City of Des Moines. City Manager Recommended Two-Year General Fund Operating Budget Plan FY 2013 and FY December 5, 2011

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1 City of Des Moines City Manager Recommended Two-Year General Fund Operating Budget Plan FY 2013 and FY 2014 December 5, 2011

2 Actions to Balance Past Budgets Focused on expense reductions- all options were explored to maintain services at lower costs Privatization (mowing, custodial, animal control) Partnerships (zoo, botanical center) Cooperative agreements with employee groups to reduce costs Health insurance plan changes and use of consultant for lower negotiated rates More 2

3 Actions to Balance Past Budgets Health insurance change to self-insured Aggressive debt refinancing ($13 million in savings) Reorganization (Parks, Community Development) Automation/Equipment changes resulting in fewer injuries and more production (refuse side loader trucks and wing plows added to snow plows) Reductions in contracts, supplies, and travel budgets Procurement of fuel and natural gas future contracts 3

4 Budget Challenges Met Always balanced the budget FY 2007 / FY 2012 $24 million of operating budget reductions and significant reductions in G.O. Bond supported capital improvements Overall reduction of about 275 positions over the last 10 yrs Maintained property tax rate last significant tax rate increase was in FY 2002 Transparent budget process with public meetings and Council workshops throughout the year on all topics 4

5 Beyond a Balanced Budget At the same time we were tightening the belt and downsizing, we were achieving great results. Forbes #1 Best Cities For Young Professionals (2011) Kiplinger top 10 Best City for the Next Decade (2010) $2 billion of public and private construction downtown Overall satisfaction with City services is significantly higher than the national average (residents of Des Moines generally think they get better value for their local taxes than residents of other large cities) More 5

6 Beyond a Balanced Budget Secured over $150 million in new federal and state grants past four years Gray s Lake recognized as one of America s Great Places Responded to major flood events in two years and near record snow amount and number of snow events Achieved the top Standard and Poor s Bond rating of AAA Major project completion MLK, Levee Construction, Franklin Library Expansion Renovation, Pappajohn Sculpture Park Received 33rd consecutive GFOA Achievement for Excellence in Financial Reporting (history of perfect audits) 6

7 Current Challenge is Different The Economy & Revenue Projections Declining Property Tax Valuations $159 million reduction in FY 2013 taxable valuations available to operation levies (loss of $2.3 million in tax revenue and a 2.4% reduction) 28% reduction in downtown commercial property values over past two years alone 3.4% average reduction to residential assessed values Other revenues showing slow growth or no growth (ex: Interest income, permit activity) 7

8 This Budget Challenge -- Revenue Issue Based On Current Tax Rate 10 Largest Downtown Properties Drop in Valuation 10 Largest Downtown Properties Drop in Taxes $347,467,400 $282,097,600 $5,759,665 $4,677,178 Loss of $65,400,000 Taxable Valuation Loss of $1,080,000 Annual Taxes to the City 2009 Valuation 2011 Valuation FY Taxes FY Taxes 8

9 General Operating Budget Gap is $7.2 Million Guiding Principals Achieve a two-year balanced budget Public Input - three town hall forums to assist departments in identifying preferred budget reductions along with other public input methods Service impacts must be explained Reoccurring savings (not one-time savings) New revenues must be certain and on-going Departments had a target that exceeded gap to avoid across-the-board cuts (minimized impact on public safety) 9

10 Proposed Balanced Budget Minimizes impact on public safety Identifies service reductions that will be necessary if further expense reductions are required (Police, Fire, Public Works, Park & Recreation, Library) 10

11 Reductions in Admin/Development $1,401,000 Clerk - $57,600 consolidating with Action Center, redistricting, change in printing, reduce publication costs City Manager - $130,000 staff reductions Community Development - $211,000 reduction of NID and zoning staff, combine divisions Engineering - $271,000 elimination and restructuring of positions Finance - $175,000 contract insurance services and increased efficiencies from new enterprise resource planning software and contract service reductions More 11

12 Reductions in Admin/Development $1,401,000 Human Resources - $81,400 downgrade of positions Human Rights - $4,250 reduce commodities and publication costs Information Technology - $274,000 modify computer replacement program, reduce software maintenance, upgrade phone system, reduce intern positions Legal - $195,000 reduced legal services and research capabilities Mayor & Council - $2,000 reduce salary and travel 12

13 Park and Recreation - $802,250 $362,000 Cemeteries increasing outsourcing of mowing and consolidation of maintenance and customer service staff $66,750 Recreation reduce aquatics subsidy through reprogramming of Birdland Pool $258,000 Facilities further reduce utility usage, custodial commodities savings, reduction in skilled trades support $115,500 Parks centralize staff, reduce mowing frequency, reduce trash barrels in parks Cuts below the line are not recommended. Recreation services - sports, special events, classes, community gardening, outdoor recreation and education Aquatics and Community Center facilities close lowest attendance centers with highest projected cost repairs first, reducing at least in half City Landscape Support - greenhouses, boulevard and downtown flowers and neighborhood flowers Municipal Buildings - reduce maintenance and service to employees and public 13

14 Fire - $608,300 $57,300 - Reduction of physical / treadmill program $21,000 - Reduction of single company station level supervisor from Captain to Lieutenant $530,000 - Eliminate medic squad Cuts below the line are not recommended. Eliminates daily staffing, daily brownouts Eliminate engine Eliminate engine and close station Eliminate a medic squad Eliminate a medic squad 14

15 Police - $486,000 $300,000 Animal Rescue League reduction in hours and services $186,000 Overtime reduction Cuts below the line are not recommended. Eliminate NBSD Eliminate School Resource Officers Eliminate Traffic Unit 15

16 Public Works - $539,000 $57,000 reduce call center services $157,000 eliminate sidewalk maintenance section $325,000 reduce street cleaning Cuts below the line are not recommended. Eliminate bridge maintenance services Reduce pothole patching Reduce street tree trimming 16

17 Library - $463,000 $17,000 reduce staff training 63 percent and cut all community, institutional, and professional memberships $19,000 reduce cleaning and HVAC costs $427,000 - Close each library one day a week, reducing hours of operation from 52 to 40 a week (Forest Avenue and North Side branches hours will be increased from 35.5 to 40 hours a week to establish parity) Cuts below the line are not recommended. Cut summer reading program Reduce children story hours by 65 percent Reduce teen and at-risk youth programming by 95 percent 17

18 Reductions by Department Proposed Proposed Reduction Budget FTE Department Target Reduction Reduction City Clerk $ 62,103 $ 57, City Manager 171, , Community Development 213, , Engineering 431, , Finance 174, , Fire 2,884, , Human Resources 81,487 81,400 - Human Rights 31,521 4,250 - Information Technology 432, ,000 - Legal 240, , Library 656, , Mayor & Council 52,338 2,000 - Park & Recreation 1,067, , Police 4,695, ,000 - Public Works 1,341, , Total $ 12,536,940 $ 4,300, $4.3 million in cuts plus the previous $24 million amounts to 18% reduction 18

19 Budget and Reductions by Service Area Operating Budget by Service Area $164,000,965 Reductions by Service Area $4,300,000 General & Admin Services $23,321,744 14% Community Enrichment $22,202,853 14% General & Admin Services $915,000 21% Community Enrichment $1,269,500 30% Instrastructure & Development $34,940,426 21% Public Safety $83,535,942 51% Infrastructure & Development $1,021,200 24% Public Safety $1,094,300 25% 19

20 Recap of Expenditure Reductions Budget Gap $7,200,000 Less Expenditure Reductions ($4,300,000) Remaining Gap $2,900,000 Proposed Tax Rate Increase $0.46 Current Tax Rate is $16.58 (City Only) 20

21 Revenue Proposals Revenue Enhancements Red Light and Speeding Camera Enforcement $ 200,000 EMS Fee Increases 200,000 Cemetery Sales and Recreation Income increases 100,000 Special Event Fee Allowance Reduced to $250 68,000 Fire Prevention Fee Changed based on costs 50,000 Selected PDC Fee Increase to recover costs 28,000 Street Excavation Fee Increase to recover costs 25,000 Vicious Dog Processing Fee 9,000 Projected New Income $ 680,000 Tax Rate Equivalent $

22 Balanced Budget with Revenue Enhancements Expenditure Reductions $ 4,300,000 Revenue Enhancements $ 680,000 Optional Tax Rate Incr. (35 ) $ 2,220,000 Total $ 7,200,000 Current Tax Rate $16.58 Reduced Increase $ 0.35 Total Rate w Revenue Enhancements $

23 Commercial Valuation and Tax Impact Includes 46 Cent Increase $80,000,000 Downtown Properties $1,400,000 $70,000,000 $70,863,000 $1,200,000 $60,000,000 $1,174,635 $53,570,000 $1,000,000 $50,000,000 $913,369 $800,000 $40,000,000 $30,000,000 $26,615,000 $600,000 $20,000,000 $10,000,000 $441,174 $19,150,000 $317,433 $18,480,000 $315,084 $11,350,000 $193,518 $400,000 $200,000 $- FY10 FY11 FY12 FY13 Valuation 1 Valuation 2 Valuation 3 Tax 1 Tax 2 Tax 3 $- 23

24 $350,000 Commercial Valuation and Tax Impact Includes 46 Cent Increase Properties Outside of Downtown Area $5,600 $325,000 $5,172 $300,000 $312,000 $5,056 $305,000 $4,842 $5,100 $275,000 $4,210 $284,000 $4,518 $265,000 $4,331 $4,600 $250,000 $254,000 $254,000 FY10 FY11 FY12 FY13 Valuation 1 Valuation 2 Valuation 3 Tax 1 Tax 2 Tax 3 $4,100 24

25 Residential Tax Bill Impact Includes 46 Cent Increase $ 140,000 Average Des Moines House $ 1,200 $ 120,000 $ 100,000 $ 110,600 $ 113,000 $ 836 $ 977 $ 1,000 $ 800 $ 80,000 $ 60,000 $ 600 $ 40,000 $ 400 $ 20,000 $ 200 $--- FY10 FY11 FY12 FY13 $--- Valuation Tax 25

26 Residential Tax Bill History $ 900 Des Moines Residential Tax Bill vs Consumer Price Index $ 800 $ 700 $ 600 $ 500 $ 400 $ 300 $ 200 $ 100 $--- FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 DM Tax Bill CPI 26

27 Federal & State Impact on Budget Governor s commercial rollback proposals State pension system contribution requirements Potential federal funding reductions (CDBG and CSBG) ADA settlement costs (unfunded mandates) EPA/DNR Consent Decree on sewer improvements Annual Revenue Loss to Des Moines From Past State Actions $ 264,000 Monies & Credits Replacement $3,151,000 Machinery & Equipment Tax $2,021,000 Personal Property Replacement $2,254,000 Population Allocation $ 330,000 Bank Franchise $8,020,000 Total State no longer provides City of Des Moines with general operating funds 27

28 Lack of Diversified Revenues Intergovernmental 14% Revenues by Category Fines and Fees 5% Reimbursement / Charge for Services 21% Hotel-Motel Taxes 2% Franchise Fees 8% Local Taxes 50% 95% of the state s municipalities have additional revenue from local option sales tax revenue, but Des Moines relies primarily on the property tax. 28

29 The Road Ahead The Municipal Service Center is a critical project for the City both in terms of long term operating efficiency as well as economic development initiatives Face an urgent need to address significant flood protection improvements resulting from the Army Corps of Engineers flood frequency study released in January, 2011, its impact on level of flood protection and the need to make improvements before we face levee de-accreditation and designation of extensive areas as being unprotected against a 100 year flood More 29

30 The Road Ahead Gaming revenue to continue to be allocated primarily to street and bridge repairs. Potential use of excess gaming funds for economic development. Need to retain a strong commitment to economic development because of ongoing budget issues and dropping values. Will pursue lower street light rates through tariff process. UPS early payment to be used as an operating endowment (loss of PILOT) and possible source for internal loan(s) (ex: to parking system) 30

31 Summary $24 million expense reductions (FY 2007 through FY2012) + $4.3 million recommended expense reductions = $28.3 million (about 18% of General Fund) 275 full time jobs eliminated 2002 through full time jobs eliminated FY2013 and 2014 = 313 Full Time Jobs eliminated (1956 to 1643, or about a 16% reduction) Essential Public Safety services (Police, Fire, Public Works) have been maintained, while expense reductions in other areas (Parks, Administration, Libraries) have carried the brunt of the cuts. Further budget cuts beyond the level recommended will jeopardize the City s ability to deliver the essential services that our citizens want More 31

32 Summary A modest increase in the tax rate of not more than $.46 is recommended in order to avoid expense reductions that will have a detrimental impact on the services most needed by our residents and businesses. First significant City tax rate increase since Average single family home owner ($113,000) will pay $27 more per year, or about $2.25 more per month when a 46-cent tax increase is included. Average single family home owner ($113,000) will pay $19 more per year, or about $1.57 more per month when a 35-cent tax increase is included. The tax bill for the City portion of the tax bill paid by the average homeowner over the past ten years has increased at about the rate of inflation despite the adverse financial impact of many Federal and State actions beyond the City s ability to control. Commercial property owners will pay less in property taxes to the City due to declining assessed values even with the modest increase in tax rate. The $.46 increase in tax rate can be reduced by up to $.11 if Council elects to use additional revenue streams. Unless the State of Iowa adopts legislation that further reduces tax revenues (as has been proposed with the commercial rollback), and baring some other unforeseen event, the City will have a balanced budget for two years. Efforts should continue to diversify revenues. 32

33 Questions and Answers 33