February 2008
To The Mayor and Ames City Council:
I have attached for your approval the City Manager’s Recommended Budget for fiscal year 2008-09. This financial/management plan for the City reflects expenditures and revenues for operations and capital improvements associated with the various funds we maintain. You will note that the expenditure total of $179,790,678 for FY 2008-09 is significantly greater than for the previous year. This difference is attributable to large projects, especially in the Electric Utility, that have moved to the front of the Capital Improvements Plan.
As we began the preparation of the budget, we were faced with two significant challenges. First, the growth in our taxable valuation is anticipated to be only .4% for the coming year. This very modest increase in taxable valuation for FY 2008-09 can be attributed to: 1) a distressed national economy that has slowed new construction to only $51,225,000, 2) the continuation of conversions of apartments to condominiums/coops resulted in a loss of $20,000,000 in taxable valuation, 3) court-ordered reductions in valuation for a few of our major commercial and industrial properties that lowered our valuations by $15,000,000, and 4) the negative impact of the state mandated rollback on assessed valuation that caused a further erosion of our tax base by $34,344,030.
Second, the increase in local option sale tax receipts is estimated to be only 1.24%. While no studies have been conducted to explain the causes for this modest increase in sales tax revenue, some have hypothesized that 1) a stagnating national economy has also negatively impacted retail sales and 2) we are experiencing substantial “leakage” as our residents take advantage of other shopping opportunities in the commercial areas to the south of Ames. Regardless of the reasons, the increases associated with these two revenue sources are the lowest that I can recall, and undoubtedly had a direct impact on our property tax asking for FY 2008-09.
To offset this smaller than desired increase in revenues, we will benefit from the following three developments: 1) a $400,000 decrease in our obligation to finance the Fire and Police Retirement Fund, 2) a significant increase in interest earnings ($385,260) in all funds due to investment at interest rates higher than prior years, and 3) a larger than expected beginning balance in the General Fund for FY 2007-08 due to staff vacancies and increased interest earnings in FY 2006-07. The larger balance has allowed us to fund needed items, such as capital for the Police Department, in FY 2007-08 rather than in FY 2008-09.
The FY 2008-09 budget requires a 6% increase in the City tax rate from $10.43 per $1,000 of taxable valuation to $11.06 per $1,000 of taxable valuation, or an additional $1,305,154 of new property tax revenue. It should be emphasized that $ 0.47 of this rate increase, or $960,000, is attributable to the first year’s debt payment for the new Donald and Ruth Furman Aquatics Center that was approved by 76% of the voters last July. Without this payment, the tax rate increase would be only 1.46%.
As you know, the actual impact on the tax bills for our citizens will be less than the rate increase for most of the property owners in the city. Because the state-mandated rollback continues to reduce the amount of property subject to taxes for residential and commercial property owners, the impact of this budget on actual property tax bills will be only 2.56% and 5.72% respectively for these two classifications of owners.
Since it is not possible in this letter to adequately address all of the important services reflected in this budget, I have attempted to highlight several of the new initiatives.
Information Driven Policing is the cornerstone of the FY2008-09 budget. While previous investments built a shared radio and data infrastructure between Ames, ISU and Story County, this budget takes advantage of that infrastructure to implement advancements that will put more information in the hands of individual police employees. The technology requests included in this budget will increase both the efficiency and effectiveness of the Police Department, particularly for the officers on the street.
The addition of mobile data capability to the computers in the patrol vehicles will give the officers on the street immediate access to critical information. Officers will also be able to do more of their routine checks on licenses and vehicle registration from these workstations, thus allowing the communications center staff to allocate more of their attention to incoming calls. In addition, quality digital video will replace obsolete VHS tape systems to provide a more efficient system and a better visual product.
The cost of accomplishing these technology improvements is significant. Along with approximately $130,000 of local financial support for the start-up costs associated with these new technologies, an additional $70,000 of Information Technology staff time will be needed to support these new ventures.
As the City embraces data driven decision-making, citizen and staff demands for reports and data summaries continues to increase. Citizens continue to request information about their neighborhoods related to traffic crashes, crime, and special events. In response to this growing need, $23,000 for additional part-time civilian staff has been added to the budget to improve evidence management and the responsiveness of the records division.
Over the next two years we are anticipating a number of retirements in the Police Department. Typically, it takes six months for a new recruit to complete our internal training program and State academy. If we wait until an officer retires before we hire a replacement and begin the training process, there could be many months when we are short an officer on the street. In an effort to reduce this delay, I have budgeted $40,500 in FY 2007-08 to allow us to begin hiring and training new officers before the retirees actually leave the department.
Given the recent discussion of the changing cultural face of Ames, funds also have been included in FY 2007-08 and FY 2008-09 for diversity training for all employees in the department.
FIRE SAFETY ACTIVITIES
Two years ago, I discussed our desire to increase the number of fire fighters who are available to respond to the increasing number of incidents, as well as overlapping calls. In the past it was difficult to address these staff additions because of the cost. I have taken advantage of the significant reduction in the retirement fund obligation in FY 2008-09 to add three new fire fighter positions ($189,000) in the budget.
It should be emphasized that in addition to adding personnel, our ability to address this availability issue is also impacted by the amount of time off taken for injuries, holiday leave, sick leave, training, and vacation. Therefore, it is our intent that any additional improvements in this situation will be addressed by identifying techniques for better management of controllable leave.
BUILDING SAFETY
Each year we attempt to establish the various permit fees to cover the cost of our inspections. However, because it is difficult to project the magnitude of the construction activity we will experience, sometimes revenues exceed expenses and sometimes the reverse is true. In FY 2007-08, we are projecting expenses to exceed our user fees by $113,000. Here again, the national economy might be impacting a downturn in new construction activity, although our workload remains challenging with a steady stream of renovation work. Given the magnitude of this revenue shortfall, the FY 2008-09 budget includes increases in the various permit fees.
GEOGRAPHIC INFORMATION SYSTEM (GIS)
The responsibility for coordinating our GIS system was originally assigned to one of our Planners. The demand from our departments, citizens, and City Council members for GIS-related information had grown to the point where almost 60% of our Planner’s time was devoted to this assignment. However, as the planning-related workload also is increasing dramatically, I no longer believe we can center this responsibility in the Current Planning program. Therefore, the FY 2008-09 budget reflects a reassignment of this function with the GIS Specialist in Public Works Engineering, along with two interns, assuming responsibility for coordinating the software operations of the GIS system and additional support for the hardware coming from the Information Technology staff. Although the GIS function started as a minor operation with little cost, the service has now blossomed into a $288,000 annual venture supported by various funds.
RECREATION OPPORTUNITIES
The Parks and Recreation Department continues to do an excellent job in increasing the efficiency of the staff. As a result, the Parks and Recreation Administrative program calls for a 1.5 reduction in FTEs in FY 2008-09 (.5 Project Administrator and 1.0 Secretary).
-Aquatics
Based on our most recent estimates from our architect/engineers for the Donald and Ruth Furman Aquatics Center, the budget reflects the new facility being open for one month in FY 2008-09 and Carr Pool closing after the summer 2008 swim season.
-Community Center/Auditorium/Bandshell
Because there were only two activities shown in Social Programs we have combined these activities (municipal band and craft fair) into the Community Center/Auditiorium/Bandshell program.
-Ames/ISU Ice Arena
In order to maintain the viability of this enterprise fund in FY 2007-08, the budget includes a transfer of interest earnings and the annual contribution to the Arena’s Capital Reserve Fund to the operations fund. These two actions helped us reach a desired fund balance in the operations fund and still maintain an acceptable capital reserve fund balance.
-Homewood Golf Course
After reviewing the portion of time from various positions that were being assigned to this operation, it was decided to reduce the FTEs by a net of .25, which was transferred to support other programs. The reorganization has allowed us to project a breakeven operation for this enterprise fund in FY 2008-09.
LIBRARY ACTIVITIES
You will notice in the Library Activities section of the budget that most of the program FTE totals reflected for FY 2008-09 are different from the FY 2007-08 levels. These modifications were made by the Library Director to better reflect reorganization within the department based on where actual staff time is now being devoted.
The net result of all the personnel changes is an additional .5 FTE. A new Outreach Supervisor position has been added in FY 2008-09 to direct the Bookmobile, Project Smyles, and Homebound programming, while a .5 FTE custodian position was eliminated from the budget.
For the first time, a portion of the state library funding is being budgeted to purchase materials in an effort to reach their target level.
LEGAL SERVICES
In order to assist the City Attorney with an increased workload, an additional .5 FTE ($27,818) of support staff has been included in the General Fund. This additional staffing should free up our attorneys’ time from administering the new case tracking software to handling staff inquiries.
TRANSPORTATION
Additional funds have been included in the budget to improve sign and signal maintenance, pavement marking, and right-of-way maintenance. This new emphasis is being accomplished by increasing a maintenance worker position from .75 FTE to 1.0 FTE ($23,000) along with a new more efficient line painter ($7,250), more frequent replacement of our loop detection units ($8,000), and extra monies ($10,000) to perform a higher level of maintenance on our right-of-ways.
CYRIDE
The Transit Board is requesting that the City contribute $1,210,300 to support CyRide in FY 2008-09. This total represents a 5.8% increase in funding, or an additional $66,349. Included in this request are two minor increases in service totaling $12,000: earlier Sunday morning service on the Green Route and Sunday evening service on the Silver Route. In addition, the budget reflects the expansion of hours (.50 FTE) of a part-time dispatcher, .50 FTE for a new part-time clerical position in the maintenance division, and 1.0 FTE for new Receptionist.
CITY HALL SPACE NEEDS
Much has changed since we moved into the renovated Central Junior High School building back in 1990. As our workload grew and new service responsibilities were added, additional staff in the Planning and Housing, Public Works, Human Resources, Fire, Police, and Legal Departments were assigned to City Hall. We have reached a point where lack of adequate space in City Hall is impacting the effectiveness of our work. Therefore, in FY 2007-08 I have earmarked $20,000 for an architectural/engineering study to determine how we could renovate the basement and vacant Police holding cell areas into viable office space. An additional $60,000 has been budgeted for minor renovations to provide more usable office space on the first and second floors of City Hall.
UTILITIES
-Electric
During the past year, we have emphasized that it is time for us to develop a strategy to meet the future electric demands of our customers until at least 2025. The last major addition made to our base-load capacity was in the early 1980’s. Even with aggressive demand side management programs, our aging facilities will require refurbishing or replacement.
We have been working with a consulting firm, Burns and McDonnell, to help us identify the most cost-effective and environmentally sensitive options for meeting our customers’ electric needs. Unfortunately, by the time staff had finalized our budget recommendation, we had not received a final report from our consultant. Absent these recommendations, the operating budget and CIP anticipates maintaining our existing units #7 and #8 and gas turbines so that our current installed generating capacity of 153 MWs will be in a condition to function well into the future. Within our planning horizon, we are projecting the need to add 25 MWs of additional base load capacity by constructing a new unit that burns natural gas and/or alternative fuels, or purchasing capacity as part of another generating facility.
We estimate that this strategy will require an 8% rate increase in FY 2008-09 and a 10% rate increase in FY 2009-10. The City Council might want to consider an early implementation of this first increase to improve cash flow and accomplish the adjustment prior to the higher summer rates. In addition to the rate increases, we anticipate that compliance with new environmental standards will necessitate an increase in the Energy Cost Adjustment (ECA) of approximately 5%.
Major expenditure increases reflected in FY 2008-09 are due to the beginning of the capital investment in our existing units and the purchase of allowances to meet 2009 federal emissions requirements.
-Water
Our peak demand in this utility continues to grow primarily due to outdoor watering. While we will continue to work hard to reduce this trend with a more aggressive water conservation program, it appears that major capital expenditures will be required in the near future because of an aging treatment facility. Lacking an engineering analysis, the current CIP reflects an expenditure of $29,000,000 beginning in FY 2009-10 to expand our Water Plant to satisfy our customers projected needs. The best estimate at this time is that this type of project will require a series of five annual rate increases beginning in 2009-10. The primary task before the staff this year is to work with an engineering firm to develop more definitive cost estimates and funding strategies for this project.
-Water Pollution Control
We are proud to announce that our Water Pollution Control Plant was one of only three such plants nationwide to receive the Platinum-17 Award from the National Association of Clean Water Agencies for 100% compliance with discharge standards for 17 consecutive years.
In accordance with the City Council’s direction, the staff has been working with officials at the Iowa Department of Natural Resources (IDNR) to develop discharge limits to incorporate into a new NPDES permit. Our application has been submitted and we are awaiting approval from the State.
In support of the IDNR’s Use Attainability Analysis of the South Skunk River, which determined that the segment where we discharge can support “primary contact,” we are planning for a $3,000,000 disinfection project in two years. This project is a major factor in requiring our rates in this utility to be increased 10% in 2009-10 and again in 2011-12. The City Council might want to consider raising our sewer rates earlier in 2008-09 to avoid a second rate increase and the combination of a electric, water, and sewer rate increases in 2009-10.
-Storm Sewer
In addition to our traditional projects in this utility (Low Point Drainage, Intake Rehabilitation, and Outlet Erosion Control), the new $500,000 Storm Water Facility Rehabilitation Program is being funded by these user fees. Annual expenditures are exceeding annual revenues to a point where, in a few years, if nothing is done the balance in the fund will be insufficient. Therefore, we are projecting the need for a rate increase in this utility in 2009-10 from $2.60 per month to $3.00 per month.
-Resource Recovery
The fund balance in this utility is in such good shape that it is our intent to maintain the current
$10.50 per capita charge to all of the partner jurisdictions that contribute financially to our
system. The City’s portion of the support for this operation is $423,475 in FY 2008-09.
These are exciting times for this operation. We have contracted with Prairie Rivers RC & D to perform an assessment on our Refuse Derived Fuel (RDF) to determine the viability of converting our RDF into a clean burning, more marketable bio-fuel product. A non-ferrous separation system is being planned that will recover aluminum, copper, and stainless steel for recycling. These materials are currently landfilled. Finally, in FY 2007-08 our glass recycling program has been expanded to the ISU campus and the City of Nevada. We hope to include other member communities in the future.
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Each year it seems like we are faced with insurmountable challenges in our quest to provide excellent services at the least possible cost to our citizens. Yet, each year we are able to meet these challenges. Due to the leadership from an outstanding team of department heads, along with a dedicated group of city employees, Fiscal Year 2008-09 will be no different. Also, we must not forget the tireless efforts of Duane Pitcher, Carol Collings, Sharon Hjortshoj, Sheila Lundt, and Bob Kindred. Without them, the national recognition we continue to receive for our program budget would not be possible.
Sincerely,
Steve
Steven L. Schainker
City Manager
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To see the entire 2008/2009 City of Ames program budget, click here.