district and special assessments on the properties in those districts. As these districts are developed, a greater portion of the city s operations and maintenance property tax revenues will be transferred into these funds. For FY a total of $5.58 million will be transferred to the TIF districts, an increase of $1.3 million from the prior year. TIF 2014 Tax Allocation 2014 Taxes Tax District Value Increment Factor Paid to TIF Increase Districts #1 Las Colinas $2,489,026,005 $1,570,142, % $5,552,535 $1,266,374 #2 Irving Blvd. 214,979,898 8,811,052 65% 26,133 26,133 #3 Bridges of Las Colinas 7,434,560 (1,767,080) 50% 0 0 #4 Campion Hollows 2,809,540 9,610 50% #5 Parkside Estates 17,966, % 0 0 Total $2,732,216,183 $1,577,196,377 $5,578,690 $1,292,529 Sales Tax Budgeted at $57.2 million, representing an increase of $4.9 million, or 9.45%, compared to the FY adopted budget of $52.26 million. Other Revenues Budgeted at $51.2 million and representing 25% of the revenue budget, other General Fund revenues, including franchise fees, fines, development fees and charges for service, have been stable or are showing a slight increase over the prior year. General Fund Expenditures Salary and Benefit Program Increases - $7.25 million Personnel costs have increased to $7.25 million to maintain competitive total compensation packages for employees. Retaining and attracting quality employees to work in Irving is essential to maintaining and providing exceptional city services for Irving residents and businesses. In FY , City Council approved market adjustments for Police and Fire Civil Service employees at midyear. The FY budget includes full year costs for those market adjustments. The proposed budget also includes a 2% cost of living adjustment for all employee groups: General Fund Budget Expenditures Salaries and Wages 104,079,240 Benefits 32,605,357 Personnel Costs $ 136,684,597 70% Contractual Rebates 8,517,155 Transfers 12,183,004 Insurance 4,522,953 Utilities 6,483,289 Fixed Costs $ 31,706,401 16% Supplies 5,042,889 Maintenance 9,344,645 Outside Services 9,566,229 Miscellaneous 2,595,845 Capital 399,245 Operating Costs $ 26,948,853 14% Total Budget: $ 195,339,851 general government, police and fire civil service. This increase is based upon the increase in the consumer price index since the last compensation study conducted by Paradox and implemented in Due to budgetary considerations, this increase will take effect in the final quarter of FY For several years, the city has maintained competitive salary rates based on the 65 th percentile of salary CM - 8

9 benchmarks. The proposed pay plan adjustment considers only the increase in the cost of living for employees and will not be benchmarked against pay rates in comparative cities. The following are key personnel-related programs in the FY budget: Maintain current salary step progression for all city employees. The cost of step increases is projected to be $1.4 million. Full year implementation of the Police and Fire Civil Service market adjustments equals $1.7 million. Quarter-year funding of a 2% cost of living adjustment for all city employees is projected to cost $574,000. Health insurance cost projections are projected to rise by 8.86% for FY The cost to the General Fund is $1.35 million. As mentioned before, the city is proposing to reinstate an automatic repeating cost of living adjustment (COLA) of 30% for the city s TMRS pension program. Reinstating the COLA would provide an ongoing financial benefit to the city s retirees and restore pension funding parity between all employee classes. The General Fund cost of the 30% COLA is $2.18 million with an additional $156,000 increase to the firefighters pension plan. The 30% COLA will increase the city s contribution rate to TMRS from 10.61% to 14.16% for FY The city s total pension contribution for all pension plans would be 15.65%. Increase in Operating Costs - $3.176 million Additional costs for operating expenses, including supplies, maintenance, equipment replacement, outside services, contractual obligations and tax allocations to the TIF districts are also increasing the overall budget. The key cost drivers are summarized below: $1.1 million increase in Information Technology for the maintenance contract of the new Motorola communications system. Approximately $1.269 million increase in transfers to the Tax Increment Financing (TIF) districts, bringing the total transfer to just under $5.3 million. Approximately $286,000 increase in economic development incentive rebates, bringing the total General Fund cost for development agreements to $8.5 million. An additional $1.8 million for the Olympus agreement is paid from General Debt Service, bringing the total contributions related to economic development incentives to $10.3 million. An increase of $295,000 in street infrastructure maintenance. Estimated operating costs for the city assuming operation of the North Lake Natatorium from the North Lake Community College on January 1, This agreement has not been finalized, but the estimated costs of $203,683 have been included in the proposed budget. Budget Enhancements - $2.17 million The General Fund budget also includes approximately $2.17 million in proposed program enhancements to maintain current levels of service and address Council strategic priorities. Key programs include: Construction funding of the Texas Musicians Museum for $1.25 million. Staffing and overtime increases related to the SH 183 expansion project totaling $454,150 and including funding seven positions in the General Fund: o Three Engineering Inspectors o Engineering Coordinator o Traffic Engineering Manager o Two Traffic Signal Technicians CM - 9

10 Four Detention Officer positions in the Police Department. These positions will serve as an attrition buffer to maintain required staffing at the jail while new employees are in training. The net cost of these positions is $0 due to decreases in overtime costs. One quarter funding for five Police Officers and a Police Sergeant to form a second problem solving team. A grant application has been submitted to fund 75% of the costs of these positions for three years, the local matching funds of $145,912 have been included in the proposed budget. One Building Inspector and an Office Coordinator in Inspections to match the increase in construction in the city. The total cost of these positions is $176,606, which is offset by increases in inspection revenues. Funding of a survey party team consisting of a Survey Party Chief and a Survey Party Worker to provide in-house surveying at a reduced cost. The total cost of these two positions is $147,613 which is offset by transfers from capital funds. Additionally, current year savings in FY will finance one-time projects and programs estimated at $1.9 million. Key programs include: Police body worn cameras - $99,120 Fire station generators at Fire Administration and Fire Stations #3 and #4 - $514,890 Replacement of ½ of Fire s thermal imaging cameras - $125,000 Park and athletic equipment replacements - $318,384 Repair of Centennial Park s log cabin - $100,000 Additional fleet replacement funds - $500,000 Replacement of a crack seal machine in Public Works - $68,000 Replacement of two ice control sand spreaders - $58,000 The remaining expenditures include new vehicles, equipment, building repairs and projects totaling $150,459. Water and Sewer System Fund Budget Water and Sewer System Fund is the second largest operating fund in the city with a FY budget of $90 million. This budget is a 6.5% increase in expenditures when compared to the FY adopted budget of $84.5 million. As an enterprise fund, charges for services provided are expected to fund all operations, capital and debt service expenditures of the system. No water or sewer rate increases were adopted for FY or FY Trinity River Authority (TRA), the city s sewage treatment provider, is implementing a multi-year capital program and is passing the costs through to its users. In FY , the cost for sewage treatment increased by $3 million. This increase was absorbed in FY without a rate increase. An additional $1.8 million increase is anticipated for FY , bringing the total increase to $4.8 million. These increases cannot be absorbed in this budget without a rate increase. Pass-through costs from other agencies, including TRA, make up a significant part of the budget for which the city has little or no control. These costs represent $29.6 million, or 33% of the Water and Sewer Fund FY budget. In addition to pass-through cost increases, operating and capital increases are projected. This includes the Water and Sewer system s share of salary, pension and health insurance increases, as well as an additional Utility Service Technician position for the SH 183 expansion project. In addition to scheduled water and sewer main replacements, an additional elevated storage tank is necessary to provide water to residential developments in north central Irving. To address the increased costs of operations, capital and pass-through contracts, a rate increase of 6.2% for water and sewer rates is proposed for FY Based on the multi-year rate study conducted by Red Oak, additional increases of 4.1% and 3.5% will be necessary in FY and FY , respectively. CM - 10

11 Water and sewer revenues are projected based on an average year s usage, taking rainfall and temperature into account. Exceptionally cool summers and above average rainfall can significantly impact water revenues. The revenue impact of water conservation measures is another factor to be considered. Staff monitors the revenue and expenditures of the fund on a monthly basis and will bring to the City Council s attention any deviation from projections so that corrective actions can be implemented during FY to ensure the financial stability of the fund and the ability to meet all contractual obligations and debt covenants. Solid Waste Services Fund Budget Solid Waste Services also is an enterprise fund where user fees pay all costs of service. The city has one of the highest customer service levels in the state, providing twice-weekly manual curbside refuse collection; weekly recycling, brush and bulky waste collection, curbside household hazardous waste collection; as well as resident access to the municipal landfill. Commercial and multifamily services are primarily provided by private waste haulers. The growth of the city is straining the capacity of current solid waste operations. The current route sizes exceed industry standards for manual, bagged collection routes. The current budget is based on a transition plan to phase in necessary increases in operations to accommodate increased demand. Four equipment operators and two trucks were added in FY Four additional equipment operator positions are included in this budget, along with two additional collection trucks. The trucks will be financed with a lease purchase to be paid back over the estimated life of the equipment. The proposed budget includes the first increase in rates in 10 years: From $18.25 to $19.25 per month for residential service. This represents a 7.3% increase in rates and will provide a balanced budget of $12.8 million. Municipal Drainage Fund Budget Residents and businesses pay a monthly fee for drainage that generates $5.26 million in annual revenues. Expenditures are budgeted at $5.26 million. This fund is applied to projects and operations to reduce the chance of flooding through channel maintenance, channel expansion and pond dredging. The fund also pays for neighborhood drainage projects, assistance for channel dredging to the four flood control districts within Irving, and personnel to design, build and maintain the storm water drainage network. Hotel Occupancy Tax Funds Hotel Occupancy Tax (HOT) revenue funds the operations of the Irving Convention and Visitors Bureau, Irving Arts Center, Museums and Irving Convention Center(ICC). The city collects a 9% local hotel occupancy tax. The tax is allocated to fund several programs and departments, with 5% used for the expenditures of the operating departments and programs, 2% allocated to the debt service related to the construction of the Irving Convention Center, and an additional 2% (Brimer) HOT tax, which was approved by voters in 2006 for the development and construction of an entertainment venue. The Irving Convention Center at Las Colinas opened in late January 2011, and since that time has hosted more than 930 events and welcomed more than 770,000 attendees. The Irving Convention Center is the first of a three-phase project envisioned by the city to maximize its potential for visitor revenues; the next phase is the Irving Music Factory, an entertainment district authorized by Irving voters in 2007 on the same site anchored by the Irving Convention Center; construction is expected to begin later this month. The final phase will be a full-service headquarter hotel, which will be located between the convention center and the Irving Music Factory. CM - 11

12 In early 2014, the city completed financing of its commitment to fund construction of a vibrant entertainment center in Irving. The Irving Music Factory will be an 18-acre complex adjacent to the Irving Convention Center and the Convention Center Hotel that would hold at least 6,500 people and include a performance theater, amphitheater, plaza, parking garage, at least nine restaurants and retail space. The entertainment complex will attract patrons from across the Metroplex, as well as, those in town attending conferences. Additionally, it will provide Irving residents a place to visit for dining and entertainment. Construction of the Irving Music Factory is scheduled to begin in Fall Once completed, the three-part district the Convention Center, the Hotel, and the Irving Music Factory are expected to make the Urban Center a destination location. Capital Expenses Capital Improvement Program FY Debt Other Financing Financing Campion Trails/TRE Trail $ - $ 2,070,000 Centennial Park Log Cabin Repair - 100,000 Communications Plan - 60,000 Communications System - CAD & RMS 750,000 - Convention Center Hotel 9,000,000 - Deeds and Easements to GIS - 40,000 DFW Orange Line Phase III ROW - 1,590,771 Fire Engines 9 and 10-1,200,000 Fire Station #12 2,000,000 - Landfill Building 1,450,000 - Motocross Park - 250,000 Neighborhood Park Development - 30,000 Gateway Infrastructure 1,900,000 - Parks Theft Vandalism Replacement - 39,000 Pavement Management System - 333,333 Police & Fire Training Academy/Burn Tower 3,000,000 - Streetlighting 400,000 - TxDOT Right of Way 1,200,000 - TxDOT - SH 183 Expansion 1,000, ,000 Traffic Operations Center - 400,000 Traffic Signal Installation 600,000 - Twin Wells Golf Course 1,750,000 - General CIP $ 23,050,000 $ 6,213,104 Annual Tank Rehab $ - $ 1,500,000 Annual Wastewater Main Replacements 1,500,000 1,500,000 Annual Water Main Replacements 2,000,000 - Elevated Water Storage Tank 4,000,000 - Large Meter/Vault Replacements - 500,000 Southwest Irving (WIC) Interceptor 4,500,000 - TxDOT - SH 183 Expansion - 15,000,000 Water & Sewer System $ 12,000,000 $ 18,500,000 Neighborhood Drainage $ - $ 253,828 TxDOT - SH 183 Expansion - 41,100 Municipal Drainage Utility $ - $ 294,928 Total $ 35,050,000 $ 25,008,032 The city currently has authorization to issue $304 million in General Obligation bonds for various infrastructure improvements from bond elections in 1999 and This funding supports the reconstruction and expansion of major thoroughfares; the construction of new parks, libraries and fire stations; and new programs and facilities including the South Irving Library which is currently under construction. The City Council and city management have adjusted the size of each year s capital program to ensure that the volume of projects is within the capability of staff to manage, and to also avoid an undue debt burden on the tax base. City Council and city management have focused on funding projects that were the highest priority, had the most impact on the community, and met the goals and objectives of the Strategic Plan. The total capital program proposed for FY is just over $60 million. This includes the issuance of $14 million in General Obligation Bonds, $9 million in Certificates of Obligation for the Convention Center Hotel and $12 million in Water & Sewer Revenue Bonds. General debt will fund the city s share of ROW and construction costs for State Highway (SH) 183 expansion right of way, fund improvements at Twin Wells Golf Course, construct a new administrative building at the municipal landfill, purchase land for Fire Station #12, construct a burn tower for fire training, construct public infrastructure related to TOD development projects and fund replacement of the public safety computer-aided dispatch and records management CM - 12

13 system. Water & Sewer revenue bonds will fund water and sewer main replacements, the construction of a new elevated water storage tank and the reconstruction of the southwest Irving sewer interceptor. The remaining $25 million in projects will be GO Bond Sales financed from non-bond sources of funds, In Millions including state and county grants, short-term lease purchases, and pay-as-you-go projects $40 funded by cash reserves. Several years of accumulated fund balances allow for the $32.7 Water and Sewer system capital plan of $18.5 $30 million in projects including $15 million for $25.2 water and sewer relocations related to the SH $18.7 $18.5 $19.6 $ expansion project. Other projects funded $17.1 from non-bond revenues include additional sections of the Campión Trail, the TRE Trail $10 $6.6 along Rock Island Road, purchase of two fire pumpers, the third year of the city s payment for the DART Orange Line connection to DFW $0 airport, funding for the pavement management project and traffic operations center, neighborhood drainage projects and several small projects and capital equipment purchases. Conclusion The City of Irving has weathered the recession as well, or better than most organizations, and we are proud of the work completed during the past five very tough economic years. This budget begins the process of establishing a long-term financial strategy for both operational and capital needs with a primary focus on maintaining current levels of service, and adequately funding facility and infrastructure upkeep and maintenance. This process will require multiple years to implement. I look forward to working with the Council to establish and define short and long-term strategic priorities and fundamental policy directions. I would like to express my appreciation to our managers, directors, city departments, budget staff and performance team. Mostly, I would like to thank the hard-working employees who help residents every day and who continue to make Irving a better, cleaner, safer place in which to work, live and play. $ Chris Hillman City Manager CM - 13