City of Galesburg 2012 Property Tax Levy & Optional Utility Tax Revenue Source. Presented September 10, 2012

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1 City of Galesburg 2012 Property Tax Levy & Optional Utility Tax Revenue Source Presented September 10, 2012

2 Property Tax Levy Requirements by Date Requirement Council Meeting Estimate the amount of the tax levy (at least 20 days prior to the passage of the tax levy ordinance) 35 ILCS 200/18-55 et seq. 11/05/2012 Public hearing held for 12/31/12 budget prior to Council meeting 11/19/2012 First reading on property tax ordinance 11/19/2012 Truth in Taxation hearing (if necessary) prior to Council meeting 12/03/2012 Second reading on property tax ordinance 12/03/2012 Tax levy ordinance submitted to County Clerk 35 ILCS 200/18-15 By 12/24/2012

3 2011 Property Tax Levy (Current) Rate Setting Equalized Assessed Value (EAV) $315,357,449 Total tax rate with all taxing bodies $ City s share of tax rate $ Total tax amount on $50K value = $1,485 City s share of tax on $50K value = $411 Other taxing agencies share = $1,074

4 2011 Property Tax Rate by Taxing Body Taxing Body 2011 Rate District 205 $ City of Galesburg Knox County Carl Sandburg College Galesburg Sanitary District Township Total $

5 2011 Property Tax Levy by Taxing Body Carl Sandburg College 7% Sanitary District 3% Township 2% County 13% School District 47% City 28%

6 2012 City Property Tax Assumptions EAV is estimated to decrease slightly by less than.50% per Darrell Lovell EAV estimated may be around $314,000,000 Abatement of City levy for general obligation bonds in the 2012 levy request Police and fire pension fund levies based on 2011 recommended rate plus 5% - 8% increase IMRF annual required contribution rate = 13.86% If no City tax rate increase, General Fund would see a 10% reduction or $347,637 and Library would see a 2.5% increase or $34,000 (Library has seen an increase for 5 out of last 6 years)

7 Fire and Police Pension Funds Pension funds are a defined benefit single employer pension plan Benefits, employer and employee contributions are mandated by IL Compiled Statutes Public Act provides direction for the annual tax levy requirements Actuarial information as of 12/31/11: Pension # of Members % Funded Actuarial Accrued Liability Actuarial Value of Assets Unfunded Actuarial Accrued Liability Police % $34,181,125 $21,005,141 $13,175,984 Fire % $36,220,038 $21,375,059 $14,844,979

8 Pension Contributions Requested vs. ARC Actuarial companies may use different assumptions which will result in different outcomes Requested contributions from the pension board can be higher than the annual required contribution (ARC) Actuarial can provide various levels of funding: recommended funding based on their assumptions; ARC in accordance with paragraph 36f of GASB Statement 25; statutory minimum contribution which would require documenting an unfunded pension liability in the notes to the financial statement (Current Requirement)

9 Property Tax Scenarios

10 Alternative 2012 City Tax Levy A General Fund Levy Remain Flat, Library Increased & Pension Funds Increased to Projected Recommended Amount Description Current Tax Rate Estimated Tax Rate Current Levy Amount Projected Levy Amount General $ $ $3,300,216 $3,300,216 IMRF , ,150 Social Security , ,658 Police Pension ,703 1,036,887 Fire Pension ,342,477 1,554,480 Library ,354,145 1,388,145 Total $ $ $7,775,139 $8,188,536 IMRF levied at 77% of budgeted amount; General Fund subsidy $211,935 Police Pension levied at 2011 levy rate plus 5% increase; data unavailable Fire Pension Fund levied at 2011 levy rate plus 8% increase; data unavailable

11 Alternative 2012 City Tax Levy A All Levies Remain Flat Except Pension Funds Requested Amount Fire Pension $1,554,480 19% Library $1,388,145 17% Police Pension $1,036,887 13% IMRF $704,150 9% General $3,300,215 40% Soc Security $134,658 2%

12 Alternative 2012 City Tax Levy A Estimates General Fund Levy Remain Flat, Library Increased & Pension Funds Increased to Projected Recommended Amount Total City levy increases 4.42% or $343,397 City tax rate estimated change from $2.465 to $2.586 or 12 cents Estimated City tax levy for $50,000 value from $ to $ Estimated dollar change for $50,000 value $20 or 4.9% increase City tax levy would not require a truth in taxation hearing

13 Alternative 2012 City Tax Levy B General & Library with 3% Increase and Pension Funds at Estimated ARC Description Current Tax Rate Estimated Tax Rate Current Tax Levy Amount Projected Levy Amount General $ $ $3,300,216 $3,399,222 IMRF , ,150 Social Security , ,697 Police Pension ,703 1,036,887 Fire Pension ,342,477 1,554,480 Library ,354,145 1,394,769 Total $ $ $7,775,139 $8,228,205 3% Increase for General Fund levies and Library levy IMRF levied at 77% of budgeted amount; General Fund subsidy $211,935 Police Pension levied at 2011 levy rate plus 5% increase; data unavailable Fire Pension Fund levied at 2011 levy rate plus 8% increase; data unavailable

14 Alternative 2011 City Tax Levy B General Fund and Library with 3% Increase - Pension Funds At Estimated ARC Fire Pension $1,554,480 19% Library $1,394,769 17% General $3,399,222 41% Police Pension $1,036,887 13% IMRF $704,150 8% Soc Security $138,697 2%

15 Alternative 2011 City Tax Levy B Estimates General & Library with 3% Increase - Pension Funds at Estimated ARC Total City levy increases 5.827% or $453,068 City tax rate estimated change from $2.465 to $2.620 or 15.5 cents Estimated City tax levy for $50,000 value from $ to $ Estimated dollar change for $50,000 value $25.82 or 6.28% increase City tax levy would require a truth in taxation hearing

16 Alternative 2012 City Tax Levy C Flat Levy with Pension Funds Using Estimated ARC Description Current Tax Rate Estimated Tax Rate Current Tax Levy Amount Projected Levy Amount General $ $.9417 $3,300,216 $2,956,819 IMRF , ,150 Social Security , ,658 Police Pension ,703 1,036,887 Fire Pension ,342,477 1,554,480 Library ,354,145 1,388,145 Total $ $ $7,775,139 $7,775,139 General Fund absorbs increases for pension funds Police Pension levied at 2011 levy rate plus 5% increase; data unavailable Fire Pension Fund levied at 2011 levy rate plus 8% increase; data unavailable

17 Alternative 2012 City Tax Levy C Flat Levy with Pension Funds Using Estimated ARC Fire Pension $1,554,480 20% Library $1,388,145 18% Police Pension $1,036,887 13% General $2,956,819 38% IMRF $704,150 9% Soc Security $134,658 2%

18 Alternative 2011 City Tax Levy C Estimates Flat Levy with Pension Funds Using Estimated ARC City total levy increases 0% or $0 City tax rate estimated change from $2.465 to $2.476 or 1.1 cents Estimated City tax levy for $50,000 value from $ to $ Estimated dollar change for $50,000 value $1.78 or.43% increase General Fund levies would decrease by $343,397 Library levy would increase by $34,000 City tax levy would not require a truth in taxation hearing

19 Summary of 2012 Property Tax Alternatives City Tax Rates and Change in Total Tax Levy % Description Est. Tax Rate Est Tax on $50,000 Change in Taxes on $50,000 Value % Change in Total Tax Levy Current Levy $2.465 $ N/A N/A Alternative A General $ Remain the Same Alternative B 3% Increase for General & Library $ % % Alternative C Flat Levy Dollars %

20 Estimated City Levy Dollars for 2012 Property Tax Alternatives Agency Current Alt. A Tax Levy Alt. B Tax Levy Alt. C Tax Levy General $3,300,216 $3,300,216 $3,399,222 $2,956,819 Library 1,354,145 1,388,145 1,394,769 1,388,145 IMRF 696, , , ,150 Social Sec. 134, , , ,658 Police Pension 946,703 1,036,887 1,036,887 1,036,887 Fire Pension 1,342,477 1,554,480 1,554,480 1,554,480 Total $7,775,139 $8,118,536 $8,228,205 $7,775,139

21 Estimated Change in Dollars for City 2012 Property Tax Alternatives vs City Tax Levy Agency Alt. A Tax Levy General Flat Alt. B Tax Levy 3% Increase for General & Library Alt. C Tax Levy Flat Levy in Total $ General $0 $99,006 $(343,397) IMRF 7,210 7,210 7,210 Social Sec. 0 4,040 0 Library 34,000 40,624 34,000 Police Pension 90,184 90,184 90,184 Fire Pension 212, , ,003 Total $ Change $343,397 $453,067 $0 Levy % Change 4.42% 5.83% 0%

22 Summary of City 2012 Property Tax Levy Alternatives Prop. Description Est. Tax Levy Increase Est. Rate Est. Change for $50,000 Value Change in General Fund Levy A B C General Fund remains flat; increase pension funds; increase library 2.5% 3% increase for General Fund & Library; pension funds at est. ARC Flat levy with no increase from 2011 levy; pensions at estimated ARC 4.42% $2.586 $20.00 $0 5.83% $2.620 $25.82 $99, % $2.476 $1.78 ($343,397)

23 City Property Tax Levies FY Fiscal Year General Soc Sec IMRF Library Police Pension Fire Pension Total ,859, , ,146 1,129, , ,875 6,566, ,052, , ,888 1,236, , ,700 7,177, ,913, , ,705 1,240, , ,706 7,536, ,587, , ,879 1,265,621 1,000,072 1,100,176 7,719, ,588, , ,954 1,320,018 1,000,254 1,100,279 7,774, ,300, , ,940 1,354, ,706 1,342,476 7,775,139

24 FY Levy in Dollars 4,500,000 4,000,000 4,192,248 4,052,184 3,913,999 3,500,000 3,859,837 3,587,965 3,588,213 3,000,000 3,300,216 2,500,000 2,000,000 1,500,000 1,000, ,000-1,354,145 1,236,005 1,240,604 1,265,621 1,320,018 1,097,658 1,129,082 1,342,477 1,100,176 1,100, , ,700 1,000,072 1,000, , , , , , , , , , , , , , , , , , , , , ,658 FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 General Social Security IMRF Library Police Pension Fire Pension

25 FY : % of Tax Levy by Agency 70% 60% 62% 59% 56% 50% 52% 46% 46% 40% 42% 30% 20% 10% 17% 16% 17% 17% 16% 16% 17% 17% 11% 13% 14% 14% 10% 13% 13% 12% 9% 11% 10% 7% 9% 0% FY 06 FY 07 FY 08 FY 09 FY 10 FY 11 FY 12 General Social Security IMRF Library Police Pension Fire Pension Linear (Library) Linear (Fire Pension)

26 Acronyms & Abbreviations Alt. - Alternative ARC Annual Required Contribution EAV Equalized assessed value Est. Estimated IMRF IL Municipal Retirement Fund

27 Alternative Revenue Source Utility Tax

28 Municipal Utility Tax City can impose a municipal tax on the privilege of use of electric and/or natural gas delivered to the purchaser Use of consumption and not for resale Under IL law; can tax up to 5% The collecting company can include an allowance of 3% of the tax to cover administration expense of accounting and collecting (i.e. 5% tax would =.15% admin fee)

29 Electric & Natural Gas Use Tax Electric charge is set up on 10 tiers of kilowatt-hour (kwh) usage Natural gas either a % of the cost of natural gas or on a per-therm basis Gas use tax (GUT) implemented by home rule communities only to expand source by taxing users purchasing from outside the municipal boundaries Many municipalities use GUT as a complement to protect municipal utility tax revenues

30 Home Rule Units Taxing Survey (August 2012) Community Electricity Gas Rate Carbondale Y Y 5% Danville N N - Moline Y Y 5% Monmouth N N - Normal Y Y 5% Pekin N N - Peoria Y Y 5% Quincy N N - Rock Island Y Y 5% An Ameren IL Company report indicates the company collects electric tax for approximately 260 communities and gas tax for approximately 185 communities

31 Estimated Tax Revenue Gas estimated revenue Rate by % Est. Revenue 3% $462,423 4% 616,565 5% 770,706 Electric Estimated Revenue % of Max. Rate Est. Revenue 50% $785,484 80% 1,256, % 1,570,969 Total = $2,341,676

32 Estimated Tax on Family of 3 Bungalow Built in st floor 1121 sq. ft.; 2 nd floor 560 sq. ft. Approximately 10,540 kilowatts used annually Approximately 580 therms used annually Service Year 1 Year 2 Year 3 Electric Estimated Month $2.76 $4.42 $5.52 Electric Estimated Annual $33.09 $53.01 $66.18 Gas Estimated Month $1.69 $2.25 $2.81 Gas - Estimated Annual $20.23 $26.97 $33.72 Electric/Gas Estimated Month $4.44 $6.67 $8.33 Electric/Gas Estimated Annual $53.32 $79.98 $99.90

33 Estimated Tax on Family of 5 Ranch Build in square feet Approximately 12,625 kilowatts used annually Approximately 885 therms used annually Service Year 1 Year 2 Year 3 Electric Estimated Month $3.30 $5.29 $6.61 Electric Estimated Annual $39.64 $63.50 $79.29 Gas Estimated Month $2.19 $2.92 $3.65 Gas Estimated Annual $26.25 $34.99 $43.74 Electric/Gas Estimated Month $5.49 $8.21 $10.25 Electric/Gas Estimated Annual $65.89 $98.50 $123.03

34 Proposed Use of Tax Revenue Description Allocation Year 1 (3%/50%) Year 2 (4%/80%) Year 3 (5%/100%) Annual pension contributions Annual OPEB contributions Capital projects/ infrastructure Maintenance Park capital projects/ maintenance 20% $249, , ,335 10% 124, , ,168 40% 499, , ,670 10% 124, , ,168 Property tax relief 20% 249, , ,335 Total 100% $1,247,907 $1,873,340 $2,341,676

35 Tax Revenue vs. Personnel Expenses FY $20,000,000 $19,000,000 $18,000,000 $18,616,143 $18,023,494 $17,713,749 $17,000,000 $16,000,000 $15,950,860 $17,467,353 $17,238,092 $16,522,438 $15,000,000 $15,275,797 $15,395,646 $14,000,000 $14,050,393 $14,623,788 $13,000,000 $13,184,280 $12,000,000 $11,000,000 $10,000, Tax Revenue Personnel Expense

36 FY Levy in Dollars 4,500,000 4,000,000 4,192,248 4,052,184 3,913,999 3,500,000 3,859,837 3,587,965 3,588,213 3,000,000 3,300,216 2,500,000 2,000,000 1,500,000 1,000, ,000-1,354,145 1,236,005 1,240,604 1,265,621 1,320,018 1,097,658 1,129,082 1,342,477 1,100,176 1,100, , ,700 1,000,072 1,000, , , , , , , , , , , , , , , , , , , , , ,658 FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 General Social Security IMRF Library Police Pension Fire Pension

37 Benefits of Proposed Utility Tax Proposal would address significant Council priorities. Allow City to fund police and fire annual contribution based on entry age normal cost method. Method recommended by actuary to address unfunded liability. Allow City to make GASB based OPEB contribution. Generates dedicated source for capital projects. Portion of revenue stream could be considered for debt service.

38 OPEB Actuary Information Actuarial Valuation Report Retirees/ Active/ Total Members Unfunded Actuarial Accrued Liability (UAAL) 12/31/06 80 / 252 / 332 $6,393,779 12/31/08 69 / 272 / 341 6,489,194 12/31/10 79 / 233 / 312 8,543,659 12/31/12 77 / 236 / ,866,377

39 Benefits of Proposed Utility Tax Creates designated revenue source for Park capital projects for improving and maintaining system. Funds could be used for matching grants. A portion of the revenue could be dedicated to reducing property taxes. Allocation could be designated in approval. Implementation of aggregation savings would lessen impact.

40 Council Goals Linkage Be proactive rather than reactive Strategically invest in maintenance of infrastructure and facilities to avoid more costly rehabilitation and reconstruction later (Capital Projects, Park Capital Projects). Maintain fiscal health of organization Explore cost reduction and revenue enhancement strategies (Capital Projects, OPEB & Pension Liabilities, Property Tax Relief) Provide community amenities Develop strategy to organize and fund parks and recreation capital and operational needs - Evaluate existing and potential funding sources to be dedicated to parks & recreation (Park Capital Projects).

41 Infrastructure Maintenance - KEY TO IMPROVING THE OVERALL STREET SYSTEM

42 Council Goals Linkage Develop infrastructure management plans to ensure long and short term maintenance is being addressed (Capital Projects) Evaluate incentives and programs to improve sidewalks Identify potential funding sources (Capital Projects) Develop capital improvement program (Capital Projects)

43 Questions/Comments