Finance Advisory Committee

Meeting Location City of DeKalb Police Department Training Room, 2nd Floor 700 West Lincoln Highway DeKalb, Illinois 60115 AGENDA Finance Advisory Committee January 30, 2018 5:00 p.m. 1. Call to Order 2. Roll Call for Attendance 3. Public Participation 4. Approval of Minutes a. Minutes of the Finance Advisory Committee Meeting of November 2, 2017 b. Minutes of the Joint City Council and Finance Advisory Committee Meeting of November 16, 2017 5. FY2019 Budget Schedule 6. Five Year Financial Plan 7. Committee Operations Policy 8. Location of Meetings 9. Confirm Next Meeting Date and Time a. Tuesday, February 27, 2018 at 5:00 p.m. 10. Adjournment The Finance Advisory Committee’s role (as listed in Chapter 54-11) is to provide well-reasoned, financially sound recommendations to the Council. Meetings and reporting shall be on a project-by-project basis or as otherwise assigned by the City Council. The Finance Advisory Committee shall work in cooperation with the City Council and the City Manager to analyze the City’s financial policies, long term financial stability, options for greater efficiencies and possible revenue and expenditure modifications. 1  MINUTES FINANCE ADVISORY COMMITTEE CITY OF DEKALB NOVEMBER 2, 2017 1. CALL TO ORDER The Finance Advisory Committee meeting of November 2, 2017 was called to order at 5:01 p.m. by Chair Peddle. 2. ROLL CALL Committee members present were Tom Teresinski, Lynn Neeley, Steve Parker, Dave Conlin, Ron Partch and Chair Mike Peddle. Staff present: City Manager Anne Marie Gaura, Assistant City Manager Patty Hoppenstedt, Finance Director Molly Talkington, Assistant Finance Director Robert Miller, Customer Service Representative Kendall Frerichs, and Account Technician III Carri Parker. Staff present in audience: Human Resources Director Cris Randall, Fire Chief Eric Hicks, Economic Development Director Jo Ellen Charlton, Information Technology Director Marc Thorson, Police Chief Eugene Lowery (arrived at 5:07 p.m.) and Public Works Director Tim Holdeman (arrived at 6:29 p.m.). 3. PUBLIC PARTICIPATION No public participation Committee member voiced concerns communication by Marc Charvat with regard to the video and audio recordings. Chair Peddle asked City Manager Gaura to explain the Boards and Commissions structure on meeting with the City Council. Committee member Teresinski commented on the location of the meetings and responsibilities of the committee. 4. APPROVAL OF MINUTES a. Minutes of the Finance Advisory Committee Meeting of October 30, 2017 MOTION Committee Member Neeley moved to approve the minutes; seconded by Committee Member Teresinski. The Finance Advisory Committee have not approved these minutes. 2  Finance Advisory Committee Meeting November 2, 2017 Page 2 of 7 VOTE Motion carried on a unanimous vote. Chair Peddle declared motion passed. 5. REVIEW FISCAL YEAR 2018 BUDGET Chair Peddle explained the focus for the meeting. Finance Director Talkington explained the charts that were discussed in the last meeting. She stated that she received a release of the municipal review and explained that staff has been watching the trends in income tax. She reviewed the estimates provided have reduced with the new release of information. A discussion ensued between the Committee and staff on the income tax changes from IML and the effect on the budget and the Five-Year Plan. Police Chief Lowery left the meeting at 5:29 p.m. Police Chief Lowery returned to the meeting at 5:31 p.m. Police Chief Lowery left the meeting at 5:33 p.m. Finance Director Talkington continued her presentation on the Local Use Tax. She stated that the City id trending above what is budgeted. Police Chief Lowery returned to the meeting at 5:36 p.m. Information Technology Director Thorson left the meeting at 5:37 p.m. Committee member Conlin left the meeting at 5:38 p.m. Finance Director Talkington continued explaining the municipal sales tax. Information Technology Director Thorson returned to the meeting at 5:39 p.m. A discussion ensued between Committee and staff regarding the sales tax projections. Committee member Conlin returned to the meeting at 5:42 p.m. City Manager Gaura mentioned that there are projects in the works that we will not see the benefit in 2018, but will carry over to 2019. Economic Director Charlton left the meeting permanently at 5:50 p.m. The discussion continued between Committee members and staff of the sales tax projections. The Finance Advisory Committee have not approved these minutes. 3 Finance Advisory Committee Meeting November 2, 2017 Page 3 of 7 Assistant City Manager Hoppenstedt left the meeting permanently at 5:56 p.m. A discussion ensued between the Committee and staff on the restaurant development in the DeKalb area and how the sales will be affected. Committee member Neeley commented on page 236 in the budget, she stated that the projections are concerning. Finance Director Talkington replied that the projections are accumulative. A discussion ensued between the Committee and staff regarding the projections on page 236. Committee member Neeley left the meeting at 6:14 p.m. Committee member Teresinski provided a handout with recommendations. He continued to explain the information provided. Committee member Neeley returned to the meeting at 6:16 p.m. A discussion ensued between the Committee and staff regarding the needed recommendations. Public Works Director Tim Holdeman arrived at the meeting at 6:29 p.m. City Manager Gaura left the meeting at 6:34 p.m. Committee member Partch asked about the Debt Policy. Chair Peddle explained the debt policy. City Manager Gaura returned to the meeting at 6:36 p.m. Fire Chief Hicks left the meeting at 6:37 p.m. Fire Chief Hicks returned to the meeting at 6:38 p.m. 6. RECOMMENDATIONS The following items are recommendations from the Committee are will be voted as an omnibus vote. A. Income Tax Revenue from the State be adjusted for FY17 and FY18 to reflect the November 1, 2017 estimates from the IML and any future fiscal years after FY18 be adjusted to reflect these changes. B. The Committee strongly commits to current and future budgets that strictly to adhere to the minimum 25% General Fund balance per the City’s adopted fund The Finance Advisory Committee have not approved these minutes. 4  Finance Advisory Committee Meeting November 2, 2017 Page 4 of 7 balance and endorses the fact that fund balances above the minimum are preferred. C. The Committee continues to support the present practice with respect to the water system charges in terms of segregating the rate increase portion that is reserved for capital purposes and that regular updates are provided to the City Council and Finance Advisory Committee as to the capital balance of that account. D. Revenues collected for Capital purposes should be segregated for matters that are not diverted to operations. E. The FAC recommends that no new debt be incurred by the City or on the City’s behalf until a financially balanced Five-Year Plan iteration is completed. MOTION Committee Member Neeley moved to approve the above; seconded by Committee Member Conlin. VOTE Motion carried on an omnibus vote. Chair Peddle declared motion passed. Police Chief Lowery left the meeting at 6:43 p.m. Police Chief Lowery returned to the meeting at 6:46 p.m. Information Technology Director Thorson left the meeting at 6:48 p.m. Information Technology Director Thorson returned to the meeting at 6:50 p.m. A discussion ensued between the Committee and staff regarding the sales tax increase. F. The Committee recommends to the City Council the Committee will support the 1% increase in the Home Rule Sales Tax with the division of those revenues as presented by the staff recommendation. MOTION Committee Member Parker moved to recommend a 1% increase of the Home Rule Sales Tax to be split in accordance to the staff recommendation; seconded by Committee Member Neeley. VOTE Motion failed on a 0-6-0 vote. Chair Peddle declared motion failed. Committee member Parker left the meeting at 7:06 p.m. The Finance Advisory Committee have not approved these minutes. 5 Finance Advisory Committee Meeting November 2, 2017 Page 5 of 7 Committee member Parker returned to the meeting at 7:07 p.m. Police Chief Lowery left the meeting at 7:10 p.m. Police Chief Lowery returned to the meeting at 7:12 p.m. G. The Committee recommends increasing the spending from the TIF fund on roads from $500,000 to $1 million with the difference to be made up by reducing what is spent on other capital projects within the TIF. MOTION Committee Member Teresinski moved to recommend increasing the spending from the TIF fund on roads from $500,000 to $1 million with the difference to be made up by reducing what is spent on other capital projects within the TIF; seconded by Committee Member Partch. VOTE Motion carried on a 5-1-0 vote. Chair Peddle declared motion passed. H. The Committee recommends a permanent expenditure reductions of $1.5 million. MOTION Committee Member Teresinski moved to recommend a permanent expenditure reductions of $1.5 million; seconded by Committee Member Neeley. Chair Peddle left the meeting at 7:15 p.m. The meeting broke for a break at 7:15 p.m. due to lack of a Chair. The meeting resumed at 7:21 p.m. with all Committee members. Chair Peddle opposed the motion. No vote taken. A discussion ensued between the Committee and staff regarding the budgeted revenues and expenditures for FY2018. VOTE Motion carried on a 4-2-0 vote. Chair Peddle declared motion passed. A discussion ensued between the Committee and staff with regard to last minute handouts. Chair Peddle stated that the Committee needs to come to an agreement on the next steps. He mentioned that the discussions need to focus on a balanced plan and strategies related to the Five Year Financial Plan. He suggested the Committee needs The Finance Advisory Committee have not approved these minutes. 6  Finance Advisory Committee Meeting November 2, 2017 Page 6 of 7 to look at the vulnerabilities in the City’s structure. He added that the Committee would like to work on a 12-month basis. I. The Committee recommends to the City Council to increase the Home Rule Sales Tax .75% with a six-year sunset date to be solely used for Streets and Fleet. MOTION Committee Member Conlin moved to recommends to the City Council to increase the Home Rule Sales Tax .75% with a six-year sunset date to be solely used for Streets and Fleet; seconded by Committee Member Partch. DISCUSSION Committee member Teresinski stated he is hesitant on supporting on the motion until the Five-Year Plan is finalized. Information Technology Director Thorson left the meeting at 8:22 p.m. VOTE Motion carried on a 4-2-0 vote. Chair Peddle declared motion passed. Information Technology Director Thorson returned to the meeting at 8:25 p.m. J. The Committee recommends to the City Council to increase the Home Rule Sales Tax 1% to be solely used for three additional police officers in accordance to the proposed FY2018 budget and the remaining be dedicated to Capital. MOTION Committee Member Parker moved to recommends to the City Council to increase the Home Rule Sales Tax 1% to be solely used for three additional police officers in accordance to the proposed FY2018 budget and the remaining be dedicated to Capital; seconded by Committee Member Neeley. Human Resources Director Randall left the meeting at 8:31 p.m. DISCUSSION Committee member Teresinski mentioned that the Committee is not voting for or against Police Officers. It has to do with the total budget process. Human Resources Director Randall returned to the meeting at 8:35 p.m. Chair Peddle stated that he will support this motion as it is supporting Capital and the three officers. VOTE Motion carried on a 4-2-0 vote. Chair Peddle declared motion passed. The Finance Advisory Committee have not approved these minutes. 7 Finance Advisory Committee Meeting November 2, 2017 Page 7 of 7 7. OTHER ITEMS Committee member Partch requested that we have a policy for handouts. Chair Peddle recommended that the Committee reference minutes from last year budget discussions. 8. CONFIRM NEXT MEETING Police Chief Lowery left the meeting at 8:38 p.m. Chair Peddle has recommended that the Committee meets in the middle of January. Police Chief Lowery returned to the meeting at 8:40 p.m. 9. ADJOURNMENT Chair Peddle requested a motion to adjourn, moved by Committee Member Parker and seconded by Committee Member Partch. Motion passed by a unanimous vote. Meeting adjourned at 8:46 p.m. __________________________________________ CARRI PARKER, Account Technician III The Finance Advisory Committee have not approved these minutes. 8  MINUTES JOINT CITY COUNCIL AND FINANCE ADVISORY COMMITTEE MEETING CITY OF DEKALB NOVEMBER 16, 2017 The City Council of DeKalb, Illinois held a Joint City Council and Finance Advisory Committee meeting on November 16, 2017, in the City Council Chambers of the DeKalb Municipal Building, 200 South Fourth Street, DeKalb, Illinois. Mayor Smith called the Special City Council meeting to order at 5:02 p.m. Finance Advisory Committee Chair Peddle called the Special Finance Advisory Committee meeting to order at 5:03 p.m. 1. ROLL CALL Deputy City Clerk Carri Parker called the roll, and the following City Council members were present: Alderman Bill Finucane, Alderman Mike Marquardt, Alderman Pat Fagan, Alderman Kate Noreiko, Alderman Mike Verbic, Alderman Tony Faivre, and Mayor Jerry Smith. Alderman Mike Marquardt arrived at 5:03 p.m. Alderman David Jacobson arrived at 5:06 p.m. Finance Advisory Committee members present were: David Conlin, Lynn Neeley, Steve Parker, Ron Partch, Tom Teresinski, and Chair Mike Peddle. City staff present were: City Manager Anne Marie Gaura, Assistant City Manager Patty Hoppenstedt, Finance Director Molly Talkington, City Attorney Dean Frieders, Police Chief Gene Lowery, Fire Chief Eric Hicks, Community Development Director JoEllen Charlton, Public Works Director Tim Holdeman, Information Technology Director Marc Thorson, Human Resources Director Cris Randall, Assistant Finance Director Robert Miller, Code Compliance Coordinator Carl Leoni, Utilities Superintendent Bryan Faivre, Accountant Susan Hauman, Management Analyst Patrick DiDiana, Management Analyst Ray Munch, Management Analyst Aaron Stevens, and Deputy City Clerk Carri Parker. Mayor Smith explained the purpose of the Special Joint City Council and Finance Advisory Committee (FAC) meeting. He mentioned that the City’s department heads would be presenting the details of the proposed expenditure reductions for their departments, Finance Director Talkington would be presenting the revenue projections, and FAC Chair Peddle would present the FAC recommendations. He added that Council and the FAC would then discuss the information presented. He stated that decisions regarding the FY2018 would not be made at this meeting. FAC Chair Peddle explained that the FAC had met several times in the previous months. He stated that the role of the FAC is to provide the best financial advice based on each FAC member’s experience within the finance world. He added that the City has The Finance Advisory Committee have not approved these minutes. 9  Special Joint City Council and Finance Advisory Committee Meeting November 16, 2017 Page 2 of 4 a financial policy regarding funding pensions and in the past Council has failed to meet the fiduciary responsibility to adhere to those polices or meet the fiduciary responsibility to the City. He mentioned the outcomes of the Council not meeting the fiduciary responsibility. Mayor Smith mentioned that at the November 13, 2017,City Council meeting, staff was directed to find overall expenditure cuts from 2.5% – 5%. 2. FY2018 PROPOSED ANNUAL BUDGET City Manager Gaura provided an overview of the steps taken by staff to meet the requested information from Council of finding 5% reductions in the general fund. She added that the recommendations of the tentative Tax Levy is based on the Equalized Assessed Value (EAV) and the City’s budget policies. She explained that the presentations are based on two things: (1) the property tax levy including only an increase of the projected EAV increase, and (2) a pension expenditure estimate of a 7.5% investment return rate with other non-property tax revenue. She stated that based on direction from Council, there are three options provided: (1) a $700,000 reduction in ongoing costs to reach a 25% fund balance, (2) an overall 2.5% reduction, and (3) an overall 5% reduction. She added that implementing these reductions will affect City services. Each City department head explained the variety of cuts provided in the agenda memo. Alderman Marquardt left the meeting at 6:15 p.m., and returned at 6:17 p.m. City Manager Gaura communicated some expenditure assumptions that have affected the FY2018 to assist in the requested reductions. She added an explanation of the staffing plan handout. Finance Director Talkington explained the changes to the Five Year Financial Plan based on the proposed reductions. She added that the assumptions are based on the three scenarios: (1) a $700,000 reduction in ongoing costs to reach a 25% fund balance, (2) an overall 2.5% reduction, and (3) an overall 5% reduction. Finance Director Talkington also addressed the revenue assumptions. A discussion ensued between Council members, FAC members, and City staff on the pension investment return rate assumption. Alderman Jacobson left the meeting at 6:27 p.m., and returned at 6:29 p.m. Alderman Finucane left the meeting at 6:30 p.m., and returned at 6:32 p.m. A discussion ensued between Council members, FAC members, and City staff on the future staffing plans and truth in taxation levy amount. The Finance Advisory Committee have not approved these minutes. 10 Special Joint City Council and Finance Advisory Committee Meeting November 16, 2017 Page 3 of 4 Chair Peddle summarized the FAC recommendations and the future plans for the FAC relative to future planning. A discussion ensued between Council and FAC members with regard to the effect on Moody’s based on the recommendations. FAC member Neeley left the meeting at 7:34 p.m., and returned at 7:37 p.m. Alderman Fagan left the meeting at 7:36 p.m., and returned at 7:39 p.m. Alderman Marquardt left the meeting at 7:52 p.m., and returned at 7:54 p.m. 3. PUBLIC PARTICIPATION Dwayne Brown mentioned his projections of wage growth. He presented quotes by various Aldermen and Mayor Smith from the previous Council meeting. He added not to add more tax to the overburdened taxpayer. He stated that he’d rather see it cut and be done with. City Manager Gaura left the meeting at 7:57 p.m., and returned at 8:00 p.m. William Heinisch stated that growth needs to be the primary focus. He is concerned about the sales tax increase as he cannot compete with surrounding communities. He added that if the sales tax is increased he will have to absorb the increase, which financially is not feasible. Sara Dorner, AFSCME Representative, spoke in reference to City employees and their dedication to the City. She asked the Council and FAC to think about City services, and to consider the people who provide those services for the City. Jacob Burlingame stated he would like to see the pensions fully funded. He added that with the increase in crime, it is not a good time to cut funding in police and fire services. He stated that if there was a choice in protection services to raising taxes, he would support an increase in taxes. Bessie Chronopoulos stated she is happy that Mayor Smith is fulfilling his promises. She commended the talent of the FAC members and taking the steps to work together to discuss what needs to be done. She stated that the budget process should be completed earlier and it is not fair to discuss these important topics in crunch time. Council members shared their thoughts on the presented information and their suggestions on future decisions relative to the FY2018 budget. 4. ADJOURNMENT MOTION The Finance Advisory Committee have not approved these minutes. 11  Special Joint City Council and Finance Advisory Committee Meeting November 16, 2017 Page 4 of 4 FAC Chair Peddle moved to adjourn the Special meeting; seconded by Alderman Marquardt. VOTE Motion carried on a voice vote. City Council 8-0 voice vote: Aye: Jacobson, Finucane, Marquardt, Fagan, Noreiko, Verbic, Faivre, Smith. Nay: None. FAC 6-0 voice vote: Aye: Conlin, Neeley, Partch, Teresinski, Parker, Peddle. Nay: None. Mayor Smith declared the motion passed and the meeting adjourned at 8:31 p.m. _____________________________________ CARRI PARKER, Deputy City Clerk Approved by City Council: December 11, 2017. The Finance Advisory Committee have not approved these minutes. RETURN TO AGENDA 12 DATE: January 12, 2018 TO: Mike Peddle, Chair Finance Advisory Committee FROM: Anne Marie Gaura, City Manager Molly Talkington, Finance Director SUBJECT: Fiscal Year 2019 Budget Process I. Summary On January 8, 2018, City Council supported a new budget process for the Fiscal Year (FY) 2019 Budget to clearly tie the City Council’s goals to budget action plans. The City’s budget and financial process for the FY2019 Budget began in January 2018. This report details the new budget process from setting the City Council’s Vision and Goals for the City through final adoption in December 2018. As well, the budget schedule outlines the role of the Finance Advisory Committee (FAC) within this new process. II. Background Prior Council Action  On December 4, 2017, Council was presented with the initial FY2019 first quarter budget schedule in the Fiscal Year 2018 Proposed Budget Revisions Report.  On December 11, 2017, Council adopted the Fiscal Year 2018 Annual Budget via Ordinance 2017-051.  On January 8, 2018, Council supported the new budget process for the FY2019 at the Committee of the Whole meeting.  On January 8, 2017, service level presentations for Council were on the Refuse, Recyclables, and Yard Waste Contract Update and Snow and Ice Removal Plan. Fiscal Year 2019 Budget Process On January 8, 2018, City Council supported a new budget process for the FY2019 Budget to clearly tie the City Council’s goals to budget action plans. The City’s budget and financial process for the FY2019 Budget has begun. This meeting for the FAC is to review 13 the Five-Year Financial Plan and identify any changes sought for the next revision. As indicated at the December 4, 2017, City Council Special meeting on the budget, the FY2019 Budget calendar is presented through this report. Shown below is the draft schedule for review and revision prior to Council review and revision. Additionally this report includes an initial overview of the Financial Policies currently in place. Since the budget process is going to be a major focus for the coming year, it is recommended to have Budget Workshop meetings for Council and the FAC from January to November. The FAC would meet to review and discuss budget topics, with their recommendations included in the budget information that Council would review and discuss. These meetings would culminate in a City Council and FAC Joint Meeting on the proposed budget on November 6, 2018, for final review and revisions. The first reading of the proposed budget would take place at the November 26, 2018, Regular meeting, followed by the second reading on December 10, 2018. Below is an outline that provides further detail on the FY2019 Budget process followed by the schedule of events. 1. City Council Vision and Goals (What and Why). On January 24, 2018, the City Council will hold a Goal Setting Session to determine what goals they want to accomplish in 2018. As part of that session, the Council would be asked to identify short-term and long-term goals. Specifically, goals or projects they would like to address in the next one to two years would be identified. This would determine what subject areas Council wants staff to focus their time on and could impact the current and future budgets. Council will be asked to identify the broad outcomes to be accomplished in the next 18 months to three-and-a-half years. These steps are an integral part of the budget process as shown on the next page. Page |2 14  Vision of the City (Why) Strategic Plan Goal #1 (What) Goal #2 (What) Key Initiatives Key Initiatives Action Plan (How) Action Plan (How) Financial Policies Services Services Funding Funding Personnel Personnel Commodities Commodities Contractual Services Contractual Services Capital Capital Tools Tools 2. Action Plan – Services (How). The Council’s Vision for the City and Goals are put into action through the services the City provides. The City of Austin, Texas produces a Budget Basics video that provides a great overview of current services they provide. The video serves as a model for DeKalb to use in producing its own Budget Basics video for release in March 2018. The video will be shared with Council and citizens through various means such as a Budget Workshop meeting, the City’s social media, website, and GATV Channel 14. The link for the video is: (https://www.youtube.com/watch?v=ERqJEiZVeBk). Next, service level presentations will be held to delve deeper into the current service levels including potential challenges, opportunities to enhance services, and the tools needed to provide the services. Following is a listing of the service level presentations to be held between February and June. Only a few have tentative dates scheduled for the Council’s Committee of the Whole because of time sensitive information and/or decisions for Council on the direction the services. a. Capital Improvements Plan (CIP) (Public Works and Finance). Page |3 15  b. City Manager's Office Operations. c. Code Compliance and Property Maintenance (Community Development, Police, Legal, and Fire). d. Economic Development Efforts (Community Development and City Manager’s Office). e. Finance Services. f. Fire Operations. g. Human Resources Services. h. Information Technology Services – State of Technology scheduled for February 12, 2018, Committee of the Whole. i. Legal Services. j. Legislative Services. k. Parking Operations (Police, Public Works, and Finance). l. Public Works Operations. m. Recruiting (Human Resources and Public Safety Departments). n. Refuse and Recycling (Public Works and Finance) – Solid Waste Agreement presented on January 8, 2018, for the Committee of the Whole. o. Snow and Ice Removal – Presented January 8, 2018, for the Committee of the Whole. p. Social Services Funding. q. Tax Increment Financing (TIF) Funds – TIF Phase Out and New TIF Policy Direction scheduled for the January 22, 2018, for the Committee of the Whole. 3. Framework. The City Council adopts financial policies that establish the framework for the services provided. These are the financial policies that are currently adopted. a. The Budget Policy (01-01) outlines the high level steps that staff work within to provide the City Council a budget annually and steps to take to amend the current budget (Attachment A). Page |4 16  b. The Fund Balance Policy (01-02) defines fund balance as the net financial resources available to finance expenditures of future periods. The reserve policies are in place to avoid cash flow interruptions, generate investment income, and reduce the need for borrowing. The fund balance reserves identified within this policy are the minimum balances necessary to accomplish these objectives (Attachment B). c. Capital Equipment Replacement Fund (01-03) established the Capital Equipment Replacement Fund (CERF) to encourage departments to set aside funds each year for the eventual replacement of existing equipment and to avoid significant fluctuations in the operating budget from one year to the next. In order to build and maintain sufficient funds on hand to replace items at the end of their useful life, water tower rental income, revenue received from the E911 Board for OSSI payments will be dedicated annually as well as transfers by each department from the General Fund determined annually through the budget process. The remainder of this policy is intended to provide guidance as to how the CERF will operate (Attachment C). d. Revenue and Expenditure Policy (01-04) establishes a foundation for revenue diversification and principles for revenue establishment and practice, as well as expenditure expectations (Attachment D). e. Accounting, Auditing and Financial Reporting Policy (01-05) confirms the need for an annual audit and a Comprehensive Annual Financial Report, procurement of auditors, and outlines the financial reporting requirements for the City (Attachment E). f. Capital Asset Policy (01-06) defines what is considered a capital asset, funding for assets, and financial requirements for recording and reporting capital assets (Attachment F). g. Debt Management Policy (01-07) was established to help ensure the City’s credit worthiness and to provide a functional tool for debt management and capital planning (Attachment G). h. Investment Policy (01-08) is to invest public funds in a manner that will conform to state statute, maximize security, meet daily cash flow demands, and attempt to attain a market rate of return (Attachment H). The City’s financial policies will be a topic during the Budget Workshop meetings to discuss the current policies and to determine if revisions are needed. The financial policies discussion would begin at the April meeting of the FAC. City Council would review the policies at the May Budget Workshop along with the FAC recommendations. Page |5 17 4. Financials. In June, a mid-year Budget review by FAC would be conducted with revenue and expenditure projections for the General and Water Funds, which are the City’s largest operating funds for the FY2018 Budget. Also, at this meeting, the updated Five-Year Financial Plan (Plan) will be presented for review. The Plan will include the revisions FAC recommended in January 2018, the most recent FY2018 financials, any Council-directed service changes, and updated projections for FY2019 through FY2023. The City Council review will follow in July for those two items along with the FAC recommendations from their June review. Then, based on all the information City Council has reviewed and/or revised since January through to the Plan review, the outcome of the July meeting would establish the budget strategy for the FY2019 proposed budget development. The budget strategy will set the framework for City staff to begin the FY2019 Budget development. Staff will work from July through August on development through City Manager review. New this cycle will be a budget preview for City Council released in September that will focus on the changes from the FY2018 Budget to the FY2019 Budget at a line item level. Attachment I is an example that shows the Legislative (Elected Officials and Municipal Band) budget in detail from the FY2017 unaudited year-end to the FY2018 proposed budget. This Budget Preview will cover all departments and funds for review. The FAC will have a review of the Budget Preview prior to City Council. City Council will then review the Budget Preview and FAC’s recommendations related to the preview. In October, a follow-up meeting on the Budget Preview will occur to discuss any needed revisions. The feedback from City Council at these meetings will then be incorporated into the proposed budget document. The proposed budget document would be released for review in late October/early November depending on the level of revisions needed from the Budget Preview reviews. The City Council and FAC would then hold a joint meeting in early November on the proposed budget document. From there, any needed revisions will be made. Then, the public hearing and first reading of the proposed budget would be on November 26, 2018. Second reading would be on December 10, 2018, for adoption. Since the property tax levy is a key revenue in the budget, the tax levy will be part of the Budget Workshop meetings. First, the Comprehensive Annual Financial Report (CAFR) and Police and Fire Pensions actuarial reports will be reviewed in August. The CAFR provides the final FY2017 financial information and will note any deficiencies found, if any. The Police and Fire Pensions actuarial reports will set the minimum funding levels for these pensions that the City is obligated to fund in the FY2019 Budget. At the same meetings for the Budget Preview, the 2018 property tax levy will be reviewed and will include the actuarial information previously reviewed in August. The discussion on the property tax levy will establish how the estimated 2018 levy will be presented at the November 12, 2018, Regular Council meeting. The estimated levy where City Council sets the ceiling for the tax levy and will determine if Truth in Taxation requirements apply. The 2018 property tax levy public hearing will be at the Committee of the Whole on Page |6 18 November 26, 2018, with the first reading on the Regular City Council meeting. The second reading for adoption would be on December 10, 2018. 5. Schedule. Below is the schedule of events that incorporates the above steps of the budget process. The schedule can be altered to address any revisions City Council has to the FY2019 budget process. Also, the location of the meetings and start times may vary and will be finalized closer to the meeting date. Date Who Meeting Topic January 8, 2018 City Council Fiscal Year 2019 Budget Schedule & Service Level Reviews – Snow and Ice Removal Plan & Refuse, Recyclables, and Yard Waste Contract Update January 22, 2018 City Council Service Level Review – Human Services Funding Report & Tax Increment Financing Policy Direction January 24, 2018 City Council Strategic Plan and Goal Setting Session February 12, 2018 City Council Service Level Review – State of Technology February 20, 2018 City Council Budget Workshop – Service Level Reviews February 26, 2016 City Council Fiscal Year 2017 Strategic Plan Update February 27, 2018 Finance Advisory Committee Five-Year Financial Plan Review continued (if needed) & Begin Financial Policies Review March 5, 2018 Staff Budget Basics Video Release March 20, 2018 City Council Budget Workshop – Service Level Reviews March 27, 2017 Finance Advisory Committee Financial Policies Review continued April 17, 2018 City Council Budget Workshop – Service Level Reviews April 24, 2018 Finance Advisory Committee Financial Policies Review continued April 2018 (end of Actuary Police and Fire Pension Funds month) Actuarial Reports Final May 15, 2018 Finance Advisory Committee Financial Policies Review continued (if needed) Page |7 19 Date Who Meeting Topic May 22, 2018 City Council Budget Workshop – Service Level Reviews & Financial Policies Review June 19, 2018 City Council Budget Workshop – Service Level Reviews & Financial Policies Review June 26, 2018 Finance Advisory Committee Fiscal year 2018 Year-to-Date Budget Update & Five-Year Financial Plan Review July 10, 2018 City Council Budget Workshop – Financial Policies Review continued, Fiscal year 2018 Year-to-Date Budget Update & Five-Year Financial Plan Review to set Budget Strategy July 10, 2018 Staff Fiscal Year 2019 Budget Development Begins August 7, 2018 Finance Advisory Committee Audit & Actuarial Reports Review August 21, 2018 City Council Budget Workshop – Audit & Actuarial Reports Review September 11, 2018 Finance Advisory Committee Property Tax Levy & Fiscal Year 2019 Budget Preview Review September 18, 2018 City Council Budget Workshop – Property Tax Levy & Fiscal Year 2019 Budget Preview Review September 25, 2018 Finance Advisory Committee Budget Preview Review continued (if needed) October 16, 2018 City Council Budget Workshop – Property Tax Levy continued & Fiscal Year 2019 Budget Preview Review continued (if needed) October 23, 2018 Finance Advisory Committee Budget Preview Review continued (if needed) October 2018 (end DeKalb County Anticipated Receipt of the of month) Estimated Equalized Assessed Valuation Late October/Early Staff Release the Fiscal Year 2019 November Proposed Budget document November 6, 2018 City Council & Finance Joint Meeting to Review the Advisory Committee Fiscal Year 2019 Proposed Budget Page |8 20  Date Who Meeting Topic November 12, 2018 City Council Estimated 2018 Property Tax Levy Adoption (Determines if Truth in Taxation Notice is Required) November 26, 2018 City Council Committee of the Whole – Public Hearing for 2018 Property Tax Levy Regular Meeting – Public Hearing for the Fiscal Year 2019 Annual Budget, First Reading of the Annual Budget & First Reading of the 2018 Property Tax Levy December 10, 2018 City Council Second Reading of the Fiscal Year 2019 Annual Budget & Second Reading of the 2018 Property Tax Levy December 25, 2018 Staff Last Day to File the Annual Budget and 2018 Property Tax Levy with the County January 1, 2019 Fiscal Year 2019 Begins III. Community Groups/Interested Parties Contacted The FY2019 budget process will be open to the public and citizen input is welcome at the FAC and Council Budget Workshop meetings. IV. Options Since this is a new budget process, Council weighed in on the different aspects of the process as discussed throughout the Report at their January 8, 2018, Committee of the Whole meeting. It is important to remember the budget process is a fluid process. Revisions to the process can happen at any point within the process; meaning if a specific part of the process is not producing the intended results, shifting to a new way of obtaining the information can happen at that point. Page |9 21  Attachment A Budget Policy ______________________________________________________________________________ Policy Number: 01-01 Date: January 9, 2017 Purpose: The City Manager shall submit an annual budget to the City Council which is within the City’s ability to pay. The annual budget should provide for the following: 1. A meeting will be held with the Finance Advisory Committee after June 30 and before joint City Council budget discussions begin to discuss the previous year-end Comprehensive Annual Financial Report, review revenues trends and discuss any new policy recommendations. 2. Management shall prepare a draft of the annual budget for review by the City Council and the Finance Advisory Committee in October/November of each year. The recommended budget should be submitted to the City Council for review and a public hearing in November of each year. The final budget document shall be submitted to the full membership for approval prior to December 31 of each year. 3. The annual budget should effectively communicate meaningful and understandable information to the City residents, City Council, City Staff, and other readers. 4. The annual budget shall be monitored on a monthly basis. Revenue and expenditure budget reports shall be prepared and made available to City management staff for departmental review on a monthly basis. A quarterly budget summary report (Treasurer’s Report) shall be presented to the City Council. 5. The annual budget should allow for the implementation of as many of the City Council’s goals and objectives from the 2025 strategic plan as financially possible. 6. The annual budget should provide for the adequate funding of all pension plans (IMRF, Police Pension Fund, and Firefighters Pension Fund). An independent actuary should be used to determine the annual City contributions to the Police Pension Fund and the Firefighters Pension Fund and determine if these pension funds are adequately funded. 7. The annual budget should provide funding for the adequate maintenance of municipal equipment, municipal facilities, and infrastructure. City of DeKalb 22  Attachment A 8. The annual budget should set aside-adequate funding (pay-as-you-go funding) for the replacement of major equipment. Annual funding (depreciation funding) for these replacements will eliminate major expenditure jumps in the annual budget when these acquisitions are made. 9. During the budget process, the City will assess the need for contingency funds to be included in the budget to fund unanticipated expenditures that might arise. 10. The annual budget should finance current operating expenditures, excluding major capital expenditures, with current revenues. The use of reserve funds to finance current operating expenditures should be carefully considered and avoided if possible. 11. The City should limit the use of the reserve fund to nonrecurring operating expenditures or capital expenditures, specifically if our anticipated fund balance is below our Fund Balance Reserve Policy of 25%. 12. When the City is required to undertake a budget amendment and/or execute expenditure transfers to ensure that actual expenditures are within approved budgetary limits as authorized by City Council the following procedures will be followed. Administration of these procedures will be the responsibility of the City’s Finance Director and the Finance Director will sign off that these procedures have been adhered to for any budget amendments and/or expenditure transfers undertaken by the City. Those procedures are as follows: a. Upon knowledge that a budget amendment and/or expenditure transfer will be required, the City’s Finance Director will inform both the Finance Committee and the City Council. b. Documents will be drafted by the Finance Director with the reason for the required budget amendment and/or expenditure transfer, including the specific accounts affected and the dollar amounts of said amendments and/or expenditure transfers. c. Formal City Council review and approval of proposed budget amendments and/or expenditure transfers will be required before any amendments and/or transfers are executed by the Finance Director. City of DeKalb 23  Attachment B Fund Balance Policy ______________________________________________________________________________ Policy Number: 01-02 Date: January 9, 2017 Purpose: Fund balance measures the net financial resources available to finance expenditures of future periods. Fund balance reserve policies are established to avoid cash flow interruptions, generate investment income, and reduce the need for borrowing. The fund balance reserves identified within this policy are the minimum balances necessary to accomplish these objectives. While keeping in mind the uneven nature of the City’s cash flows, should the projected ending fiscal year fund balance fall below the desired percentage or amount, the City should create a plan to restore the appropriate levels. Part II – Governmental Funds This section only applies to fund balances reported in the General Fund, Special Revenue Funds, Debt Service Funds, Capital Projects Funds, and Permanent Funds. 1. Definitions The five fund balance classifications outlined in GASB Statement 54 follows: Nonspendable Fund Balance: This classification includes amounts that cannot be spent because they are either (a) not in spendable form or (b) legally or contractually required to be maintained intact. This would include items not expected to be converted to cash including inventories and prepaid amounts. It may also include the long-term amount of loans and receivables, as well as property acquired for resale and the corpus (principal) of a permanent fund. Restricted Fund Balance: This classification should be reported when constraints placed on the use of resources are either (a) externally imposed by creditors, grantors, contributors, or laws or regulations of other governments or (b) imposed by law through constitutional provisions or enabling legislation. Committed Fund Balance: This classification reflects specific purposes pursuant to constraints imposed by formal action of the district’s highest level of decision-making authority (generally the governing board). Also, such constraints can only be removed or changed by the same form of formal action. Assigned Fund Balance: This classification reflects amounts that are constrained by the government’s intent to be used for specific purposes, but meet neither the restricted nor committed forms of constraint. City of DeKalb 24  Attachment B Unassigned Fund Balance: This classification is the residual classification for the general fund only. It is also where negative residual amounts for all other governmental funds would be reported. 2. Fund Balance Commitments & Assignments Committed fund balance for a specific use must be taken by formal action of the City Council. Amendments or modifications of the committed fund balance must also be approved by formal action of the City Council. In order to be recognized in the annual Audit Report, commitments of fund balance must be enacted prior to the end of that Report’s particular fiscal year. Assigned Fund Balance is intended for specific purposes not imposed by external parties or City Council’s formal action. The City Council authorizes the City Manager and/or his/her designee(s) to assign fund balance. Such assignments cannot exceed the available (spendable, unrestricted, uncommitted) fund balance in any particular Fund. 3. Reserves General Fund: Unassigned fund balance will be maintained at a minimum level equal to 25% of annual expenditures. The City’s unassigned General Fund balance will be maintained to provide the municipality with sufficient working capital and a margin of safety to address emergencies without borrowing. TIF Funds: The City currently has two budgeted TIF Funds (the Central Area TIF and TIF II). These Funds should be self-supporting and should maintain a fund balance equivalent to meet the planned improvements identified in a multi-year capital schedule(s). Capital Projects Fund: This Fund is used for resources accumulated and used in right of way improvements such as street repair, street reconstruction, and curb and gutter replacement. Costs associated with this Fund must not be State MFT eligible and must cost over $5,000 and have a useful life of at least three years. The funding source for this Fund will be the local home rule motor fuel tax. The Capital Projects Fund should work toward establishing a fund balance at a minimum dollar amount to meet the planned improvements identified in a multi-year capital replacement schedule(s). Special Revenue Funds: These Funds are used to account and report the proceeds of specific revenue sources which are restricted or committed toward expenditures for specific purposes other than debt service or capital projects. In general, all these Funds should maintain the least fund balance necessary to cover current fiscal year expenditures, plus an amount to pay for those expenditures of the subsequent fiscal year needed to avoid a cash deficit position. City of DeKalb 25  Attachment B 4. Fund Balance Classification Fund balance classifications depict the nature of the net resources that are reported in a governmental fund type. An individual governmental fund may include nonspendable resources and amounts that are restricted, committed, or assigned, or any combination of those classifications. The General Fund may also include an unassigned amount. 5. Prioritization of Fund Balance Use When an expenditure is incurred for a purpose which can be paid from multiple fund balance classifications, the City will spend the most restricted dollars before less restricted, in the following order:  Nonspendable (if funds become spendable)  Restricted  Committed  Assigned  Unassigned Part III – Enterprise, Internal Service, & Fiduciary Funds This section applies to Funds outside the scope of GASB 54. 1. Definitions Restricted Net Assets: The component of net assets restricted by external parties, constitutional restrictions, and enabling legislation. Net Assets Invested in Capital Assets, Net of Related Debt: A component of net assets calculated by reducing capital assets by accumulated depreciation and the principal portion of related debt. Unrestricted Net Assets: The portion of net assets that is neither restricted nor invested in capital assets net of related debt. 2. Reserves Water Operating Fund: The unrestricted net assets of the Water Fund will be maintained at a minimum level equal to 25% of the annual budgeted operational expenses. Net position above 25% will be transferred annually to the Water Capital Fund for use in funding the Water Capital plan. Water New Construction Fund: This revenue is from impact fees and is restricted for any new water main infrastructure in the City of DeKalb. Water Capital Projects Fund: This fund will be used to account for all capital revenues and expenditures to Water Capital as approved by City Council in the annual budget. Capital projects include existing water infrastructure for water mains, wells, treatment plants, pumping systems and water towers. Additionally, Water Division equipment and City of DeKalb 26  Attachment B fleet that exceed $10,000 with a useful life exceeding one year would be accounted for through this fund and be subject to the same annual budget approval by Council. Airport Fund: The unrestricted net assets of the Airport Fund will be maintained at a minimum level equal to 25% of annual budgeted operational expenses, plus the budgeted capital improvements for the current fiscal year. Other Specified Funds: The Health Insurance Fund should maintain unrestricted net assets of one month of IPBC premium. Any amount above this threshold may be transferred to the Workers’ Compensation Fund or Liability/Property Insurance Fund to be used toward claims, eliminate potential deficits, or maintain net asset policy in these other Funds. The Workers’ Compensation Fund should maintain unrestricted net assets of $1,000,000 collectively (or 1 year premium for reinsurance plus the average annual retention costs associated with that premium). The Liability/Property Insurance Fund should maintain unrestricted net assets approximately equivalent to 25% of annual budgeted expenses. Part IV – Other 1. Cash Deficits Should any Fund incur a cash deficit by the end of the fiscal year, an interfund loan will be created with a Fund or Fund(s) which have a cash surplus (unless restricted by statute or Fund Balance policy). 2. Reporting Year to date revenues and expenditures for the General Fund will be issued to the City Council by their second regular meeting of each month. On a quarterly basis, the City Council shall receive an update on the General Fund with a year-end forecast for the fiscal year and also receive a summary of major fund balances. TIF Funds will be reported in greater detail to Council by the end of March and by the end of September of each year. The City Council shall receive an update on Workers’ Compensation claims through December 31 by the end of March and claims through June 30 by the end of September of each year. City of DeKalb 27  Attachment B A semi-annual report on economic development incentives will be reported to Council by the end of March and by the end of September of each year. An update on retiree insurance costs will be reported annually by the end of March of each year. City of DeKalb 28  Attachment C Capital Equipment Replacement Fund ______________________________________________________________________________ Policy Number: 01-03 Date: January 9, 2017 Purpose: The City of DeKalb has established the Capital Equipment Replacement Fund (CERF) to encourage departments to set aside funds each year for the eventual replacement of existing equipment and to avoid significant fluctuations in the operating budget from one year to the next. In order to build and maintain sufficient funds on hand to replace items at the end of their useful life, water tower rental income, revenue received from the E911 Board for OSSI payments will be dedicated annually as well as, transfers by each department from the General Fund determined annually through the budget process. The remainder of this policy is intended to provide guidance as to how the CERF will operate. The Capital Equipment Replacement Fund shall be used only to replace existing equipment owned by the City. The fund shall not be used to purchase equipment not currently owned by the City or as a means to circumvent the process for having new equipment approved by the City Council. Requests for new equipment shall be made as part of the annual operating budget and must be approved by the City Council before acquisition; Only those items which individually have a replacement cost of more than $10,000 or groups of similar equipment (e.g. personal computers, bullet proof vests, etc.) which, in the aggregate, exceed $10,000 with a useful life of more than one year shall be included in the CERF. Departments shall include individual items or groups of items with a value of less than $10,000 in their annual operating budget. The cost of items associated with new vehicles such as vehicle markings, light bars, radios and similar equipment shall be included in the replacement cost of the vehicle. The replacement cost and useful life for each vehicle or technology related equipment will be re- evaluated by the individual departments on an annual basis. This re-evaluation may change the annual amounts that programs contribute for the replacement of each item. The Department Head, in consultation with the City Manager and the Finance Director shall determine when a vehicle or equipment is due for replacement. Final capital asset replacement decisions using CERF monies will be discussed and approved by the City Council as part of the annual budget process. City of DeKalb 29  Attachment C When CERF equipment is sold, the proceeds of the sale shall be credited to the CERF Fund. From time to time, departments may be assigned previously used technology related equipment from within their department or another department in the City. The Director of Information Technology, in consultation with the Department Head, shall recommend that such equipment be assigned to a department when it meets the department’s needs and when doing so will help avoid the expense of purchasing new equipment. Consideration shall be given to the annual operating cost of maintaining the used equipment when deciding whether or not to continue using it. The City Manager shall have the final say in determining whether or not previously used technology is assigned to a department. City of DeKalb 30  Attachment D Revenue and Expenditure Policy ______________________________________________________________________________ Policy Number: 01-04 Date: January 9, 2017 Purpose: Revenues The City desires to maintain a diversified and stable revenue base to reduce the impacts of fluctuations in any one revenue source. The revenue mix combines elastic and inelastic revenue sources to minimize the effects of an economic downturn. The City also incorporates the following principles related to revenues as it furthers its financial planning and fulfills its fiscal responsibilities: 1. The City prefers to keep its property tax rate as low as possible. The following components shall be followed in priority order each year when establishing the property tax levy: a. Levy for Police, Fire and IMRF pensions per actuary calculations. If the actuarial reports indicated a higher employer contribution is needed, said increase will need to be added to the City’s overall previous year levy request to avoid underfunding problems. b. Levy for FICA. c. Levy for general obligation bond principal and interest less abatements. d. Levy to support General Fund operations including Police, Fire, Public Works, Community Development, Finance, Human Resources, I.T. and Administration. The annual increase for this component should not exceed the rate of inflation. e. Levy to fund additional personnel as determined by the City Council. 2. User charges and tap-on fees will be sufficient to finance all operating and debt service costs for the Water Fund. 3. The City Manager should impose spending limits if, in his/her judgment, revenues will be below original estimates. Staff should review and monitor on City of DeKalb 31  Attachment D a monthly basis expenditures to assure control of spending within available revenues. 4. Ongoing transfers will be made from the General Fund to the Fleet Replacement fund on an annual basis to help plan for the purchasing of large capital equipment needs. Expenditures The City will strive to adhere to the following policies: 1. The City will consistently budget the minimum level of expenditures which will provide for the public well-being and safety of the residents and businesses of the community. 2. Expenditures will be within the confines of generated revenue. Fund balances will not be used to pay for operating expenditures except in the case of emergencies and after careful consideration. City of DeKalb 32  Attachment E Accounting, Auditing and Financial Reporting Policy ______________________________________________________________________________ Policy Number: 01-05 Date: January 9, 2017 Purpose: The City shall have an annual audit conducted on its financial records by a qualified, independent public accounting firm. The City should request proposals from qualified independent accounting firms to conduct an annual audit of its financial statements every five to six yearsby the use of a request for proposal (RFP) process. In accordance with Government Finance Officers Association’s (GFOA’s) Best Practice Guidelines, the current auditors can be included in the RFP process, however, it is recommended changing the audit team if the same firm came in with the best proposal. The audit shall be conducted on an annual basis to be completed and filed within six months after the end of each fiscal year. The City should submit its Comprehensive Annual Financial Report (CAFR) to the Government Finance Officers Association’s (GFOA) Certificate of Achievement for Excellence in Financial Reporting Program. The City’s financial statements shall be prepared according to generally-accepted accounting principles (GAAP) as promulgated by the Governmental Accounting Standards Council (GASB). The City should contract with an independent actuary to determine the City’s annual contribution to the Police and Fire Pension Funds. When the City prepares monthly significant account reconciliations, prepares the year-end adjustments, and prepares the year-end financial statements, the following procedures will be followed. Administration of these procedures will be the responsibility of the City’s Finance Director and the Finance Director will sign off that these procedures have been adhered to on a monthly and year-end basis. Those procedures are as follows: The Finance Department, under approval of the Finance Director, will prepare a listing of all significant accounts of the City that are to be reconciled on a monthly basis. These accounts are to include at a minimum all balance sheet accounts at month-end, all grant related revenue and expense accounts, all restricted use revenue accounts and all other accounts deemed necessary by the Finance Department to be reviewed on a monthly basis. A monthly checklist of these accounts will be prepared and signed off by the Finance Director. City of DeKalb 33  Attachment E Within 90 days after the close of the fiscal year the Finance Department will be required to submit to the Finance Director all required year-end close adjustments. These adjustments are to be approved and reviewed by the Finance Director and posted to the general ledger prior to the auditors beginning audit fieldwork. The City’s auditors assist in the preparation of the City’s financial statements, including the footnote disclosures, in accordance with generally accepted accounting principles. Further, the City will review a complete initial draft and final draft of the financial statements as prepared by the auditors. The City Finance Director will be responsible for a final complete review of the financial statements, including the footnotes disclosures, to ensure that the financial statements are prepared in accordance with generally accepted accounting principles. Any questions or concerns related to the financial statements will be discussed with the City’s auditors. The City’s Comprehensive Annual Financial Report and Management Letter will be approved by the City Council and available for distribution no later than six months after the close of the City’s fiscal year-end. City of DeKalb 34  Attachment F Capital Asset Policy ______________________________________________________________________________ Policy Number: 01-06 Date: January 9, 2017 Purpose: Capital assets purchased or acquired with an original cost of $25,000 or more are reported at historical cost or estimated historical cost. Contributed assets are reported at fair market value as of the date received. Additions, improvements and other capital outlays that significantly extend the useful life of an asset are capitalized. Other costs incurred for repairs and maintenance are expensed as incurred. The accounting and financial reporting treatment applied to a fund is determined by its measurement focus. General capital assets are long-lived assets of the City as a whole. Infrastructure such as streets, traffic signals and signs are capitalized. In the case of the initial capitalization of general infrastructure assets (i.e., those reported by the governmental activities) the government chose to include all such items regardless of their acquisition date. The valuation basis for general capital assets are historical cost, or where historical cost is not available, estimated historical cost based on replacement costs. Capital assets in the proprietary funds are capitalized in the fund in which they are utilized. The valuation bases for proprietary fund capital assets are the same as those used for the general capital assets. Donated capital assets are capitalized at estimated fair market value on the date donated. Depreciation on all assets is computed and recorded using the straight-line method of depreciation over the following estimated useful lives: Buildings and Building Improvements 40 to 50 Years Equipment 10 to 20 Years Vehicles 3 to 20 Years Infrastructure 25 to 50 Years Water Distribution System 40 to 65 Years When capital assets are purchased with the use of federal funds the following procedures will be completed by the City. Administration of these procedures will be the responsibility of the City’s Finance Director and the Finance Director will sign off that these procedures have been adhered to for the purchase of every federal funded capital asset. Those procedures are as follows: Capital assets purchased with federal funds will be tagged with a special notation of “F” in addition to the regular identification number system used by the City. City of DeKalb 35  Attachment F The description of the capital asset in the City’s capital asset records will also include the words “federally funded” before the description of the specific asset acquired. The source of federal funds must be noted and include a description of who holds title to the assets, along with the asset acquisition date, the asset cost, location of the asset, condition and use/purpose of the asset. The portion of the asset that is federally funded must also be noted in the City’s capital asset records. Upon disposition of any federally acquired assets, the City must note in the capital asset records the disposition date and sale price. A physical inventory of all assets acquired with federal funds will be performed on a biennial basis. The results of the City’s inventory of federally funded capital assets will be reconciled to the City’s capital asset records to ensure accuracy. This inventory will be overseen and approved by the City’s Finance Director. City of DeKalb 36  Attachment G Debt Management Policy ______________________________________________________________________________ Policy Number: 01-07 Date: January 9, 2017 Purpose: The City of DeKalb developed this Debt Management Policy to help ensure the City’s credit worthiness and to provide a functional tool for debt management and capital planning. The City of DeKalb faces continuing capital infrastructure requirements to meet the increasing needs of its citizens. The City limits long-term debt to only those capital improvements that cannot be financed from current revenues. The City of DeKalb will not use long-term debt to fund operating programs. The costs of the capital requirements will be met through the issuance of various types of debt instruments. Consequently, the City needs to anticipate increases in debt levels based upon historical data. With these increases, the effects of decisions regarding the type of issue, method of sale, and payment structure become ever more critical to the City's financial well-being. To help ensure the City's credit worthiness, an established program of managing the City's debt becomes essential. To this end, the City Council recognizes this "Debt Management Policy" to be financially prudent and in the City's best economic interest. This policy will provide a functional tool for debt management and capital planning, and enhance the City's reputation for managing its debt in a conservative and prudent manner. Goals Related to the Issuance of General Obligation and Revenue Bond Debt: The City shall pursue the following goals below when issuing debt. Though the City may not have achieved all these goals as of yet, these are long term objectives for which we must continue to strive toward. 1. Maintain at least an Aa3 (Moody’s) or equivalent credit rating for each general obligation debt issue. 2. Take all practical precautions to avoid any financial decision which will negatively impact current credit ratings on existing or future debt issues. 3. The City should attain a General Fund unassigned balance equal to a minimum of twenty five percent (25%) of total annual expenditures. 4. Consider market timing. City of DeKalb 37  Attachment G 5. Determine the amortization (maturity) schedule which will best fit with the overall debt structure of the City’s general obligation debt and related tax levy at the time the new debt is issued. The City may choose to delay principal payments or capitalized interest during project construction. For issuance of revenue bonds, the amortization schedule which will best fit with the overall debt structure of the fund and its related rate structure will be considered. Consideration will be given to coordinating the length of the issue with the lives of assets, whenever practicable, while considering repair and replacement costs of those assets to be incurred in future years as an offset to the useful lives, and the related length of time in the payout structure. 6. Consider the impact of such new debt on overlapping debt and the financing plans of local governments which overlap, or underlie the City. 7. Assess financial alternatives to include new and innovative financing approaches, including whenever feasible, categorical grants, revolving loans or other state/federal aid. 8. Minimize debt interest costs. Debt Issuance in General: 1. Authority and Purposes of the Issuance of Debt The laws of the State of Illinois authorize the issuance of debt by the City. The Local Bond Law confers upon municipalities the power and authority to contract debt, borrow money, and issue bonds for public improvement projects as defined therein. Under these provisions, the City may contract debt to pay for the cost of acquiring, constructing, reconstructing, improving, extending, enlarging, and equipping such projects or to refund bonds. The City Charter authorizes the City Council to incur debt by issuing bonds for any lawful municipal purpose as authorized by the State Constitution or its Home Rule Powers. 2. Short-Term Debt (three years or less) The City may issue short-term debt to finance projects or portions of projects for which the City ultimately intends to issue long-term debt. This will be used to provide interim financing which will eventually be refunded with proceeds of long-term obligations, which may include, but not be limited to, bond anticipation notes or variable rate demand notes. The City will have an estimated timeframe when any short-term debt issue will eventually be converted into long-term debt. City of DeKalb 38  Attachment G a. Line of Credit The City may also issue debt instruments to meet cash flow requirements. With the approval of the City Council, the City may establish a tax-exempt line of credit with a financial institution selected through a competitive process. This line should have a limit of $2,500,000. Draws should be made on the line of credit when the need for financing is needed to meet operating expenditures on a temporary basis. Draws made on the line of credit must be requested by the Finance Director and approved by the City Manager and the City Council. 3. Long-Term Debt (more than three years) The City may issue long-term debt which may include, but not limited to, general obligation bonds, certificates of participation, capital appreciation bonds, special assessment bonds, self-liquidating bonds and double barreled bonds. Level or declining debt service should be employed unless operational matters dictate otherwise, or except to achieve overall level debt service with existing bonds. The City shall be mindful of the potential benefits of bank qualification and will strive to limit its annual issuance of debt to $10 million or less when such estimated benefits are greater than the benefits of exceeding the bank qualification limit. Should subsequent changes in the law raise this limit, then the City policy will be adjusted accordingly. The cost of issuance of private activity bonds is usually higher than for governmental purpose bonds. Consequently, private activity bonds will be issued only when they will economically benefit the City. The cost of taxable debt is higher than for tax-exempt debt. However, the issuance of taxable debt is mandated in some circumstances and may allow valuable flexibility in subsequent contracts with users or managers of the improvement constructed with the bond proceeds. In addition, there may be circumstances in which the issuance of taxable debt may be more cost effective than the issuance of tax-exempt debt. Therefore, the City will usually issue obligations tax exempt, but may occasionally issue taxable obligations. a. Capital Leasing The City may also enter into long-term leases for public facilities, property, and equipment with a useful life greater than one year that costs less than $500,000. The City should be limited to issuing a capital lease of no more than $1,000,000 in a fiscal year. City of DeKalb 39  Attachment G Whenever a lease is arranged with a private sector entity, a tax-exempt rate should be sought. Whenever a lease is arranged with a government or other tax-exempt entity, the City should strive to obtain an explicitly defined taxable rate so that the lease will not be counted in the City’s total annual borrowing subject to arbitrage rebate. The lease agreement should permit the City to refinance the lease at no more than reasonable cost should the City decide to do so. A lease which can be called at will is preferable to one which can merely be accelerated. 4. Capital Improvement Program The Capital Improvement Program (CIP), approved by the City Council as part of the annual budget, should determine the City's capital needs. The program should be a five- year plan for the acquisition, development and/or improvement of the City's infrastructure. Projects included in the CIP should be prioritized; and the means for financing each should be identified. If the current resources are insufficient to meet the needs identified in the CIP, the City Council may consider incurring debt to fund the shortfall. The City Council may also consider incurring debt to fund multiple years of the Capital Improvement Program. The CIP should be revised and supplemented each year to maintain and test compliance with the City's Debt Management Policy Financial Policy #01-07. 5. Structure of Debt Issues The duration of a debt issue should not remain outstanding beyond the asset’s useful life. Each new bond issue should be structured to be callable in 10 years. The City should design the financing schedule and repayment of debt so as to take best advantage of market conditions and, as practical, to recapture or maximize its credit capacity for future use, and moderate the impact to the taxpayer. In keeping with the stated goals of this debt management policy, the City should structure each general obligation issue (except refunding and mini-bond issues) to comply with the rapidity of debt repayment provisions in Section III. E-4 following. 6. Credit Enhancements Credit enhancements are mechanisms which guarantee principal and interest payments. Typically they include bond insurance and/or a line or letter of credit. Usually this will bring a lower interest rate and a higher rating from the rating agencies, thus lowering costs. City of DeKalb 40  Attachment G The City may enter into agreements with commercial banks or other financial entities for the purpose of acquiring credit enhancements when their use is judged cost effective or otherwise advantageous. Any such agreements shall be approved by the City Council. 7. Inclusion of Local Institutions Whenever practical and in the best interest of promoting the City of DeKalb, local financial institutions are to be offered the opportunity to bid on debt instruments. Legal Constraints and Other Limitations on the Issuance of Debt 1. State Law 30 ILCS 305/0.01, et. seq.: the short title is "The Bond Authorization Act." 2. Authority for Debt The City may, by bond ordinance, incur indebtedness or borrow money, and authorize the issue of negotiable obligations, including refunding bonds, for any capital improvement of property, land acquisition, or any other lawful purpose with approval by the City Council. 3. Debt Limitation The City of DeKalb is a home rule community. As such, the debt limitations of the bond laws are not applicable because the General Assembly has set no limits for home rule municipalities. 4. Methods of Sale When feasible and economical, obligations should be issued by competitive rather than negotiated sale. A sale may be negotiated when the issue is predominantly a refunding issue or in other non-routine situations which require more flexibility than a competitive offer allows. Whenever the option exists to offer an issue either for competition or for negotiation, analysis of the options should be performed to aid in the decision-making process. When a sale is not competitively bid, the City will publicly present the reasons and select the underwriter or direct purchaser. If a Financial Advisor is hired to assist the City in bond issuance, the Financial Advisor will not underwrite any debt issues on which it is advising. The criteria used to select an underwriter in a competitive sale should be the true interest cost. In a negotiated sale, the underwriter may be selected with or without a request for proposals (RFP). The criteria used to select an underwriter in a negotiated sale should include the following: City of DeKalb 41  Attachment G  Overall experience  Marketing philosophy  Capability  Previous experience as managing a co-managing partner  Financial statements  Public Finance team and resources  Underwriter’s discount When cost/beneficial, the City may privately place its debt. Since no underwriter participates in a private placement, it may result in lower costs of issuance. Private placement is sometimes an option for small issues. 5. Credit Implications When issuing new debt, the City should strive not to exceed credit industry benchmarks where applicable. Therefore, the following factors should be considered in developing debt issuance plans: a. Ratio of Gross Bonded Debt to Full Market Value of Taxable Property The formula for this computation is Gross Bonded Debt, which is the total outstanding debt, divided by the current Full Market Value of Taxable Property as determined by the Township Assessors. The City should not exceed 2% of Gross Bonded Debt per Full Market Value of Taxable Property. b. Gross Bonded Debt Per Capita The formula for this computation is Gross Bonded Debt divided by the current population as determined by the most recent U.S. Census. The City should not exceed $1,200 for Gross Bonded Debt per capita. c. Ratio of Annual Debt Service to General Fund Expenditures The formula for this computation is annual debt service expenditures divided by General Fund expenditures (excluding certain interfund transfers). The City should not exceed 10% of General Fund expenditures for annual debt service. d. Rapidity of Debt Service Repayment The City's general obligation bond issues should be so structured whereby the duration of the debt should not exceed 120% of the life of the asset. e. Current Fund Balance General Fund Cash Reserve The City should maintain a General Fund unassigned balance equal to a minimum of twenty five percent (25%) of total annual appropriations, exclusive of interfund transfers. Such calculation, including a projection to City of DeKalb 42  Attachment G June 30th (of the current fiscal year), should be made on an annual basis by the Finance Director (or designee) during the budget process. Debt Administration 1. Financial Disclosures The City shall prepare appropriate disclosures as required by the Securities and Exchange Commission, the federal government, the State of Illinois, rating agencies, underwriters, investors, agencies, taxpayers, and other appropriate entities and persons to ensure compliance with applicable laws and regulations. 2. Review of Financing Proposals All capital financing proposals that involve a pledge of the City's credit through the sale of securities, execution of loans or lease agreements and/or otherwise directly involve the lending or pledging of the City's credit shall be referred to the Finance Director who shall determine the financial feasibility, and the impact on existing debt of such proposal, and shall make recommendations accordingly to the City Manager. 3. Establishing Financing Priorities The Finance Director shall administer and coordinate the City's debt issuance program and activities, including timing of issuance, method of sale, structuring the issue, and marketing strategies. The Finance Director along with the City's bond consultants shall meet, as appropriate, with the City Manager and the City Council regarding the status of the current year's program and to make specific recommendations. 4. Credit Rating The City should endeavor to maintain and/or to improve its credit rating and staff will specifically discuss with the City Council any proposal which might cause that rating to be lowered. Before a general obligation bond is issued, the City will update its rating from at least one national rating agency. The City Manager, Finance Director, and the City's bond consultants should meet with a rating agency to disclose the City's capital plans, debt issuance program, and other appropriate financial information as required by the rating agency. 5. Refunding Policy The City should consider refunding outstanding debt when legally permissible and financially advantageous. When refunding for savings purposes, a net present value City of DeKalb 43  Attachment G debt service savings of at least two percent or greater must be achieved. Depending on the time to maturity and the absolute level of interest rates of the refunding candidate this target may change. For longer maturities the target can be higher, for shorter maturities, lower. For higher interest rates the target may be higher, for lower rates it could be lower. There may be circumstances where the City may refund bonds for restructuring purposes that may not generate any savings. 6. Investment of Borrowed Proceeds The City acknowledges its ongoing fiduciary responsibilities to actively manage the proceeds of debt issued for public purposes in a manner that is consistent with Illinois statutes that govern the investment of public funds, and consistent with the permitted securities covenants of related bond documents executed by the City. The management of public funds should enable the City to respond to changes in markets or changes in payment or construction schedules so as to (i) optimize returns, (ii) insure liquidity, and (iii) minimize risk. The City will invest bond proceeds in accordance with the City’s investment policy and federal arbitrage requirements. Glossary of Terms: Ad Valorem Tax - A direct tax based "according to value" of property. Advanced Refunding Bonds - Bonds issued to refund an outstanding bond issue prior to the date on which the outstanding bonds become due or callable. Proceeds of the advanced refunding bonds are deposited in escrow with a fiduciary, invested in United States Treasury Bonds or other authorized securities, and used to redeem the underlying bonds at maturity or call date. Amortization - the process of paying the principal amount of an issue of bonds by periodic payments either directly to bondholders or to a sinking fund for the benefit of bondholders. Arbitrage - Usually refers to the difference between the interest paid on the tax-exempt securities and the interest earned by investing the proceeds in higher yielding taxable securities. Internal Revenue Service regulations govern arbitrage (reference I.R.S. Reg. 1.103-13 through 1.103-15). Arbitrage Bonds - Bonds which are deemed by the I.R.S. to violate federal arbitrage regulations. The interest on such bonds becomes taxable and the bondholders must include this interest as part of gross income for federal income tax purposes (I.R.S. Reg. 1.103-13 through 1.103-15). Assessed Value - An annual determination of the just or fair market value of property for purposes of ad valorem taxation. Basis Point - 1/100 of one percent. City of DeKalb 44  Attachment G Bond - Written evidence of the issuer's obligation to repay a specified principal amount on a date certain, together with interest at a stated rate, or according to a formula for determining that rate. Bond Anticipation Notes (BANS) - Short-term interest bearing notes issued by a government in anticipation of bonds to be issued at a later date. The notes are retired from proceeds of the bond issue to which they are related. Bond Counsel - An attorney retained by the City to render a legal opinion whether the City is authorized to issue the proposed bonds, has met all legal requirements necessary for issuance, and whether interest on the bonds is, or is not, exempt from federal and state income taxation. Bonded Debt - The portion of an issuers total indebtedness represented by outstanding bonds. Direct Debt or Gross Bonded Debt - The sum of the total bonded debt and any unfunded debt of the issuer. Net Direct Debt or Net Bonded Debt - Direct debt less sinking fund accumulations and all self-supporting debt. Total Overall Debt - Net direct debt plus the issuer's applicable share of the direct debt of all overlapping jurisdictions. Net Overall Debt - Net direct debt plus the issuer's applicable share of the net direct debt of all overlapping jurisdictions. Overlapping Debt - The issuer's proportionate share of the debt of other local governmental units which either overlap or underlie it. Callable Bond - A bond which permits or requires the issuer to redeem the obligation before the stated maturity date at a specified price, the call price, usually at or above par value. Capital Appreciation Bonds (CAB) - A long-term security on which the investment return is reinvested at a stated compound rate until maturity. The investor receives a single payment at maturity representing both the principal and investment return. Certificates of Participation - Documents, in fully registered form, that act like bonds. However, security for the certificates is the government's intent to make annual appropriations during the term of a lease agreement. No pledge of full faith and credit of the government is made. Consequently, the obligation of the government to make basic rental payments does not constitute an indebtedness of the government. Commercial Paper - Very short-term, unsecured promissory notes issued in either registered or bearer form, and usually backed by a line of credit with a bank. City of DeKalb 45  Attachment G Coupon Rate - The annual rate of interest payable on a coupon bond (a bearer bond or bond registered as to principal only, carrying coupons evidencing future interest payments), expressed as a percentage of the principal amount. Debt Limit - The maximum amount of debt which an issuer is permitted in incur under constitutional, statutory or charter provision. Debt Service - The amount of money necessary to pay interest on an outstanding debt, the serial maturities of principal for serial bonds, and the required contributions to an amortization or sinking fund for term bonds. Demand Notes (Variable Rate) - A short-term security which is subject to a frequently available put option feature under which the holder may put the security back to the issuer after giving specified notice. Many of these securities are floating or variable rate, with the put option exercisable on dates on which the floating rate changes. Double Barreled Bonds (Combination Bonds) - A bond which is payable from the revenues of a governmental enterprise and are also backed by the full faith and credit of the governmental unit. Enterprise Funds - Funds that are financed and operated in a manner similar to private business in that goods and services provided are financed primarily through user charges. General Obligation Bond - A bond for whose payment the full faith and credit of the issuer has been pledged. More commonly, but not necessarily, general obligation bonds are payable from ad valorem property taxes and other general revenues. Lease Purchase Agreement (Capital Lease) - A contractual agreement whereby the government borrows funds from a financial institution or a vendor to pay for capital acquisition. The title to the asset(s) normally belongs to the government with the lessor acquiring security interest or appropriate lien therein. Letter of Credit - A commitment, usually made by a commercial bank, to honor demands for payment of a debt upon compliance with conditions and/or the occurrence of certain events specified under the terms of the commitment. Level Debt Service - An arrangement of serial maturities in which the amount of principal maturing increases at approximately the same rate as the amount of interest declines. Long-Term Debt - Long-term debt is defined as any debt incurred whose final maturity is more than three years. Maturity - The date upon which the principal of a municipal bond becomes due and payable to bondholders. City of DeKalb 46  Attachment G Mini-bonds - A small denomination bond directly marketed to the public. Net Interest Cost (NIC) - The traditional method of calculating bids for new issues of municipal securities. The total dollar amount of interest over the life of the bonds is adjusted by the amount of premium or discount bid, and then reduced to an average annual rate. The other method is known as the true interest cost (see "true interest cost"). Offering Circular - Usually a preliminary and final document prepared to describe or disclose to investors and dealers information about an issue of securities expected to be offered in the primary market. As a part of the offering circular, an official statement should be prepared by the City describing the debt and other pertinent financial and demographic data used to market the bonds to potential buyers. Other Contractual Debt - Purchase contracts and other contractual debt other than bonds and notes. Other contractual debt does not affect annual debt limitation and is not a part of indebtedness within the meaning of any constitution or statutory debt limitation or restriction. Par Value or Face Amount - In the case of bonds, the amount of principal which must be paid at maturity. Parity Bonds - Two or more issues of bonds which have the same priority of claim or lien against pledged revenues or the issuer's full faith and credit pledge. Principal - The face amount or par value of a bond or issue of bonds payable on stated dates of maturity. Private Activity Bonds - One of two categories of bonds established under the Tax Reform Act of 1986, both of whom are subject to certain tests and State volume caps to preserve tax exemption. Ratings - Evaluations of the credit quality of notes and bonds, usually made by independent rating services, which generally measure the probability of the timely repayment of principal and interest on municipal bonds. Refunding Bonds - Bonds issued to retire bonds already outstanding. Registered Bond - A bond listed with the registrar as to ownership, which cannot be sold or exchanged without a change of registration. Reserve Fund - A fund which may be used to pay debt service if the sources of the pledged revenues do not generate sufficient funds to satisfy the debt service requirements. Self-Supporting or Self Liquidating Debt - Debt that is to be repaid from proceeds derived exclusively from the enterprise activity for which the debt was issued. City of DeKalb 47  Attachment G Short-Term Debt - Short-term debt is defined as any debt incurred whose final maturity is three years or less. Spread - The income earned by the underwriting syndicate as a result of differences in the price paid to the issuer for a new issue of municipal bonds, and the prices at which the bonds are sold to the investing public, usually expressed in points or fractions thereof. Tax-Exempt Bonds - For municipal bonds issued by the City tax-exempt means interest on the bonds are not included in gross income for federal income tax purposes; the bonds are not items of tax preference for purposes of the federal, alternative minimum income tax imposed on individuals and corporations; and the bonds are exempt from taxation by the State of Illinois. Tax Increment Bonds - Bonds secured by the incremental property tax revenues generated from a redevelopment project area. Term Bonds - Bonds coming due in a single maturity. True Interest Cost (TIC) - Also known as Canadian Interest Cost. A rate which, when used to discount each amount of debt service payable in a bond issue, will produce a present value precisely equal to the amount of money received by the issuer in exchange for the bonds. The TIC method considers the time value of money while the net interest cost (NIC) method does not. Yield to Maturity - The rate of return to the investor earned from payments of principal and interest, with interest compounded semiannually and assuming that interest paid is reinvested at the same rate. Zero Coupon Bond - A bond which pays no interest, but is issued at a deep discount from par, appreciating to its full value at maturity. City of DeKalb 48  Attachment H Investment Policy ______________________________________________________________________________ Policy Number: 01-08 Date: January 9, 2017 Purpose: 1.01 Policy It is the policy of the City of DeKalb to invest public funds in a manner that will conform to state statute, maximize security, meet daily cash flow demands, and attempt to attain a market rate of return. 1.02 Scope This policy includes all funds governed by the City Council and, except for cash in certain restricted funds, the City of DeKalb will consolidate cash balances to maximize investment earnings. Investment income will be allocated to the various individual funds based on their respective participation. Interest income derived from non-fund specific consolidated bank accounts will be attributed to the General Fund. 1.03 Objectives The primary objectives of the City of DeKalb's investment activities are, in order of priority: A. Safety of principal Investments shall be undertaken in a manner that seeks to ensure the preservation of capital in the overall portfolio, while mitigating credit and interest rate risks, as defined below: 1. Credit Risk, that is, the risk of loss due to the failure of the security issuer or backer. It may be mitigated by:  Limiting investments to the safest types of securities;  Pre-qualifying the financial institutions, broker/dealers, intermediaries, and advisors with which the City will do business; and  Diversifying the investment portfolio so that potential losses on individual securities will be minimized. 2. Interest Rate Risk, that is, the risk that the market value of securities in the portfolio will fail due to changes in general interest rates. It may be mitigated by:  Structuring the investment portfolio so that securities mature to meet cash requirements for ongoing operations, thereby avoiding the need to sell securities on the open market prior to maturity, and  By investing operating funds primarily in shorter-term securities City of DeKalb 49  Attachment H B. Liquidity, so as to meet all operating requirements that may be reasonably anticipated, the portfolio shall consist largely of securities with active secondary or resale markets (dynamic liquidity). C. Yield, with the objective of attaining a market rate of return throughout budgetary and economic cycles, taking into account the investment risk constraints and liquidity needs. Return on investment is of least importance compared to the safety and liquidity objectives described above. The core of investments shall be limited to relatively low risk securities in anticipation of earning a fair return relative to the risk being assumed. Securities shall not be sold prior to maturity with the following exceptions: 1. a declining credit security could be sold early to avoid loss of principal; 2. a security swap would improve the quality, yield, or target duration in the portfolio; or, 3. liquidity needs of the portfolio require that the security be sold. 1.04 Standards of Care A. Prudence The standard of prudence to be used by investment officials shall be the "prudent person" standard and shall be applied in the context of managing an overall portfolio. Investment officers and employees of the City of DeKalb, while acting in good faith in accordance with this investment policy and any written procedures as might be established, shall be relieved of personal liability for an individual security’s credit risk or market price changes. Investments shall be made with judgment and care, under circumstances then prevailing, which persons of prudence, discretion and intelligence exercise in the management of their own affairs, not for speculation, but for investment, considering the probable safety of their capital as well as the probable income to be derived. B. Ethics and Conflicts of Interest City of DeKalb employees involved in the investment process shall refrain from personal business activity that could conflict with the proper execution and management of the investment program, or that could impair their ability to make impartial decisions. They shall disclose any material interests in financial institutions with which they conduct business. They shall further disclose any personal financial/investment positions that could be related to the performance of the investment portfolio. Employees shall refrain from undertaking personal investment transactions with the same individual with whom business is conducted on behalf of their entity. C. Delegation of Authority Authority to manage the investment program is granted to the authorized municipal official described in Chapter 54 of the DeKalb Municipal Code. Responsibility for the operation of the investment program is hereby delegated to the Finance Director or his/her designee, who shall carry out established written procedures and internal controls for the operation of the investment program consistent with this investment policy. These procedures shall include references to: safekeeping, delivery vs. payment, investment accounting, repurchase agreements, wire transfer agreements collateral/depository agreements and banking services City of DeKalb 50  Attachment H contracts. All investments shall follow the investment plan designed and approved by the Finance Director or his/her designee prior to execution. No person may engage in an investment transaction except as provided under the terms of this policy and the procedures established by the DeKalb City Council. The Finance Director, as Chief Financial Officer, shall be accountable for all transactions undertaken and shall establish a system of controls to regulate the activities of subordinate officials. 1.05 Safekeeping and Custody All trades where applicable will be executed by Delivery vs. Payment (DVP). This shall ensure that securities are deposited in the eligible financial institution prior to the release of funds. Securities will be held by a third party custodian as evidenced by safekeeping receipts. 1.06 Authorized Financial Dealers and Institutions A list shall be maintained of financial institutions authorized to provide investment services to the City of DeKalb, as well as a list of approved security broker/dealers (or their respective custodial clearing firm) selected for creditworthiness (minimum capital requirement of $10,000,000 and at least five years of operation). These may include "primary" dealers or regional dealers that qualify under Securities and Exchange Commission rule 15C3-1 (uniform net capital rule). All financial institutions and broker/dealers who desire to become qualified bidders for investment transactions must supply the following (as appropriate): 1. audited financial statements 2. proof of National Association of Securities Dealers (NASD) certification 3. proof of state registration 4. completed broker/dealer questionnaire 5. certification of having read the City of DeKalb’s investment policy and that all investments will comply with the policy An annual review of the financial condition and registration of qualified bidders will be conducted by the Finance Director or his/her designee. 1.07 Internal Controls The Finance Director or his/her designee is responsible for establishing and maintaining an internal control structure designed to ensure that the assets of the entity are protected from loss, theft or misuse. The internal control structure shall be designed to provide reasonable assurance that these objectives are met. The concept of reasonable assurance recognizes that (1) the cost of a control should not exceed the benefits likely to be derived; and (2) the valuation of costs and benefits requires estimates and judgments by management. Accordingly, the Finance Director or his/her designee shall establish a process for an annual independent review by an external auditor to assure compliance with policies and procedures. The internal controls shall address the following points: City of DeKalb 51  Attachment H 1. Prevention of collusion 2. Separation of transaction authority from accounting and record keeping. 3. Custodial safekeeping (Securities purchased from any bank or dealer including appropriate collateral, as defined by State Law, shall be placed with an independent third party for custodial safekeeping). 4. Avoidance of physical delivery securities. 5. Clear delegation of authority to subordinate staff members. 6. Written confirmation of telephone transactions for investments and wire transfers (may be via fax if on letterhead and the safekeeping institution has a list of authorized signatures). 7. Development of a wire transfer agreement with the lead bank or third party custodian, which shall outline the various controls, security provisions, and delineate responsibilities of each party making and receiving wire transfers. 1.08 Suitable and Authorized Investments Investment Types Consistent with the GFOA Recommended Practice on State Statutes Concerning Investment Practices, the following investments will be permitted by this policy and are those defined by state law where applicable: 1. U.S. Government obligations, U.S. Government agency obligations, and U.S. Government instrumentality obligations 2. Repurchase agreements 3. Certificates of deposit 4. Savings and loan association deposits 5. Investment-grade obligations of state, provincial and local governments and public authorities 6. Money market mutual funds regulated by the Securities and Exchange Commission and whose portfolios consist only of domestic securities 7. Statewide investment pools Use of repurchase agreements should be consistent with GFOA Recommended Practices on Repurchase Agreements (see attached "GFOA Recommended Practices"). Consistent with the GFOA Recommended Practice on Use of Derivatives by State and Local Governments, extreme caution shall be exercised in the use of derivative instruments (see attached "GFOA Recommended Practices"). From time to time, the City may choose to invest in instruments offered by minority and community financial institutions. These financial institutions may not meet all the criteria under this section. All terms and relationships will be fully disclosed and authorized by the City Manager prior to purchase and shall be consistent with state or local law. 1.09 Collateralization Funds on deposit (checking accounts, certificates of deposit, etc.) in excess of FDIC or SIPC limits, excluding interest, must be secured by some form of collateral, witnessed by a written agreement City of DeKalb 52  Attachment H (see the attached "GFOA Recommended Practices"). Pledged collateral shall be held in safekeeping by the Federal Reserve Bank of Chicago (or other independent third party designated by the Finance Director or his/her designee) in the name of the municipality. In addition, the value of the pledged collateral must be marked to market monthly, or more frequently depending on the volatility of the collateral pledged. Last, the City requires that the amount of collateral pledged equal 110% of the uninsured amount on deposit. 1.10 Diversification The City of DeKalb shall attempt to diversify its investments appropriate to the nature of the funds, the purpose for the funds, and the amount available to invest. Diversification can be by type of investment, number of institutions invested in, and length of maturity. 1.11 Maximum Maturities To the extent practicable, the City of DeKalb shall attempt to match its investments with anticipated cash flow requirements. Unless matched to a specific cash flow, the City of DeKalb will not directly invest in securities maturing more than 3-years from the date of purchase. Reserve funds may be invested in securities exceeding 3-years if the maturity of such investments is made to coincide as nearly as practicable with the expected use of the funds. Regardless of the foregoing, no funds may be invested in securities maturing in excess of 7-years from the date of purchase unless authorized by the City Council. 1.12 Reporting The Finance Director or his/her designee shall prepare a monthly investment and bank balance report for City Council that provides: 1. Cash balances held at the end of the month; 2. A listing of individual securities and corresponding maturities held at the end of the reporting period; 3. The percentage of the total portfolio which each type of investment represents; 4. Inception-to-date yields for each individual security; 5. Average weighted inception-to-date yield to maturity of the entire portfolio as compared to applicable benchmarks. 1.13 Performance Standards This investment portfolio will be managed in accordance with the parameters specified within this policy. The portfolio should attempt to obtain a comparable rate of return during a market/economic environment of stable interest rates. The portfolio performance should be benchmarked to the return of the 90-day Treasury bill. 1.14 Investment Policy Adoption The investment policy shall be adopted by the City Council. City of DeKalb 53  Attachment H 1.15 Policy Exemption and Amendment Exemption Any investment currently held that does not meet the guidelines of this policy shall be exempted from the requirements of this policy. At maturity or liquidation, such monies shall be reinvested only as provided by this policy. Amendment This policy shall be reviewed on an annual basis. Any changes must be approved by the City Manager and any other appropriate authority, as well as the individual(s) charged with maintaining internal controls. City of DeKalb 54  Attachment I City of DeKalb Legislative (Elected Officials and Municipal Band) FTE Staffing History 1.00 0.90 0.80 0.70 0.60 0.50 0.40 0.30 0.20 0.10 0.00 FY2014 FY2015 FY2016 FY2016.5 FY2017 FY2018 FTE Staffing History FY2014 FY2015 FY2016 FY2016.5 FY2017 FY2018 FTE 0.00 0.00 0.00 0.00 0.00 0.00 Expenditure History 350,000 300,000 250,000 200,000 150,000 100,000 50,000 - FY2014 FY2015 FY2016 FY2016.5 FY2017 FY2018 Actual Actual Actual Actual Year-End Proposed Estimate Personnel Commodities Contractual Services Other Services Equipment Total FY2017 FY2014 FY2015 FY2016 FY2016.5 Year-End FY2018 Expenditure History Actual Actual Actual Actual Estimate Proposed Personnel 70,863 67,973 67,343 35,148 68,805 69,849 Commodities 2,071 2,420 1,868 1,168 3,391 3,100 Contractual Services 234,695 229,108 232,236 62,011 95,145 92,010 Other Services - - - - - - Equipment - - - - - - Total 307,629 299,501 301,447 98,327 167,341 164,959 55  Attachment I Legislative (Elected Officials and Municipal Band) Reconciliation from FY2017 to FY2018 FY2017 Revised Budget 167,341 Personnel Part-Time Wages recurring 970 FICA recurring 74 Subtotal Personnel 1,044 Commodities Printed Materials Nameplates recurring (100) Business Cards recurring (291) Office Supplies Bound Books for Minutes recurring 100 Subtotal Commodities (291) Contractual Services Dues & Subscriptions NIU Parking Pass recurring 135 Training, Education, & Professional Development Parking Fees recurring 500 IL Municipal League (IML) Lodging - Council recurring 3,000 IML Registration - City Clerk recurring 110 IML Lodging - City Clerk recurring 500 IML Meals - Council recurring 1,000 IML Meals - City Clerk recurring 165 IML Parking - City Clerk recurring 150 Travel to Local Meetings recurring 250 Other Training and Events recurring 1,055 Contractual Services Municipal Band Stipends recurring (10,000) Subtotal Contractual Services (3,135) FY2018 Proposed Budget 164,959 RETURN TO AGENDA 56 DATE: January 12, 2018 TO: Mike Peddle, Chair Finance Advisory Committee FROM: Anne Marie Gaura, City Manager Molly Talkington, Finance Director SUBJECT: Five-Year Financial Plan Update I. Summary: The inaugural Five-Year Financial Plan (the Plan) was presented to the Financial Advisory Committee (FAC) at the September 21, 2017, meeting with further reviews during October and November 2017. In addition, the Fiscal Year (FY) 2018 Proposed Annual Budget was made available to the public via the City’s website and submitted to the FAC on October 25, 2017, for review. The FAC held multiple meetings to review and discuss the many facets of the City’s finances that affect the proposed budget. The FAC provided recommendations for the City Council to consider during their annual budget review. City Council held multiple meetings to review the proposed budget with final adoption on December 11, 2017. Additionally, on January 8, 2018, City Council approved a $0.02 per gallon Local Motor Fuel Tax increase dedicated to street improvements. II. Background: The development of the City’s inaugural Plan is an extension of the continued and progressive path of effective financial management. The Plan is a process and strategy for long‐term strategic financial planning that includes economic position analysis, benchmarking to comparable communities, revenue and expenditure analysis, capital planning and alternative policy considerations. The Plan assists the City in addressing the individual or compounded effects of various policy choices and to demonstrate their impact on the City’s financial future. Through this process and strategy, the City seeks to achieve the balance of fiscal strength, accountability, and results that the community values. As part of the summary on DeKalb’s current economic position, DeKalb’s economic strengths are summarized. Information is provided regarding DeKalb’s population, education attainment, housing and land use. This section also describes Northern Illinois University and its general impact on the community’s workforce. Additionally, a commentary providing information relative to retail and commercial real estate is 57 included. Information is also provided describing DeKalb’s recent downgraded bond rating and debt obligations. In benchmarking DeKalb to comparable communities, 13 comparable communities and four university communities were analyzed. Information was gathered from the Comprehensive Annual Financial Reports for data points of 2016, 2011 and 2006. This section compares population, per capita personal income, full time employees, employees per 1,000 population, General Fund expenditures, General Fund Expenditures per capita, General Fund revenues and General Fund revenues per capita. General Fund revenues is further summarized by category – sales tax, income tax, utility tax. This section provides each community’s information for property taxes levied, tax rates, assessed valuation and assessed valuation categories between 2006 and 2016. The last part of the benchmarking section contains comparable information for pension contributions, funding rate and unfunded liability for each community between 2006 and 2016. The FAC has requested the Town of Normal, Illinois, be included as a comparable community. Normal will be added for the Plan update in June with FAC. The Revenues and Expenditures Forecast section includes historical fund balances, revenues and expenditures, and forecasts. Baseline forecast and alternative forecast is provided utilizing inflation assumptions. Each forecast contains a summary of the impact on fund balance and property tax rate. This section contains additional information describing the cost centers with significant effect on expenditures such as personnel costs, employee salaries, union contracts, health insurance and retiree health insurance. The Streets and Fleet Preliminary Asset Management Plan is outlined. For streets and fleet, this section includes detailed summaries of asset inventory and condition assessment, level of service evaluation, asset management strategy and financial strategy. With the approval of an additional $0.02/gallon Local Motor Fuel Tax increase, this provides an additional $360,000 annually for street improvements. Since the tax increase is effective March 1, 2018, the FY2018 amount is a partial year estimated at $300,000. Alternative Funding Policy Considerations section includes detailed history of intergovernmental agreements with DeKalb County and the City of Sycamore. The current and projected impact of each agreement is provided. This section also includes funding scenarios for streets and fleet. A forecast and policy consideration for General Fund stabilization is also provided. This section will be revised to reflect the funding changes adopted in the FY2018 budget such as the Local Motor Fuel Tax increase and the Police and Fire Pension funding structure. These changes will impact the recommendations for funding scenarios for streets and fleet, forecast projections, and General Fund stabilization. The Intergovernmental Agreement with DeKalb County – Peace Road Interchange (IGA Peace Road) is still under City Council consideration. The FY2018 Budget does not include payment to the County for this agreement and could be amended should Council choose to maintain this agreement and/or a payment to the County during FY2018. In December 1997, the City entered into an agreement with the Illinois Tollway Authority to pay them in excess of $2.3 million by June 2004. The County agreed to participate in Page |2 58 repayment of the City’s debt. The City would provide additional Home Rule Sales tax revenues to the County through an increase in this tax rate from 0.75% to 1.25%. The agreement stipulates in the event the City repeals the 0.50% Home Rule Sales tax rate, every payment made to the County from the City would be applied to the principal balance due to the County and the remaining balance is subject to a 4.0% interest charge. As of 2012, the City met the obligation by paying over $2.4 million. As explained in the repeal and increase sales tax reports to Council from the November 27, 2017, meeting, by repealing then reinstating the 0.50% Home Rule Sales tax rate, the City would gain $245,000 in revenue for City service needs. Since then, the City and County have met to discuss the agreement terms, history, and the impact of the repeal of the 0.50% Home Rule Sales tax rate on the County. At this time, the City and County discussions are still ongoing. If the addition of the payment is for one year only, then use of fund balance is an option for a funding source. This would bring the General Fund balance to 24.9% or 0.1% below the fund balance policy. Given the FY2018 Budget revisions, the General Fund stabilization projections would have to be revised to incorporate the current budget. By updating the projections, each year results would change and potentially have some years that meet the City’s General Fund balance policy. However, it is still likely the fund balance would decline through the Five-Year forecast. The stabilization need would then be calculated and updated within the Plan update in June for FAC. III. Recommendation: Staff is recommending the FAC discuss other potential revisions the Committee would like to see revised in the Five-Year Financial Plan update for June. Attachment – Five-Year Financial Plan 2018-2022 Page |3 59  2018-2022 Five Year Financial Plan 60 61  Table of Contents Introduction .................................................................................................................................................. 7 Purpose of Financial Planning ................................................................................................................... 7 Tool for Decision-Making .......................................................................................................................... 8 Long-Term Financial Plan .......................................................................................................................... 8 Elements of the Plan ................................................................................................................................. 9 Economic Position ....................................................................................................................................... 13 DeKalb’s Strengths .................................................................................................................................. 13 Population ............................................................................................................................................... 14 Northern Illinois University ..................................................................................................................... 17 Property Values and Taxes...................................................................................................................... 18 National Retail and Commercial Real Estate .......................................................................................... 20 Bond Rating and Debt Obligations .......................................................................................................... 21 Benchmarking DeKalb to Comparable Communities.................................................................................. 26 Comparable Communities ...................................................................................................................... 26 Benchmarking Data ................................................................................................................................. 28 Population and Per Capita Income ......................................................................................................... 28 Full-Time Equivalent Employees ............................................................................................................. 30 General Fund Expenditures..................................................................................................................... 32 General Fund Revenues .......................................................................................................................... 34 Home Rule Sales Tax ............................................................................................................................... 39 Property Taxes and Assessed Valuation ................................................................................................. 41 62  Pensions .................................................................................................................................................. 60 Revenue and Expenditure Projections ........................................................................................................ 80 Revenue and Expenditure Forecast ........................................................................................................ 80 Baseline Forecast ................................................................................................................................ 81 Alternative Forecast ............................................................................................................................ 84 Revenues ................................................................................................................................................. 86 Expenditures ........................................................................................................................................... 90 Personnel Costs ....................................................................................................................................... 91 Outsourcing of Services ...................................................................................................................... 93 Salaries ................................................................................................................................................ 93 Bargaining Units .................................................................................................................................. 94 Wellness .............................................................................................................................................. 95 Retiree Insurance ................................................................................................................................ 95 Health Insurance Plan Design ............................................................................................................. 97 Streets and Fleet Analysis – Preliminary Asset Management Plan........................................................... 101 Fleet Inventory ...................................................................................................................................... 101 Fleet Condition Assessment .................................................................................................................. 104 Level of Service ..................................................................................................................................... 107 Replacement Cost ................................................................................................................................. 108 Street Inventory .................................................................................................................................... 110 Pavement Condition Assessment ......................................................................................................... 110 Level of Service ..................................................................................................................................... 113 Pavement Management Plan................................................................................................................ 114 Alternative Funding Policy Considerations ............................................................................................... 119 Intergovernmental Agreements – Revenue Sharing ............................................................................ 119 DeKalb Market Square Agreements and the Peace Road Interchange ............................................ 119 Peace Road Interchange Improvements ........................................................................................... 121 DeKalb County Home Agreement ..................................................................................................... 124 Sycamore Boundary Agreement ....................................................................................................... 127 General Fund Stabilization – Property Tax Levy ................................................................................... 128 Streets and Fleet Funding ..................................................................................................................... 131 Streets and Fleet Conclusions ............................................................................................................... 136 Alternative Funding Policy Conclusions ................................................................................................ 137 63 Introduction 64  Introduction  Purpose of Financial Planning  Tool for Decision Making  Long-Term Financial Plan  Elements of the Plan 65  Introduction Over the past two years, the State of Illinois’ lack of a State budget has had direct and indirect impact on the City of DeKalb. The City’s budget has been impacted by declining and delayed revenue streams. It has also had an impact on the City’s latest bond rating by Moody’s. The two sectors hit hardest by the State’s lack of annual budgets include higher education and social services. The City’s largest employer Northern Illinois University has seen their funding drastically cut and revenue decreased which has had a domino effect on enrollment. Decreased social service agency funding has negatively impacted DeKalb residents who financially are the group that can least afford the reduction. All of these realities factor into the City’s ability to provide service to DeKalb residents and businesses, both short-term and long-term. In order to address the issues relating to the City, an important strategy in funding City operations is ensuring a diversified revenue base and creating stronger, more reliable revenue streams. One of the key components of that revenue base is a strong tax base and increasing the overall Equalized Assessed Valuation (EAV). The City has a number of projects that are in the works to assist in increasing the overall EAV and create stronger revenue streams. Purpose of Financial Planning The Government Finance Officers Association (GFOA) outlines a number of Best Practices. According to their list of Best Practices and one relating to long-term planning is the Establishment of Strategic Plans. GFOA identifies the following. Strategic planning is a comprehensive and systematic management tool designed to help organizations assess the current environment, anticipate and respond appropriately to changes in the environment, envision the future, increase effectiveness, develop commitment to the organizations mission and achieve consensus on strategies and objectives for achieving that mission. GFOA further recommends that, “all governmental entities use some form of strategic planning to provide a long-term perspective for service delivery and budgeting, thus establishing logical links between authorized spending and broad organizational goals.” In 2015, the City undertook a strategic planning process that would set direction for City policy, budgeting and program development for the next 10 years. An extensive community engagement effort was conducted in order to capture the opinions and ideas about the future of DeKalb from people who live, work and/or learn in the City. In February of 2016, the City Council adopted the DeKalb 2025 Strategic Plan that provided an outline of priorities for a 10- year horizon. GFOA’s Best Practice on Long-Term Financial Planning states: 66 7  Many governments have a comprehensive long-term financial planning process because it stimulates discussion and engenders a long-term perspective for decision makers. It can be used as a tool to prevent financial challenges; it stimulates long-term and strategic thinking; it can give consensus on long-term financial direction; and it is useful for communications with internal and external stakeholders. In past annual budget documents, the City has included a Five-Year Financial Forecast for the General Fund. It included assumptions required to understand the City’s financial position in future years beyond the information contained in the main portions of the annual operating budget for the General Fund. The Forecast is updated annually as part of the budget process. The development of the City’s inaugural Five Year Financial Plan is an extension of the continued and progressive path of effective financial management. The Five‐Year Financial Plan is a process and strategy for long‐term strategic financial planning that includes economic position analysis, benchmarking to comparable communities, revenue and expenditure analysis, capital planning and alternative policy considerations. The Plan will allow the City to address the individual or compounded effects of various policy choices and to demonstrate their impact on the City’s financial future. This information enables City Council and the community to discuss policy decisions with greater awareness of their long‐term financial implications. Through this process and strategy, the City seeks to achieve the balance of fiscal strength, accountability and results that the community values. Tool for Decision-Making To achieve results that the community values in a constrained economic environment, resources must be strategically aligned to reflect community values. This process of alignment cannot be completed in only a single budget cycle. This need for multi‐year alignment is addressed through long‐term planning. The Five‐Year Financial Plan does not include specific decisions on how to bring the City’s five‐ year revenues and expenditures in balance. It presents the causes of particular issues and provides an opportunity for examining various policy options while facilitating a community dialogue about those choices. Long-Term Financial Plan As outlined, long-term financial planning is a best management practice recommended by the GFOA. The planning process combines financial forecasting with strategy planning. It is a collaborative process that considers future scenarios and helps governments navigate challenges. Long-term financial planning works best as part of an overall strategic plan. GFOA states: 67 8  Financial forecasting is the process of projecting revenues and expenditures over a long-term period, using assumptions about economic conditions, future spending scenarios, and other salient variables. Long-term financial planning is the process of aligning financial capacity with long-term service objectives. Financial planning uses forecasts to provide insight into future financial capacity so that strategies can be developed to achieve long-term sustainability in light of the government's service objectives and financial challenges. According to GFOA, “a long-term financial plan should include these steps: 1. Mobilization Phase. The mobilization phase prepares the organization for long-term planning by creating consensus on what the purpose and results of the planning process should be. 2. Analysis Phase. The analysis phase is designed to produce information that supports planning and strategizing. The analysis phase includes the projections and financial analysis commonly associated with long-term financial planning. 3. Decision Phase. After the analysis phase is completed, the government must decide how to use the information provided. Key to decision phase is a highly participative process that involves elected officials, staff, and the public. The decision phase also includes a culminating event where the stakeholders can assess the planning process to evaluate whether the purposes for the plan described in the mobilization phase were fulfilled and where a sense of closure and accomplishment can be generated. Finally, the decision phase should address the processes for executing the plan to ensure tangible results are realized. 4. Execution Phase. After the plan is officially adopted, strategies must be put into action (e.g. funding required in achieving goals). The execution phase is where the strategies become operational through the budget, financial performance measures, and action plans. Regular monitoring should be part of this phase.” Elements of the Plan The elements of the Five‐Year Financial Plan include: 1. Summary of DeKalb’s current economic position 2. Benchmarking DeKalb to comparable communities 3. Revenue and expenditure projections 4. Streets and Fleet Preliminary Asset Management Analysis 5. Alternative funding policy considerations As part of the summary on DeKalb’s current economic position, DeKalb’s economic strengths are summarized. Information is provided regarding DeKalb’s population, education 68 9 attainment, housing and land use. This section also describes Northern Illinois University and its general impact on the community’s workforce. A commentary is also provided on retail and commercial real estate. Information is provided describing DeKalb’s recent downgraded bond rating and debt obligations. In benchmarking DeKalb to comparable communities, 13 comparable communities and four university communities were analyzed. Information was gathered from the Comprehensive Annual Financial Reports for data points of 2066, 2011 and 2016. This section compares population, per capita personal income, full time employees, employees per 1,000 population, General Fund expenditures, General Fund expenditures per capita, General Fund revenues and General Fund revenues per capita. General Fund revenues is further summarized by category – sales tax, income tax and utility tax. This section provides each communities’ information for property taxes levied, tax rates, assessed valuation and assessed valuation categories between 2006 and 2016. The last part of the benchmarking section contains comparable information for pension contributions, funding rate and unfunded liability for each community between 2006 and 2016. Summaries are provided for each detailed chart and table. The Revenues and Expenditures Forecast section includes historical fund balances, revenues and expenditures and forecasts. Baseline forecast and alternative forecast is provided utilizing inflation assumptions. Each forecast contains a summary of the impact on fund balance and property tax rate. This section contains additional information describing the cost centers with significant effect on expenditures such as personnel costs, employee salaries, union contracts, health insurance and retiree health insurance. The Streets and Fleet Preliminary Asset Management Plan is outlined. For streets and fleet, this section includes detailed summaries of asset inventory and condition assessment, level of service evaluation, asset management strategy and financial strategy. Alternative Funding Policy Considerations sections includes detailed history of intergovernmental agreements between the City of DeKalb and DeKalb County and also between the City of DeKalb and the City of Sycamore. The current and projected impact of each agreement is provided. This section includes funding scenarios for streets and fleet. A forecast and policy consideration for General Fund stabilization is also provided. Since this is the Inaugural Five Year Financial Plan, it is being viewed as the foundation from which to build. Within the next year, the document will be revised and refined to be used in the development of the FY2019 Annual Budget and with subsequent budget documents. 69 10  Economic Position 70 11  Economic Position  DeKalb’s Strengths  Population  Northern Illinois University  Property Values and Taxes  National Retail and Commercial Real Estate  Bond Rating and Debt Obligations 71 12  Economic Position DeKalb’s Strengths The City of DeKalb has several distinct advantages that make it an ideal location for a regional hub for industry and business, the first being its physical location. With adjacency to I-88 and the Union Pacific West line, DeKalb has two of the nation’s economic arteries passing directly through its jurisdiction. Combined with close proximity to I-39 and the Global 3 Intermodal, the City is in the crosshairs for businesses needing access to the entire Midwest region and beyond. The City’s connectivity to the global economy goes beyond road and rail. A 7,025 foot runway at the DeKalb Taylor Municipal Airport provides access via air for businesses and executives needing timely access to their local operations. The traditional trifecta of infrastructure is not the only strength of the City. DeKalb also offers a robust fiber optic network, which will continue to become a critical component of businesses staying globally connected. In addition to DeKalb’s locational advantages with infrastructure and connectivity to the larger economy, the City also has the advantage of being situated at the fringe of the Chicago Metro Area. Although there has been much discussion in the community in regards to the number of individuals that are employed in DeKalb, but living in the far western suburbs, this can also be considered an advantage. The proximity to some of the state’s most desirable communities is a recruitment tool for attracting large employers that will have highly compensated executives and managers. This proximity allows firms to locate in DeKalb and have congestion free access and offer and easy reverse commute for their employees. As significant a strength that infrastructure and geographic location are, DeKalb’s greatest asset is its workforce. Proud home to Northern Illinois University (NIU), with excellence in engineering and business, NIU has a 123 year legacy of being a pipeline of the region’s highly- skilled employees. The City is extremely proud of the “Communiversity” relationship with NIU. It has led to innovative programs that connect students with local businesses and non-profit organizations, to assist in research, problem-solving and driving innovation. Partnerships between NIU and the region’s community college contribute to a sustainable pipeline of a highly skilled workforce. As the economy and industries continue to evolve, higher education institutions will become critical innovation hubs, necessary to maintaining regional competitiveness in a globalized economy. With the $500+ million in community investment over the past decade, DeKalb has the capacity to continue growing. While these investments have had an impact on the community’s tax burden, one must not lose sight of the opportunities that it provides for continuing to make DeKalb a great place to work, learn and live. 72 13 Population First incorporated in 1856, and later being designated a City in 1877, the population of DeKalb in 1880 was 1,598. Over the next 140 years, DeKalb would grow to its current population of 43,862 (per 2010 census). The current population is estimated at 44,030. The City saw a significant increase in population in the decades between 1950 and 1970, largely due to 1955 state legislation authorizing Northern Illinois State Teachers College to broaden its educational services beyond teacher education. Now known as Northern Illinois University (NIU), the school acted as a magnet for the community, drawing young individuals and families, many of whom stayed after graduation to start families, businesses and careers. The City also saw a steady rise in population in the decades between 1990 and 2010, largely driven by suburban sprawl and national demand for single family homes. Though DeKalb is considered an exurb of the Chicago Metropolitan Area, many were lured to the community because of the comparatively low cost of housing to the western suburbs. However, following the collapse of the housing market in 2008, DeKalb has struggled to regain traction in residential development. Additionally, NIU has seen a decline in enrollment over the past 10 years. It is possible that the 2020 Census will indicate flat population growth. What is unknown is the impact on the population because the apartments that once housed students alone now house students and families. In addition to general population trends, the demographic make-up of the population can be telling of the local economy. Compared to both the State of Illinois and the nation, DeKalb has a relatively low median household income and high poverty rate. However, the City does have a relatively high percentage of the population with a college degree. Given that DeKalb is a university community, these are common traits. Given the low income of students, it may skew the statistics for income and poverty, though it is difficult to know how much. 73 14  DeKalb Illinois United States Median Household Income (2011-2015) $37,954 $57,574 $53,889 Percentage of Population with College Degree (2011-2015) 37.0% 32.3% 29.8% Persons in Poverty (2015) 32.3% 13.6% 13.5% Unemployment Rate (2016) 5.4% 5.9% 4.9% Retail Sales per Capita (2012) $11,608 $12,942 $13,443 Population per Square Mile (2010) 2,993.8 231.1 87.4 Owner Occupied Housing Units (2011-2015) 41.6% 66.4% 63.9% Median Value of Owner-Occupied Housing Units (2011-2015) $154,100 $173,800 $178,600 A total of 35% of DeKalb residents 25 years old and older have a Bachelor's degree or higher. In addition, 10% of DeKalb residents have attained an Associate’s degree while 24% have some college education. For 23% of DeKalb residents, the highest level of education attained is a high school diploma or General Education Diploma (GED). The data shows the focus on educational attainment in DeKalb is reflective of a university community, or commonly referred to as a gown town. Population Pyramid for City of DeKalb, 2010 85 years and over 75 to 79 years 67 to 69 years 62 to 64 years 55 to 59 years 45 to 49 years Male 35 to 39 years 25 to 29 years Female 21 years 18 and 19 years 10 to 14 years Under 5 years 8% 6% 4% 2% 0% 2% 4% 6% 8% 74 15 The population pyramid data shows the median age for all residents is 23.7 Years. DeKalb is a young community due to the presence of the students at Northern Illinois University. The breakdown in housing distribution in DeKalb is 45.4% is comprised of single family housing while the remaining housing is broken down with various types of multi-family housing including apartments, townhomes and duplexes. The median year that homes were constructed in DeKalb is 1976. City of DeKalb Land Use Right of Way Single Family Residence 14% 19% Two family Residence Vacant/Agriculture 1% 19% Multi-Family Residence 3% Commercial 4% Industrial Transportation/Utilities 10% 9% Public Open Space 12% 9% 75 16 Regarding overall land use, the two largest categories of land use at 19% apiece are single family homes and vacant or agricultural areas. Of the overall breakdown, residential comprises 23% of all land use with commercial at 4% and industrial at 10%. Northern Illinois University The impact of Northern Illinois University (NIU) on the community has a much larger impact than just demographics. NIU is the largest economic driver for the City, as both the largest direct employer and largest contributor to workforce development. According to a 2015 report, NIU contributes $895 million in total economic impact to the region and is responsible for employment of 12,874 individuals. A total of 3,303 are directly employed by NIU as faculty and staff. The impact was considered to be a conservative estimate, because it did not account for the spending of visitors. The draw of visitors and students to NIU is vital to the economic success of the community. Over the past 10 years, NIU has seen a decrease in enrollment. This decline has had a direct impact on the rental housing market, leading to a surplus of available units and vacancies. Purpose built student housing, which is affordable by nature, has attracted lower income individuals and families. As a result, neighborhoods that were designed for students now have both families and students living in close proximity. This situation presents challenges for low income families and individuals, such as limited access to employment and shopping (especially grocery). Limited access to opportunity and isolation exacerbate the challenges of poverty, making it difficult, if not impossible, to break the cycle of poverty. Though improvements to public transportation systems would lead to better connectivity between individuals and employers, there are limited opportunities for employment in sectors that pay living wages. Two of the City’s top six employment sectors are low wage industries, 76 17 including retail and food services. However, there is growth in both the Healthcare sector, as well as the Administration and Support sector. Thus, continued investment in workforce development can lead to improved employment opportunities. Property Values and Taxes The recession and collapse of the housing market has had a lingering impact on the community. A recent history of Equalized Assessed Value (EAV) of property in the City shows that the peak 77 18 value was in 2008. Using EAV as a measure of property wealth, between 2008 and 2014, the City lost a total of $233,418,755 in assessed value. This amounts to a loss of $700,256,596 in total real estate value (three times EAV), with the most substantial loss being in the residential sector at $500,291,244. Similar to national trends, home values peaked in the 2006-2008 period, with the median sale price of homes in 2008 being $171,700. Early 2013 marked the low point for sale prices in DeKalb, with the median sale prices hovering just over $100,000. A decade later, while the housing market has shown signs of recovery nationally, DeKalb’s housing values have struggled to recover. The median sale price of homes in 2017 is only $131,002. The number of closed sales year to date in 2017 is 429 and have surpassed figures from 2008 at 388. This is signaling there is some demand in the market. Additionally, the number of homes currently for sale in 2017 is 35.6% lower than the same time in 2008. The laws of supply and demand would indicate that prices should be recovering, however they are not. One factor may be the age and quality of the homes in the market place. In the years leading up to 2008, many of the homes being purchased in DeKalb were of newer construction. Overall, DeKalb has an aging housing stock. Many of the older homes on the market require updates, driving the sale price down. Another contributing factor is more stringent regulations on lending through the Frank Dodd Act. For example, if a home receives multiple offers above the asking price, a bank is not permitted to underwrite a loan if the home does not appraise for the value offered by the potential purchaser. An even greater challenge to financing a home in DeKalb is high property taxes. Although DeKalb a significantly lower price per square foot compared to the western suburbs, this strategic advantage is lost when property taxes are accounted for. In many instances, the monthly cost of property tax is greater than the principal and interest on a mortgage. Therefore, when calculating what an individual or family is capable of affording, their dollar no longer goes as far in DeKalb as it once did. In addition to having an impact on demand for housing, high property taxes are also a leading reason for individuals and families moving out of the community. To illustrate the growth in residential property taxes, two charts have been provided. The property tax bills of a 35 home sample was evaluated over a 10 year period. The average assessment of those homes in 2006 was $54,293.47, with an average total property tax bill of $4,071.33. By contrast, in 2016, the average assessment of the same homes was $50,720.03, with an average tax bill of $6,743.67. Although the assessed value of those homes is less in 2016, the average property tax bill has increased by 65.6%. Of the increase in the sample property tax bill, the City has contributed to 11.5% of the increase, or approximately $306.51 annually. As a direct point of comparison, the DeKalb School District contributed to 64.8% of 78 19 the increase, or approximately $1,731.18 annually. If the community is not able to grow its tax base at a rate faster than the total cumulative levy of all taxing bodies, high property taxes will continue to have a negative impact on the economic position of the City. Given the City’s 9.5% share of the total tax bill, it has limited ability to have a marked impact on lowering the current property tax burden through reductions in its levy. However, the City has the greatest ability to effect economic growth, which is the most sustainable approach to lowering the tax burden. National Retail and Commercial Real Estate The City relies heavily on sales tax as a revenue source to the General Fund to cover operational expenses. Therefore, it is important that the City be able to forecast potential economic downturns that may affect sales tax revenue. The continued growth of online consumerism has already had an impact on several retail sectors, especially among national retailers and chains. 79 20 Recent years have seen multiple national retailers shut their doors in some or all of their stores nationally. Other retailers are downsizing their typical footprints. Many of these are considered “big box” retailers, leaving large spaces vacant and difficult to fill with new tenants. This has a secondary impact on the local economy, lowering the value of commercial properties. Additionally, the impact of online retail has had a harsher impact on national retailers, compared to niche boutique types of retailers. These types of retailers contribute large amounts of sales tax, which means the loss of one can have a substantial impact on the fiscal health of the City. The collection of local sales tax on online sales has been considered, and currently the State of Illinois does collect its portion of sales tax. Online retail sales is not the only contributing factor impacting national chains. Consumer preferences are also shifting towards a unique experiential shopping experience. This change is a driving force in many communities reinvesting in their downtowns, and concentrating on programs that support small business. Although DeKalb’s current lease rates in the downtown do not allow for redevelopment or new development to pay its own way, the affordability of rent can be seen as an asset for recruiting entrepreneurs. Bond Rating and Debt Obligations Moody’s Investors Service downgraded the City’s $32 million General Obligation (GO) bonds to ‘A1’ from ‘Aa3’on May 24, 2017. Moody’s noted in its Report: The city’s leverage related to debt and pension liabilities has increased substantially in recent years, and is expected to remain elevated. The direct debt burden and the overall debt burden…..are above state and national medians. Moody’s also identified “Increases in leverage related to the city’s debt or pension burden” as one of the factors that could lead to a downgrade. Moody’s further stated:  Certain rating factors are outside of the City’s control 80 21  – Local economy and size of local tax base – Institutional presence of Northern Illinois University, whose debt was downgraded to ‘Ba2’ (below investment grade) by Moody’s on June 9, 2017  Rating factors that are within the City’s control that are addressed in the FMP – Pension Burdens – Financial Operations and General Fund Reserves The credit strengths include:  Institutional presence of Northern Illinois University  Home-rule with considerable revenue raising flexibility The credit challenges are:  Sizable and growing pension burden  Exposure of main local economic institution to the State of Illinois (Baa2 negative) The following factors that could lead to a downgrade include:  Deterioration in the socio-economic profile or tax base valuation  Declines in the City’s reserves or liquidity  Increases in leverage related to the City’s debt or pension burden Outstanding Bonded Debt (As of 7/17/2017) Original Current Final Optional Par Amount Outstanding Coupon Range Maturity Redemption General Obligation Bonds, Series 2010A (Downtown TIF, 12 Yr bonds) $ 10,800,000 $ 5,200,000 4.00% - 4.00% 12/1/2021 Non-Callable General Obligation Refunding Bonds, Series 2010B (Pub. Works, 18 Yr Refi CAB bonds) $ 3,905,000 $ 3,905,000 4.25% - 4.75% 1/1/2028 Non-Callable Taxable General Obligation Refunding Bonds, Series 2010C (Pub. Works, PD station, 13 Yr Refi bonds) $ 5,415,000 $ 4,065,000 4.35% - 5.90% 1/1/2023 Non-Callable General Obligation Bonds, Series 2012A (PD station, 17 Yr bonds) $ 9,905,000 $ 7,405,000 2.00% - 2.63% 1/1/2030 1/1/2023 General Obligation Bonds, Series 2013A (DeKalb Library, 20 Yr bonds) $ 6,685,000 $ 5,870,000 3.00% - 4.00% 1/1/2033 1/1/2023 General Obligation Bonds, Series 2013B (PD station, 9 Yr bonds) $ 2,380,000 $ 2,320,000 1.50% - 3.00% 1/1/2022 Non-Callable $ 28,765,000 The City of DeKalb is a home-rule community and has no legal debt limit set by the Illinois General Assembly. The City monitors the overlapping debt of all taxing districts and is sensitive to the burden debt places on the taxpayer. In FY 2016, the City’s ratio of General Obligation Bonded Debt to EAV was 0.67%. 81 22  Debt Payments - Total Principal & Interest 4,000,000 3,500,000 3,000,000 2,500,000 2,000,000 1,500,000 1,000,000 500,000 0 2010A 2010B 2010C 2012A 2013A 2013B The chart below provides a ratio of general obligation bonded debt per resident in the City of DeKalb for Fiscal Years 2007 through 2016.5. Prior to Fiscal Year 2016.5, the City’s fiscal year end was on June 30th. The City’s changed its fiscal year end in 2016 to December 31st. Historical Trends of Bonded Debt Per Capita (General Obligation Bonds) $787 $733 $666 $613 $581 $589 $554 $548 $374 $329 2008 2009 2010 2011 2012 2013 2014 2015 2016 2016.5 Due to Moody’s recent downgrade as well as the City’s total debt payment, there are implications on the City’s near-term bond issuance. Based on an analysis conducted by the financial advisor Ehlers, potential near-term bonds as early as 2018 could pose a rating challenge. This will likely necessitate a delay on the earliest bond issuance until 2020. 82 23  Benchmarking 83 24  Benchmarking  Comparable Communities  Benchmarking Data  Population and Per Capita Income  Full-Time Equivalent Employees  General Fund Expenditures  General Fund Revenues  Home Rule Sale Tax  Property Taxes and Assessed Valuation  Pensions 84 25  Benchmarking DeKalb to Comparable Communities Comparable Communities In 2015, the City contracted with Sikich, a regional accounting, auditing and consulting firm, to complete a comprehensive Pay and Compensation Study. In order to identify comparable local government employers, Sikich used an empirically based, weighted variable model applied to communities that met the following criteria:  Communities located within 40 mile radius of DeKalb (due to the potential labor pool)  Communities with a population plus or minus 50% of DeKalb’s population (between 22,015 and 66,045)  Contiguous local government employers that provide a similar breadth of services to those of DeKalb (Sycamore)  Communities that provide municipal fire services The empirical model used for the study employed a sliding scale of weighted variable that correspond to the measure community’s relative similarity to the City of DeKalb for the particular variable being measured. Eleven variables were assigned weighed value of 15, 10 or 5 points where proportional points were applied based a sliding scale of relativity to DeKalb. Based on a multivariate weighted model, Sikich determined 13 comparable cities or villages were sufficiently similar. The Carpentersville was the most comparable, while Sycamore and St. Charles were the least comparable. Scoring Rubric for Empirical Development of Comparable Communities Criterion Source Variable Weighting Max Point Value 1. Municipal Fire Office of the Illinois State Fire Marshal (OSFM) Department httg://webapps.sfm.illinois.gov/FireDeptSearch/ Yes/No 2. Home Rule Status Illinois Municipal League Website 5 pts. http://imlrma.org/page.cfm?key=2 3. Colleges or 5 pts. Community Webpages Universities 4. Population Illinois State Comptroller Local Government 15 pts. Warehouse FY 2013 5. Distance from http://www.distance-cities.co/ 10 pts. DeKalb 6. Number of Full- Illinois State Comptroller Local Government 15 pts. Time Employees Warehouse FY 2013 7. General Fund Total Illinois State Comptroller Local Government 10 pts. Expenditures Warehouse FY 2013 85 26  8. Total Expenditures Illinois State Comptroller Local Government 15 pts. Warehouse FY 2013 9. Equalized Assessed Illinois State Comptroller Local Government 10 pts. Value (EAV) Warehouse FY 2013 10. Square Miles U.S. Census 2010 5 pts. 11. Total Sales Tax Illinois State Comptroller Local Government 10 pts. Revenue Warehouse FY 2013 12. Median Family U.S. Census, 2012 - American Fact Finder 5-year 10 pts. Income Estimates City of DeKalb – 2014 Comparable Market Empirical Model Results Municipality Total Municipal Fire Score Department? DeKalb 110 Yes 1 Carpentersville 90 Yes 2 Hanover Park 85 Yes 3 Romeoville 84 Yes 4 Crystal Lake 82 Yes 5 Streamwood 80 Yes 6 Wheaton 80 Yes 7 Rolling Meadows 78 Yes 8 Batavia 75 Yes 9 Elk Grove Village 70 Yes 10 Belvidere 68 Yes 11 Hoffman Estates 64 Yes 12 St. Charles 60 Yes 13 Sycamore 60 Yes 14 DeKalb County -- N/A The data was provided by the City unless it was otherwise noted. The model was provided by the Sikich study team. Communities without municipal Fire Departments were excluded from analysis due to the financial impact municipalities’ face in providing Fire protection and Emergency Medical Services (EMS). The City of Sycamore was included because it is a contiguous community with comparable service offerings, even though it did not fall within the population criteria. DeKalb County was included at the City’s request as a multi-service local government serving DeKalb. This plan includes benchmarks for the 13 comparable communities and they are listed in alphabetical order: Batavia, Belvidere, Carpentersville, Crystal Lake, Elk Grove Village, Hanover Park, Hoffman Estates, Rolling Meadows, Romeoville, St. Charles, Streamwood, Sycamore and Wheaton. The plan further analyzes four university communities in Illinois and include: 86 27 Bloomington, Charleston, Champaign and Urbana. Benchmarking Data As part of the City’s benchmarking, the data will generally be broken down to between the 13 most comparable communities first and the other three university communities second. Population and Per Capita Income Population 2016 52,894 51,895 44,528 44,030 40,743 39,680 38,291 37,973 33,460 33,238 26,045 25,070 24,667 17,867 DeKalb has the fourth highest population (44,030) of the comparable communities. Wheaton has the highest population (52,894) and Sycamore has the lowest population (17,867). DeKalb has the 4th highest population but the lowest per capita personal income. DeKalb has the third highest population University Communities - (44,030) among the university Population 2016 communities. Champaign has the 86,096 highest population (86,096) while 78,730 Charleston has the lowest population 44,030 42,311 (21,133). The university community 21,133 most comparable based on population is Urbana (42,311). Champaign Bloomington DeKalb Urbana Charleston 87 28  Per Capita Personal Income 2016 38,565 37,218 36,581 33,423 32,238 31,133 30,735 30,199 30,011 22,643 21,347 20,604 19,088 In comparison to the 13 comparable communities, DeKalb has the lowest per capita income. It is also the only community that is home to a four year university. Wheaton is home to Wheaton College. This low ranking may be due, in part, to the presence of NIU students. Whereas DeKalb has the third highest University Communities - population among the university Per Capita Personal Income 2016 community, it has the lowest per capita 44,397 income of these four. Please note that 39,237 39,237 in many of the charts in this document, 19,088 Charleston’s information is not included because it was not available. Bloomington Champaign Urbana DeKalb 88 29 Full-Time Equivalent Employees Full-Time Equivalent Employees 2016 363 313 306.28 296.05 269.1 233 231.5 206 196 191 158 157 126.5 114 Note: DeKalb’s 2016 FTE’s provided by DeKalb’s Human Resources Department For the comparable communities, DeKalb has the 7th highest number of full-time equivalent employees (FTE’s) with 231.5. Hoffman Estates has the highest FTE’s with 363 and Belvidere has the lowest FTE’s with 114. The community closest to DeKalb in FTEs is Crystal Lake (233). DeKalb ranks 4th in population, 7th for FTE’s and 10th for FTE’s per 1,000 population. The number of DeKalb’s 2016 FTEs has been provided by the Human Resources Department. The total excludes employees from the DeKalb Sycamore Area Transportation Study since they are technically not City of DeKalb employees. DeKalb has the lowest number of FTEs University Communities - Full- (231.5) of the university communities. Time Equivalent Employees 2016 Bloomington has the highest number (621), which is over 2.5 times the 621 531 number of DeKalb FTEs. 270.1 231.5 DeKalb ranks as the 3rd highest in population yet ranks 4th or has the lowest number of FTEs and FTEs per Bloomington Champaign Urbana DeKalb 1,000 population. 89 30  Employees Per 1,000 Population 9.4 8.0 7.7 7.1 7.0 6.4 6.0 5.7 5.6 5.3 5.2 5.0 4.6 4.5 DeKalb has the 10th highest FTEs per 1,000 population, or alternatively the 5th lowest. Only four comparable communities have lower FTEs per 1,000 population compared to DeKalb ranking 10th highest for FTE’s per 1,000 population with 5.3 FTE’s. Elk Grove Village has the highest FTEs per 1,000 population with 9.4 and Belvidere has the lowest FTEs per 1,000 with 4.5. Hanover Park is the closest comparable with 5.2 employees per 1,000 population. DeKalb has the lowest FTEs per University Communities - FTE's Per thousand population of the university 1,000 Population communities. Bloomington employs 7.9 FTEs per thousand population, nearly 7.9 6.4 6.2 1.5 times the level of DeKalb. 5.3 Bloomington Urbana Champaign DeKalb 90 31 General Fund Expenditures General Fund Expenditures - Fiscal Year 2016 50,296,095 49,236,218 38,108,109 36,681,918 34,058,207 31,098,260 30,744,360 29,410,240 27,837,469 26,354,397 26,295,784 24,135,474 14,944,043 14,814,837 DeKalb’s actual General Fund expenditures for Fiscal Year 2016 ranks 7th out of the 14 comparable communities. Elk Grove Village, Hoffman Estates, Belvidere and Sycamore are outliers compared to 10 other communities both on the high and low ends. Hanover Park is the closest in total General Fund expenditures at $31,098,260. University communities shown have a University Communities - General wide range of expenditures. Fund Expenditures Fiscal Year 2016 Bloomington ranks the highest at 81,090,175 $81,090,175 and Charleston at the 58,477,641 lowest at $9,865,565. DeKalb has the 3rd highest General Fund expenditures 30,744,360 27,755,937 of the five university communities at 9,865,565 $30,744,360. Bloomington Champaign DeKalb Urbana Charleston 91 32  General Fund Expenditures per Capita Fiscal Year 2016 1192 1018 969 927 924 836 819 727 720 698 645 592 591 Although DeKalb ranks 7th for expenditures and FTE’s, the City ranks 10th for expenditures per capita. That means nine comparable communities are providing municipal services at a higher per capita cost ranging from $1,192 to $720. Only Belvidere, Streamwood and Crystal Lake have General Fund expenditures lower than DeKalb’s at $698 per capita. DeKalb, Champaign and Urbana have University Communities - General very similar expenditures per capita in Fund Expenditures per Capita 2016 ranging from $656 to $698 per Fiscal Year 2016 capita. 1030 698 679 656 467 Bloomington DeKalb Champaign Urbana Charleston 92 33 General Fund Revenues Total General Fund Revenues 2016 58,312,979 55,533,341 46,563,238 42,303,364 40,949,025 34,291,821 31,697,814 30,757,742 30,683,651 28,645,838 25,579,379 25,551,564 16,085,805 15,287,923 Although, DeKalb’s actual General Fund Expenditures for Fiscal Year 2016 rank 7th and 11th for expenditures per capita, the City ranks 9th for revenues and 11th for revenues per capita. DeKalb has the 4th highest General Fund University Communities - Total revenues for all of the university General Fund Revenues 2016 communities ($30,683,651). 94,251,263 Bloomington is over three times the 72,323,419 amount of General Fund revenue ($94,251,263). The university 32,212,393 30,683,651 community with the closest General 10,114,152 Fund revenue is Urbana ($32,212,393). Bloomington Champaign Urbana DeKalb Charleston 93 34  General Fund Revenues per Capita 2016 1671 1285 1264 1173 1124 982 903 856 803 774 697 643 642 627 DeKalb ranks 11th out of 14 comparable communities for General Fund revenues per capita at $697. Only Crystal Lake, Belvidere and Streamwood have lower revenues ranging from $627 to $643. DeKalb ranks 4th out of 5 university University Communities - General communities for General Fund revenues Fund Revenues per Capita 2016 per capita. Urbana is most comparable to DeKalb at $761 per capita. 1197 840 761 697 479 Bloomington Champaign Urbana DeKalb Charleston 94 35  GENERAL FUND REVENUES 2016 Actual Home Rule Sales Actual State Sales Income Tax Revenues Utility Tax Revenues Other Revenues 100% 90% 5,197,166 11,216,757 9,963,250 80% 12,572,077 0 18,350,573 8,100,480 28,223,604 7,519,996 24,738,070 4,167,471 27,798,456 17,201,807 70% 22,787,990 38,874,867 21,764,571 60% 3,202,384 1,509,812 4,310,194 50% 0 3,668,994 4,462,992 7,049,360 5,437,859 1,791,962 2,057,469 0 11,146,198 5,929,117 40% 2,502,164 3,514,119 1,120,243 1,896,000 3,530,426 382,919 30% 5,289,536 3,696,445 2,936,915 1,285,380 4,228,795 5,637,042 2,726,656 8,293,136 4,006,240 5,107,430 10,184,441 4,985,594 2,315,210 10,990,789 7,421,224 20% 5,520,622 5,911,386 6,042,779 7,887,857 3,665,593 10% 6,511,982 3,201,200 5,040,729 3,696,341 4,713,723 8,157,011 6,146,634 5,993,378 1,969,725 3,851,280 2,519,645 3,869,271 3,627,746 2,667,060 0% 0 95 36  General Fund Revenues 2016 20% 37% 39% 0% 41% 45% 50% 51% 53% 52% 49% 16% 55% 60% 67% 69% 10% 5% 17% 0% 12% 0% 17% 15% 10% 8% 12% 13% 44% 6% 10% 13% 6% 4% 11% 1% 17% 5% 4% 9% 14% 17% 27% 26% 20% 26% 18% 9% 7% 17% 26% 12% 15% 13% 12% 21% 20% 20% 14% 15% 15% 11% 13% 14% 13% 6% 8% 9% 9% 0% Actual Home Rule Sales Actual State Sales Income Tax Revenues Utility Tax Revenues Other Revenues Thirteen comparable communities have Home Rule Sales Tax. DeKalb relies relatively more on Home Rule Sales tax as indicated by the 21% of General Fund Revenues for 2016. Most communities rely on Home Rule Sales tax for 9% to 15% of General Fund revenue. Seven communities, including: Elk Grove, Hanover Park, Hoffman Estates, Rolling Meadows, Romeoville, St. Charles and Streamwood, rely on ''Other Revenue” category for more than 50% of their General Fund Revenues for 2016. This means that they are more reliant on property tax and revenues other than sales, income and utility taxes. At 37%, DeKalb is less reliant on property tax and other revenues compared to the other communities. 96 37  University Communities - General Fund Revenues 2016 11,216,757 43,667,487 15,728,955 4,683,925 47,918,926 3,202,384 2,383,483 776,122 4,462,992 8,118,812 2,944,800 6,837,815 4,131,774 8,164,515 2,233,739 5,289,536 18,153,637 14,213,470 5,108,103 6,511,982 18,273,051 2,420,366 17,116,537 4,298,761 0 DeKalb Champaign Urbana Charleston Bloomington Actual Home Rule Sales Actual State Sales Income Tax Revenues Utility Tax Revenues Other Revenues DeKalb and three other university communities have Home Rule Sales tax. Champaign and Bloomington collect more Home Rule Sales tax. Champaign’s Home Rules Sales tax and State Sale tax account for 50% of their General Fund revenue in 2016. DeKalb relies on Home Rule Sales tax and State Sales tax for 38% of General Fund revenue. Urbana, Charleston and Bloomington are more reliant on property taxes and fees. At 37%, DeKalb is less reliant on property tax and other revenues compared to the three university communities. University Communities - General Fund Revenues 2016 37% 35% 49% 46% 51% 3% 10% 11% 15% 9% 8% 7% 25% 13% 22% 9% 17% 15% 16% 21% 25% 24% 18% 13% 0% DeKalb Champaign Urbana Charleston Bloomington Actual Home Rule Sales Actual State Sales Income Tax Revenues Utility Tax Revenues Other Revenues 97 38 Home Rule Sales Tax City Home Rule Sales Taxes & Rate 2016 8,157,011 6,511,982 6,146,634 5,993,378 5,040,729 4,713,723 3,851,280 3,696,341 3,627,746 3,869,271 2,667,060 2,519,645 1,969,725 1.75% 1.00% 0 0 2.00% 0.75% 1.00% 0.75% 1.00% 1.00% 1.50% 1.00% 1.00% 1.75% 1.00% Communities with Home Rule Sales Tax range from 0.75% to 2%. In 2016, DeKalb ranks second in Home Rule Sales Tax revenue collection. Elk Grove Village is the highest revenue collector of Home Rules Sales Tax with $8,157,011. Only five communities including DeKalb, Crystal Lake, Elk Grove Village, Romeoville and St. Charles, collect over $5 million in home rule sales tax revenues. 98 39  University Communities - City Home Rule Sales Taxes & Rate 2016 18,273,051 17,116,537 6,511,982 4,298,761 1.75% 1.50% 1.50% 0 0 2.50% DeKalb Champaign Urbana Charleston Bloomington Note: Charleston does not have Home rule sales tax University communities with Home Rule Sales Tax range from 1.5% to 2.5%. In 2016, DeKalb ranks third in Home Rule Sales Tax revenue collection. There is a significant difference in sales tax revenues collected by Champaign ($18,273,051) and Bloomington ($17,116,537) versus DeKalb and Urbana. 99 40 Property Taxes and Assessed Valuation TOTAL PROPERTY TAXES LEVIED 2006 2011 2016 17,626,952 13,080,114 23,413,146 11,172,796 17,136,948 25,313,419 8,019,303 15,491,665 6,891,780 8,841,740 10,212,017 6,596,164 8,113,730 8,364,469 19,161,057 12,852,966 10,910,424 17,971,963 12,058,027 10,419,656 11,081,993 10,690,980 9,862,989 12,057,772 13,193,894 5,286,412 3,022,052 13,061,065 11,634,443 13,160,870 11,053,029 11,879,677 6,243,388 3,193,233 3,037,991 4,196,805 6,362,197 4,237,013 3,604,253 5,094,730 4,741,604 3,925,479 Each community increased their property tax levy between years 2006 and 2016. Only St. Charles experienced a slight decrease ($300) in their property tax levy from 2011 to 2016. Wheaton had the highest property tax levy in 2016 at $25,313,419. Hoffman Estates had the 2nd highest property tax levy in 2016 at $19,161,057. Although DeKalb’s population is ranked 4th, DeKalb is ranked 12th highest of 14 communities in 2016 with a levy of $5,094,730. Through the 10 year period, DeKalb has consistently ranked 12th to 14th for property tax levy. 100 41  Property Taxes Levied for Fiscal Year 2016 25,313,419 19,161,057 17,971,963 13,193,894 13,160,870 13,061,065 12,057,772 11,879,677 11,634,443 11,053,029 6,362,197 5,094,7304,741,604 3,925,479 DeKalb ranked 12th for the property tax levy in 2016. PROPERTY TAX RATES PER $100 OF ASSESSED VALUATION 2006 2011 2016 2.9299 2.7346 1.07045 1.009 1.87 1.3367 1.2716 0.901 1.04 0.9863 1.63369 0.593 1.693 0.6499 1.583 0.75444 0.687 0.986 1.0591 0.8302 0.6899 0.7574 1.024 0.719 1.2981 0.7537 1.6716 0.80356 0.8631 0.5748 1.563 0.7785 1.1942 0.5925 1.213 1.159 1.064 0.9109 1.06287 1.0342 0.6955 Each community experienced increase of property tax rates between years 2006 and 2016. All communities also experienced increase of property tax rates between year 2011 and 2016. Through the 10 year period, DeKalb has consistently ranked in the lower half of the 14 101 42 communities for property tax rate. DeKalb’s most comparable community, Carpentersville had the highest property tax rate in 2016 at 2.9299. DeKalb’s second most comparable community, Hanover Park (DuPage County) had the second highest property tax rate in 2016 at 2.7346. DeKalb’s property tax rate of 1.1942 is ranked 9th of 14 communities in 2016. Alternatively, it can be viewed as the 6th lowest. Property Tax Rates per $100 of Assessed Valuation for 2016 2.9299 2.7346 1.8700 1.6716 1.6337 1.5630 1.2981 1.2130 1.1942 1.1590 1.0629 1.0342 0.9109 0.6955 102 43  509,622,916 608,332,947 468,077,742 919,721,190 1,053,784,460 914,945,274 395,816,101 293,958,710 599,930,235 648,109,995 445,784,892 1,200,659,064 All communities experienced an increase in total assessed value of taxable property between 1,315,132,543 979,392,388 2,200,470,660 2,340,307,770 1,589,750,480 656,477,775 2006 743,626,927 525,854,318 TOTA L A SSESSE D VA LUE O F TA XA BLE PRO PE RT Y FO R T HE F I SC A L 44 2011 1,830,698,515 2,141,847,633 1,518,840,790 2016 959,038,502 1,003,838,180 703,906,897 2006 and 2011. However, from 2011 to 2016 all communities sustained a decrease in total 894,235,108 1,276,684,761 1,065,515,505 1,352,327,533 1,548,128,154 1,322,751,195 767,607,981 961,608,681 661,216,133 309,324,156 YEA R 436,016,750 357,501,358 1,807,481,291 assessed value. 2,168,300,482 103 1,883,310,764  Total Assessed Value of Taxable Property for Fiscal Year 2006 2011 2016 Difference DeKalb 509,622,916 608,332,947 468,077,742 -140,255,205 -23% Batavia 919,721,190 1,053,784,460 914,945,274 -138,839,186 -13% Belvidere 395,816,101 293,958,710 -101,857,391 -26% Carpentersville 599,930,235 648,109,995 445,784,892 -202,325,103 -31% Crystal Lake 1,200,659,064 1,315,132,543 979,392,388 -335,740,155 -26% Elk Grove Village 2,200,470,660 2,340,307,770 1,589,750,480 -750,557,290 -32% Hanover Park 656,477,775 743,626,927 525,854,318 -217,772,609 -29% Hoffman Estates 1,830,698,515 2,141,847,633 1,518,840,790 -623,006,843 -29% Rolling Meadows 959,038,502 1,003,838,180 703,906,897 -299,931,283 -30% Romeoville 894,235,108 1,276,684,761 1,065,515,505 -211,169,256 -17% St. Charles 1,352,327,533 1,548,128,154 1,322,751,195 -225,376,959 -15% Streamwood 767,607,981 961,608,681 661,216,133 -300,392,548 -31% Sycamore 309,324,156 436,016,750 357,501,358 -78,515,392 -18% Wheaton 1,807,481,291 2,168,300,482 1,883,310,764 -284,989,718 -13% Five communities had reductions between 13% and 19% (Batavia, Romeoville, St. Charles, Sycamore and Wheaton). Five communities incurred reductions between 20% and 29% (DeKalb, Belvidere, Crystal Lake, Hanover Park and Hoffman Estates). Four communities experienced reductions between 30% and 32% (Carpentersville, Elk Grove, Rolling Meadows and Streamwood). DeKalb's assessed value declined 23% from 2011 ($608,332,947) to 2016 ($468,077,742). 104 45  TOTAL ASSESSED VALUE OF TAXABLE PROPERTY 1,883,310,764 FOR FISCAL YEAR 2016 1,589,750,480 1,518,840,790 1,322,751,195 1,065,515,505 979,392,388 914,945,274 703,906,897 661,216,133 525,854,318 468,077,742 445,784,892 357,501,358 293,958,710 DeKalb ranks 11th in assessed valuation in 2016 and has been in the lower half since 2006. Even with the relatively lower assessed valuation, through the 10 year period, DeKalb has also consistently ranked in the lower half of the 14 communities for the property tax rate. 105 46  Assessed Value of Taxable Property for Fiscal Year 2016 32,833,576 12,177,758 39,511,338 9,401,320 56,205,928 15,223,571 38,998,251 78,686,402 125,965,723 63,099,260 149,545,866 56,768,073 308,118,039 49,645,834 122,473,358 79,253,886 217,281,136 341,110,857 68,982,503 108,495,593 441,647,788 142,889,179 763,642,797 305,076,606 56,976,024 242,324,603 116,055,318 235,964,563 505,826,859 376,194,689 891,708,866 1,564,260,751 656,321,694 699,260,973 393,686,769 261,933,495 283,233,886 178,575,396 506,065,090 845,660,790 382,895,892 587,790,868 Residential Commercial Industrial DeKalb ranks 12th for residential assessed value, 7th for commercial assessed value and 10th for industrial assessed value in 2016. 106 47  325,079,355 389,625,409 283,233,886 1,564,260,751 678,936,687 764,707,767 656,321,694 891,708,866 245,030,402 178,575,396 845,660,790 525,230,256 568,109,153 376,194,689 699,260,973 860,469,362 917,883,229 699,260,973 656,321,694 615,745,592 825,416,800 587,790,868 587,790,868 2006 499,096,061 591,605,225 DeKalb ranks 12th for residential assessed value. DeKalb’s most comparable communities 506,065,090 393,686,769 RESIDENTIAL ASSESSED VALUE OF TAXABLE RESIDENTIAL ASSESSED VALUE OF TAXABLE 48 2011 885,637,285 1,148,816,831 505,826,859 845,660,790 2016 389,984,765 393,686,769 511,782,750 382,895,892 605,668,990 382,895,892 684,151,001 506,065,090 376,194,689 944,422,898 1,044,846,020 891,708,866 283,233,886 573,211,376 753,228,512 PROPERTY FOR FISCAL YEAR 2016 PROPERTY FOR FISCAL YEAR 505,826,859 261,933,495 234,122,073 326,423,881 261,933,495 (Carpentersville, Hanover Park and Rolling Meadows) all rank in the lower half of the group. 178,575,396 1,521,893,691 1,819,849,352 1,564,260,751 All communities experienced declines in residential assessed valuation between 2011 and 2016. 107  145,545,772 167,457,427 142,889,179 103,432,157 124,426,791 108,495,593 64,064,954 56,976,024 64,447,072 64,028,623 56,768,073 266,195,135 312,815,076 217,281,136 299,132,396 286,235,274 235,964,563 COMMERCIAL ASSESSED VALUE OF TAXABLE 77,236,570 71,549,079 All communities experienced declines in commercial assessed valuation between 2011 and 68,982,503 49 403,147,597 395,150,291 341,110,857 393,743,154 325,424,028 242,324,603 64,905,424 120,416,770 116,055,318 281,505,774 354,606,287 305,076,606 PROPERTY FOR FISCAL YEAR 120,273,247 135,324,254 122,473,358 2006 2011 2016 61,287,971 91,033,462 79,253,886 2016. 283,652,466 336,922,887 308,118,039 108  COMMERCIAL ASSESSED VALUE OF TAXABLE PROPERTY FOR FISCAL YEAR 2016 341,110,857 308,118,039 305,076,606 242,324,603 235,964,563 217,281,136 142,889,179 122,473,358 116,055,318 108,495,593 79,253,886 68,982,503 56,976,024 56,768,073 DeKalb ranks 7th for commercial assessed value in 2016. DeKalb’s most comparable communities (Carpentersville, Hanover Park and Rolling Meadows) all rank in the lower half of the group. 109 50  37,922,484 49,380,638 38,998,251 133,382,625 763,642,797 164,235,277 149,545,866 441,647,788 50,204,923 49,645,834 9,592,567 149,545,866 14,989,957 12,177,758 125,965,723 71,554,658 81,683,777 56,205,928 78,686,402 1,284,938,287 1,227,423,162 763,642,797 63,099,260 80,121,173 80,447,378 63,099,260 DeKalb ranks 10th for industrial assessed value in 2016. DeKalb’s most comparable community INDUSTRIAL ASSESSED VALUE OF TAXABLE INDUSTRIAL ASSESSED VALUE OF TAXABLE 51 56,205,928 2006 163,668,867 195,331,416 39,511,338 49,645,834 2011 175,310,583 166,631,402 78,686,402 39,511,338 221,990,396 2016 471,631,539 441,647,788 38,998,251 126,398,861 148,675,847 32,833,576 125,965,723 74,034,248 72,993,042 15,223,571 32,833,576 PROPERTY FOR THE FISCAL YEAR 2016 13,378,053 PROPERTY FOR THE FISCAL YEAR 12,177,758 16,908,063 15,223,571 1,456,950 9,401,320 10,667,490 9,401,320 (Carpentersville) is ranked 13th. All communities experienced declines in industrial assessed valuation between 2011 and 2016. 110  PROPERTY TAXES LEVIED FOR FISCAL YEAR 2006 2011 2016 23,586,905 24,063,364 19,955,472 20,245,796 18,942,004 15,623,559 7,710,529 7,081,807 6,153,944 5,094,730 4,478,881 4,196,805 3,022,052 DEKALB CHAMPAIGN URBANA CHARLESTON BLOOMINGTON Note: Charleston information for 2006 and 2011 was not available. Each community increased their property tax levy between years 2006 and 2011 and 2011 and 2016. The levies for DeKalb, Urbana and Charleston are substantially lower than Champaign and Bloomington. University Communities - Property Taxes Levied for Fiscal Year 2016 24,063,364 20,245,796 7,081,807 5,094,730 4,478,881 Bloomington Champaign Urbana DeKalb Charleston 111 52  PROPERTY TAX RATES PER $100 OF ASSESSED VALUATION 2006 2011 2016 2.27434 1.312 1.2942 1.3152 1.312 1.2942 1.355 1.27185 1.31118 1.32827 1.1942 0.6899 0.593 DEKALB CHAMPAIGN URBANA CHARLESTON BLOOMINGTON DeKalb, Champaign and Urbana have very similar property tax rates in 2016. Charleston is substantially higher at 2.274 per $100 assessed value. Unlike the comparable communities, the rates have remained fairly flat for the university communities. Property Tax Rates per $100 of Assessed Valuation 2016 2.27434 1.355 1.32827 1.3152 1.1942 Charleston Urbana Bloomington Champaign DeKalb 112 53  TOTAL ASSESSED VALUE OF TAXABLE PROPERTY FOR THE FISCAL YEAR 1,799,164,559 1,811,618,358 2006 2011 2016 1,541,915,649 1,539,370,157 1,489,321,602 1,190,820,008 608,332,947 595,775,666 509,622,916 522,642,560 468,077,742 469,050,593 190,900,674 DEKALB CHAMPAIGN URBANA CHARLESTON BLOOMINGTON Unlike the declines experienced by comparable communities, the assessed valuation for Champaign and Bloomington have remained fairly flat between 2011 and 2016. Urbana experienced a 12% decline compared to DeKalb’s decrease of 23%. Total Assessed Value of Taxable Property for the Fiscal Year 2016 1,811,618,358 1,539,370,157 522,642,560 468,077,742 190,900,674 Bloomington Champaign Urbana DeKalb Charleston 113 54  Assessed Value of Taxable Property for Fiscal Year 2016 8,013,530 11,989,029 38,998,251 201,974,287 626,317,035 142,889,179 1,538,377,384 668,528,346 283,233,886 320,668,273 1,171,670,602 856,408,738 DeKalb Champaign Urbana Charleston Bloomington Residential Commercial Industrial DeKalb ranks last in the assessed value of taxable residential and commercial property and 2nd for industrial assessed value behind Champaign. 114 55  RE S I DE NTI AL AS S E S S E D VALUE O F TAX AB LE P RO P E RTY FO R FI S CAL YE AR (UNI V E RS I TY CO MMUNI TI E S ) 2006 2011 2016 1,152,480,233 1,171,670,602 902,553,042 922,457,891 856,408,738 711,817,507 389,625,409 350,754,767 325,079,355 320,668,273 283,233,886 272,438,176 DEKALB CHAMPAIGN URBANA CHARLESTON BLOOMINGTON Note: Charleston information not available Except Bloomington, all communities experienced declines in residential assessed valuation between 2011 and 2016. 115 56  Residential Assessed Value of Taxable Property for Fiscal Year 2016 1,171,670,602 856,408,738 320,668,273 283,233,886 Bloomington Champaign Urbana DeKalb DeKalb ranks last residential assessed value. COMMERCIAL ASSESSED VALUE OF TAXABLE PROPERTY FOR FISCAL YEAR (UNIVERSITY COMMUNITIES) 2006 2011 2016 668,528,346 624,502,192 636,484,972 626,317,035 556,329,628 466,974,314 245,020,899 196,612,417 201,974,287 145,545,772 167,457,427 142,889,179 DEKALB CHAMPAIGN URBANA CHARLESTON BLOOMINGTON Except Champaign, all communities experienced declines in commercial assessed valuation between 2011 and 2016. 116 57  Commercial Assessed Value of Taxable Property for the Fiscal Year 2016 668,528,346 626,317,035 201,974,287 142,889,179 Champaign Bloomington Urbana DeKalb DeKalb ranks last in commercial assessed value. INDUSTRIAL ASSESSED VALUE OF TAXABLE PROPERTY FOR FISCAL YEAR (UNIVERSITY COMMUNITIES) 1,538,377,384 2006 2011 2016 37,922,484 49,380,638 38,998,251 11,127,730 13,537,720 11,989,029 8,113,430 8,417,821 8,013,530 9,728,391 9,098,042 DEKALB CHAMPAIGN URBANA CHARLESTON BLOOMINGTON DeKalb and Urbana experienced declines in industrial assessed valuation between 2011 and 2016. Champaign experienced tremendous growth in industrial assessed valuation between 2011 and 2016. 117 58  Industrial Assessed Value of Taxable Property for Fiscal Year 2016 1,538,377,384 38,998,251 11,989,029 8,013,530 Champaign DeKalb Bloomington Urbana DeKalb ranks 2nd in industrial assessed value but is only 25% of Champaign’s industrial assessed value. 118 59 Pensions Employer Contributions for IMRF All comparable communities increased Illinois Municipal Retirement 2006 2011 2016 Fund (IMRF) contributions between 2006 and 2011 and between DeKalb 995,369 1,012,131 1,122,559 2011 and 2016. Batavia 737,959 914,496 981,899 Belvidere 317,526 448,219 Carpentersville 422,294 572,580 659,799 Crystal Lake 1,116,146 1,390,362 Elk Grove 905,947 1,425,084 2,647,031 Hanover Park 640,492 685,332 950,875 Hoffman Estates 1,090,910 1,431,656 1,743,250 Rolling Meadows 1,000,809 1,077,388 1,201,445 Romeoville 679,884 1,062,441 1,380,697 St. Charles 1,249,748 1,478,679 1,610,740 Streamwood 502,094 677,610 971,995 Sycamore 240,347 296,295 371,340 Wheaton 1,017,427 1,379,976 1,391,069 EMPLOYER CONTRIBUTIONS FOR IMRF 905,947 1,090,910 1,425,084 1,249,748 1,017,427 995,369 1,116,146 1,000,809 679,884 737,959 1,431,656 1,478,679 1,379,976 1,012,131 640,492 1,077,388 1,062,441 502,094 1,390,362 2,647,031 914,496 422,294 1,743,250 1,610,740 1,122,559 317,526 685,332 1,201,445 677,610 240,347 1,391,069 981,899 572,580 950,875 1,380,697 296,295 448,219 659,799 971,995 371,340 2006 2011 2016 119 60  University Communities – Employer Contributions for IMRF All university communities increased IMRF contributions between 2006 2006 2011 2016 and 2011 and between 2011 and 2016. DeKalb 995,369 1,012,131 1,122,559 Bloomington 2,349,425 3,494,133 3,951,246 Charleston 387,734 525,284 552,229 Champaign 1,611,238 2,221,754 2,392,432 Urbana 766,964 982,107 1,269,129 EMPLOYER CONTRIBUTIONS FOR IMRF 3,951,246 3,494,133 2,349,425 2,392,432 2,221,754 2006 1,611,238 1,269,129 2011 1,012,131 1,122,559 995,369 982,107 2016 766,964 525,284 552,229 387,734 DEKALB BLOOMINGTON CHARLESTON CHAMPAIGN URBANA 120 61 Funding Rate for IMRF 2006 2011 2016 DeKalb 100.00% 83.42% 81.80% All comparable communities had fully funded IMRF pension plans in Batavia 100.00% 107.82% 84.70% Belvidere 100.00% 84.20% 2006. In 2016, the communities have funded rates ranging between Carpentersville 100.00% 100.00% 86.74% 80.07% and 89.32%. Crystal Lake 71.23% 83.01% Elk Grove 100.00% 100.00% 86.93% Hanover Park 100.00% 86.00% 84.01% Hoffman Estates 100.00% 98.00% 83.80% Rolling Meadows 100.00% 90.54% 85.23% Romeoville 100.00% 100.00% 80.07% St. Charles 100.00% 100.00% 85.28% Streamwood 100.00% 89.00% 84.33% Sycamore 100.00% 88.00% 88.36% Wheaton 100.00% 100.00% 89.32% 100.00% FUNDING RATES FOR IMRF 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 107.82% 100.00% 100.00% 86.00% 98.00% 90.54% 100.00% 89.00% 88.00% 100.00% 83.42% 100.00% 84.20% 71.23% 81.80% 84.70% 86.74% 86.93% 84.01% 83.80% 85.23% 85.28% 84.33% 88.36% 89.32% 80.07% 83.01% 2006 2011 2016 121 62  University Communities – All university communities had fully funded IMRF pension plans in Funding Rates for IMRF 2006. In 2016, the communities have funded rates ranging 2006 2011 2016 between 81.80% and 86.94%. DeKalb 100.00% 83.42% 81.80% Bloomington 100.00% 88.19% 86.20% Charleston 100.00% 97.00% 85.58% Champaign 100.00% 100.00% 86.94% Urbana 100.00% 94.00% 85.31% FUNDING RATES FOR IMRF 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 97.00% 94.00% 88.19% 86.20% 85.58% 86.94% 83.42% 85.31% 81.80% 2006 2011 2016 DEKALB BLOOMINGTON CHARLESTON CHAMPAIGN URBANA 122 63 Unfunded Liability for IMRF 2006 2011 2016 DeKalb 4,603,233 9,157,004 9,961,368 Batavia 1,706,440 6,764,380 7,151,191 Unfunded IMRF liability for all comparable communities had grown Belvidere 3,650,134 3,386,517 substantially since 2006. DeKalb’s unfunded liability has more than Carpentersville 422,232 3,548,613 3,629,660 doubled since 2006. The unfunded liability for many communities has Crystal Lake 8,976,345 10,390,342 increased between 400% and 600%. Elk Grove 3,528,861 13,313,273 10,581,775 Hanover Park 1,690,487 8,011,352 7,694,890 Hoffman Estates 3,479,984 12,324,688 12,009,200 Rolling Meadows 4,530,426 12,049,696 9,975,524 Romeoville 2,420,502 6,706,742 9,241,171 St. Charles 2,960,311 11,051,305 12,229,685 Streamwood 399,637 6,964,541 6,370,850 Sycamore 173,853 2,221,266 2,078,628 Wheaton 1,288,665 9,974,336 8,565,106 13,313,273 UNFUNDED LIABILITY FOR IMRF 12,324,688 11,051,305 12,049,696 8,976,345 12,009,200 4,603,233 9,974,336 10,581,775 9,975,524 2,420,502 12,229,685 8,011,352 1,706,440 10,390,342 6,964,541 8,565,106 9,157,004 6,706,742 7,694,890 4,530,426 6,370,850 6,764,380 3,650,134 422,232 3,528,861 3,479,984 9,961,368 2,960,311 173,853 1,690,487 9,241,171 1,288,665 3,386,517 3,548,613 7,151,191 2,221,266 399,637 2006 3,629,660 2,078,628 2011 2016 123 64  University Communities – Unfunded Liability for IMRF Unfunded IMRF liability for all university communities had grown 2006 2011 2016 substantially since 2006. DeKalb’s unfunded liability has more than DeKalb 4,603,233 9,157,004 9,961,368 doubled since 2006. The unfunded liability for Champaign Bloomington 8,907,858 35,496,747 23,428,321 increased by more than $16 million. Charleston 1,636,393 4,553,888 4,388,274 Champaign 443,411 13,062,753 16,687,186 Urbana 1,845,271 8,638,400 8,668,246 UNFUNDED LIABILITY FOR IMRF 35,496,747 23,428,321 16,687,186 2006 13,062,753 2011 9,157,004 9,961,368 8,907,858 8,638,400 8,668,246 2016 4,603,233 4,553,888 4,388,274 1,636,393 1,845,271 443,411 DEKALB BLOOMINGTON CHARLESTON CHAMPAIGN URBANA 124 65 Employer Contributions for Police Pension Fund 2006 2011 2016 All comparable communities increased Police Pension Fund DeKalb 749,471 1,342,558 1,622,105 contributions between 2006 and 2011. Except St. Charles, all Batavia 777,012 1,219,262 1,808,325 comparable increased Police Pension Fund contributions Belvidere 885,875 1,079,609 Carpentersville 1,023,148 1,667,375 2,346,705 between 2011 and 2016. Crystal Lake 1,040,962 1,778,970 Elk Grove 952,813 1,995,569 2,226,035 Hanover Park 1,124,952 1,302,480 2,153,658 Hoffman Estates 1,471,015 2,497,419 3,228,471 Rolling Meadows 494,978 2,245,217 3,104,921 Romeoville 777,284 1,538,004 1,696,960 St. Charles 972,113 1,556,450 1,540,294 Streamwood 753,613 1,437,310 2,265,811 Sycamore 182,266 293,554 391,470 Wheaton 1,100,000 1,887,986 2,000,982 EMPLOYER CONTRIBUTIONS FOR POLICE PENSION FUND 1,471,015 2,245,217 1,023,148 2,497,419 753,613 1,995,569 1,124,952 777,012 3,104,921 1,100,000 749,471 1,667,375 1,040,962 2,226,035 777,284 972,113 1,302,480 3,228,471 1,437,310 1,887,986 1,342,558 1,219,262 885,875 1,538,004 1,556,450 2,346,705 1,778,970 952,813 2,153,658 2,000,982 1,622,105 1,808,325 1,079,609 1,696,960 1,540,294 2,265,811 494,978 182,266 293,554 2006 391,470 2011 2016 125 66  University Communities – All university communities increased Police Pension Fund Employer Contributions for Police Pension Fund contributions between 2006 and 2011. Except Urbana, all 2006 2011 2016 comparable increased Police Pension Fund contributions between DeKalb 749,471 1,342,558 1,622,105 2011 and 2016. Bloomington 1,953,492 4,111,770 4,690,359 Charleston 282,367 529,835 730,357 Champaign 2,925,758 3,690,543 5,455,449 Urbana 1,403,958 1,981,806 1,396,843 EMPLOYER CONTRIBUTIONS FOR POLICE PENSION FUND 5,455,449 4,690,359 4,111,770 3,690,543 2,925,758 2006 1,953,492 1,981,806 1,622,105 2011 1,342,558 1,403,958 1,396,843 2016 749,471 730,357 529,835 282,367 DEKALB BLOOMINGTON CHARLESTON CHAMPAIGN URBANA 126 67 Funding Rates for Police Pension Fund 2006 2011 2016 DeKalb 100.23% 99.58% 47.10% Batavia 99.02% 100.00% 53.20% Like DeKalb, many comparable communities had fully funded Police Belvidere 102.72% 58.20% Pension plans in 2006 and/or 2011. However by 2016, funding rates Carpentersville 86.50% 99.96% 52.39% dropped dramatically ranging between DeKalb’s 47.10% and Crystal Lake 55.48% 57.77% Streamwood’s 61.53%. Elk Grove 103.20% 104.90% 51.79% Hanover Park 118.17% 100.00% 54.12% Hoffman Estates 99.61% 100.83% 60.70% Rolling Meadows 68.89% 107.41% 50.30% Romeoville 99.90% 99.97% 61.53% St. Charles 99.76% 99.98% 49.79% Streamwood 102.80% 105.80% 61.90% Sycamore 107.20% 77.80% 58.25% Wheaton 102.16% 100.00% 59.00% FUNDING RATES FOR POLICE PENSION FUND 118.17% 107.41% 107.20% 103.20% 102.80% 102.72% 100.23% 99.02% 99.61% 99.90% 99.76% 102.16% 86.50% 104.90% 100.00% 105.80% 100.00% 99.58% 100.00% 100.83% 77.80% 99.97% 99.98% 99.96% 68.89% 58.20% 60.70% 61.53% 61.90% 59.00% 55.48% 53.20% 54.12% 58.25% 47.10% 52.39% 57.77% 51.79% 50.30% 49.79% 2006 2011 2016 127 68  University Communities – Funding Rates for Police Pension Fund Like DeKalb, most university communities had fully funded Police Pension plans in 2006 and/or 2011. However by 2016, funding 2006 2011 2016 rates dropped dramatically ranging between Charleston’s 36.07% DeKalb 100.23% 99.58% 47.10% to Urbana’s 68.6%. DeKalb’s funding rate in 2016 was 47.10%. Bloomington 108.51% 100.64% 49.80% Charleston 90.10% 76.00% 36.07% Champaign 145.23% 133.93% 73.16% Urbana 132.40% 139.20% 68.60% FUNDING RATES FOR POLICE PENSION FUND 145.23% 139.20% 133.93% 132.40% 108.51% 100.23% 99.58% 100.64% 90.10% 76.00% 73.16% 2006 68.60% 2011 47.10% 49.80% 2016 36.07% DEKALB BLOOMINGTON CHARLESTON CHAMPAIGN URBANA 128 69  Unfunded Liability for Police Pension Fund 2006 2011 2016 DeKalb 9,151,686 13,967,807 32,197,930 Batavia 9,088,382 15,291,965 24,101,519 Unfunded Police Pension liability for all comparable Belvidere 9,851,638 13,386,846 communities grew substantially since 2006. DeKalb’s unfunded Carpentersville 16,342,552 19,117,852 33,571,081 liability increased more than 350% while Sycamore’s unfunded Crystal Lake 18,066,611 24,677,865 liability increased more than 700%. Elk Grove 12,264,740 28,076,290 65,600,563 Hanover Park 9,259,783 16,156,172 25,268,664 Hoffman Estates 19,478,947 34,120,588 46,206,322 Rolling Meadows 29,592,959 12,953,912 37,295,637 Romeoville 8,972,160 13,421,388 21,496,873 St. Charles 10,449,466 14,152,354 29,676,393 Streamwood 7,800,156 15,320,644 27,259,383 Sycamore 1,185,574 2,917,500 8,382,443 Wheaton 4,190,858 22,202,964 32,705,597 65,600,563 UNFUNDED LIABILITY FOR POLICE PENSION FUND 19,478,947 16,342,552 29,592,959 9,151,686 34,120,588 10,449,466 4,190,858 12,264,740 9,259,783 7,800,156 9,088,382 18,066,611 19,117,852 12,953,912 8,972,160 13,967,807 22,202,964 14,152,354 15,291,965 9,851,638 24,677,865 16,156,172 46,206,322 15,320,644 28,076,290 13,421,388 33,571,081 37,295,637 1,185,574 32,197,930 29,676,393 2006 13,386,846 25,268,664 27,259,383 32,705,597 24,101,519 21,496,873 2,917,500 2011 8,382,443 2016 129 70  University Communities – Unfunded Police Pension liability for all university communities Unfunded Liability for Police Pension Fund grew substantially since 2006. DeKalb’s unfunded liability 2006 2011 2016 increased more than 350% while Urbana’s was overfunded by DeKalb 9,151,686 13,967,807 32,197,930 nearly $2.8 million in 2006, but had an unfunded liability of $16 Bloomington 27,241,249 37,844,830 64,590,330 million in 2016. Charleston 5,620,072 9,549,468 20,422,014 Champaign 7,273,004 24,696,387 32,976,770 Urbana -2,840,919 -4,616,230 16,004,791 UNFUNDED LIABILITY FOR POLICE PENSION FUND 64,590,330 37,844,830 32,197,930 32,976,770 27,241,249 24,696,387 2006 20,422,014 16,004,791 2011 13,967,807 9,151,686 9,549,468 2016 5,620,072 7,273,004 -2,840,919 -4,616,230 DEKALB BLOOMINGTON CHARLESTON CHAMPAIGN URBANA 130 71 Employer Contributions for Firefighters' Pension Fund 2006 2011 2016 DeKalb 1,062,734 2,001,368 2,158,156 All comparable communities increased Fire Pension Fund Batavia 429,456 697,577 805,379 Belvidere 882,299 783,447 contributions between 2006 and 2011. Except Elk Grove and Carpentersville 421,208 720,927 1,107,232 Belvidere, all comparable communities increased Fire Pension Crystal Lake 819,655 1,555,655 Fund contributions between 2011 and 2016. Elk Grove 1,049,747 2,131,657 844,917 Hanover Park 367,369 698,763 1,220,758 Hoffman Estates 1,347,220 2,488,676 2,867,272 Rolling Meadows 500,086 2,213,935 3,245,390 Romeoville 116,796 326,594 351,767 St. Charles 605,537 1,236,962 1,162,413 Streamwood 600,828 1,059,356 1,474,025 Sycamore 284,343 417,580 579,310 Wheaton 750,000 982,397 1,010,419 EMPLOYER CONTRIBUTIONS FOR FIREFIGHTERS' PENSION FUND 2,213,935 1,347,220 3,245,390 1,062,734 1,049,747 2,488,676 2,001,368 819,655 2,131,657 367,369 605,537 600,828 2,867,272 421,208 750,000 1,059,356 2,158,156 1,555,655 429,456 882,299 698,763 1,236,962 844,917 982,397 720,927 284,343 500,086 1,474,025 697,577 783,447 116,796 1,010,419 1,162,413 417,580 1,107,232 1,220,758 2006 805,379 326,594 579,310 351,767 2011 2016 131 72  University Communities - Employer Contributions for Firefighters' Pension Fund All university communities increased Fire Pension Fund 2006 2011 2016 contributions between 2006 and 2011. Except Urbana, all DeKalb 1,062,734 2,001,368 2,158,156 university communities increased Fire Pension Fund Bloomington 1,851,299 3,140,710 4,416,266 contributions between 2011 and 2016. Charleston 391,116 603,285 637,009 Champaign 1,903,310 3,486,399 3,363,170 Urbana 1,032,024 1,483,810 1,038,747 EMPLOYER CONTRIBUTIONS FOR FIREFIGHTERS' PENSION FUND 4,416,266 3,486,399 3,363,170 3,140,710 2,158,156 2,001,368 2006 1,851,299 1,903,310 1,483,810 2011 1,062,734 1,032,024 1,038,747 2016 603,285 637,009 391,116 DEKALB BLOOMINGTON CHARLESTON CHAMPAIGN URBANA 132 73 Funding Rates for Firefighters' Pension Fund 2006 2011 2016 DeKalb 100.23% 99.58% 37.40% Like DeKalb, many comparable communities had fully funded Fire Batavia 105.69% 101.17% 66.00% Pension plans in 2006 and/or 2011. However by 2016, funding Belvidere 121.70% 52.80% rates dropped dramatically ranging between DeKalb’s 37.40% and Carpentersville 77.10% 99.96% 62.34% Streamwood’s 68.51%. Only Romeoville was unique maintaining a Crystal Lake 60.99% 68.14% funding rate at 95.12%. Elk Grove 103.50% 105.60% 49.83% Hanover Park 112.44% 100% 57.42% Hoffman Estates 100.99% 100.57% 65.20% Rolling Meadows 77.65% 104.01% 42.61% Romeoville 100.45% 99.96% 95.12% St. Charles 99.79% 99.98% 68.46% Streamwood 105.70% 106.30% 68.51% Sycamore 108.50% 80.70% 56.29% Wheaton 117.26% 100.00% 68.31% FUNDING RATES FOR FIREFIGHTERS' PENSION FUND 105.69% 121.70% 103.50% 112.44% 105.70% 108.50% 117.26% 100.99% 77.65% 100.23% 100.45% 77.10% 99.79% 100.00% 99.96% 105.60% 99.58% 101.17% 100% 100.57% 99.98% 106.30% 80.70% 99.96% 104.01% 95.12% 60.99% 66.00% 65.20% 68.51% 68.31% 52.80% 57.42% 68.46% 62.34% 68.14% 49.83% 56.29% 37.40% 42.61% 2006 2011 2016 133 74  University Communities – Funding Rates for Firefighters' Pension Fund Like DeKalb, all but Champaign had over 95% funded Fire 2006 2011 2016 Pension plans in 2006. However by 2016, funding rates dropped DeKalb 100.23% 99.58% 37.40% dramatically with Charleston at 36.72%, DeKalb at 37.40% and Bloomington 108.85% 100.78% 45.41% Bloomington at 45.41%. Only Urbana was able to maintain over Charleston 98.20% 75.10% 36.72% 80% funding rate in 2016. Champaign 70.07% 90.20% 72.30% Urbana 123.30% 124.70% 82.69% FUNDING RATES FOR FIREFIGHTERS' PENSION FUND 123.30% 124.70% 108.85% 100.23% 99.58% 100.78% 98.20% 90.20% 82.69% 75.10% 72.30% 70.07% 2006 2011 45.41% 37.40% 36.72% 2016 DEKALB BLOOMINGTON CHARLESTON CHAMPAIGN URBANA 134 75 Unfunded Liability for Firefighters' Pension Fund 2006 2011 2016 DeKalb 17,514,196 24,717,144 39,321,164 Unfunded Fire Pension liability for all comparable communities Batavia 3,693,563 5,707,429 7,926,660 grew substantially since 2006. DeKalb’s unfunded liability Belvidere 7,663,869 12,076,827 increased more than 225% while Sycamore’s unfunded liability Carpentersville 3,305,653 4,296,687 12,214,388 increased more than 423%. Crystal Lake 9,609,727 12,943,084 Elk Grove 11,296,153 32,899,023 65,716,155 Hanover Park 2,789,781 5,908,438 12,752,687 Hoffman Estates 11,118,960 24,666,002 39,798,851 Rolling Meadows 14,667,478 30,637,778 39,237,063 Romeoville 963,540 403,821 402,317 St. Charles 2,658,994 4,599,962 15,186,079 Streamwood 2,776,348 10,907,535 16,370,840 Sycamore 2,224,698 4,986,375 9,515,499 Wheaton 12,625,237 7,432,612 12,603,008 65,716,155 UNFUNDED LIABILITY FOR FIREFIGHTERS' PENSION FUND 17,514,196 11,118,960 14,667,478 24,717,144 11,296,153 24,666,002 30,637,778 2,658,994 2,776,348 32,899,023 9,609,727 2,789,781 3,305,653 12,625,237 39,321,164 7,663,869 39,237,063 39,798,851 3,693,563 2,224,698 4,296,687 5,908,438 4,599,962 10,907,535 7,432,612 2006 5,707,429 12,076,827 12,943,084 4,986,375 963,540 12,603,008 12,214,388 12,752,687 15,186,079 16,370,840 2011 7,926,660 403,821 9,515,499 402,317 2016 135 76  University Communities – Unfunded Liability for Firefighters' Pension Fund Unfunded Fire Pension liability for all university communities 2006 2011 2016 grew substantially since 2006. DeKalb’s unfunded liability DeKalb 17,514,196 24,717,144 39,321,164 increased more than 225% and Charleston’s increased by 454%. Bloomington 27,559,680 37,640,948 59,715,325 Charleston 4,924,332 8,824,007 22,389,560 Champaign 17,708,139 16,464,274 29,285,394 Urbana -747,616 -1,870,862 8,732,709 UNFUNDED LIABILITY FOR FIREFIGHTERS' PENSION FUND 59,715,325 39,321,164 37,640,948 29,285,394 27,559,680 24,717,144 22,389,560 2006 17,514,196 17,708,139 16,464,274 2011 8,732,709 2016 8,824,007 4,924,332 -747,616 -1,870,862 DEKALB BLOOMINGTON CHARLESTON CHAMPAIGN URBANA 136 77 Revenue and Expenditure Projections 78 137  Revenue and Expenditure Projections  Revenue and Expenditure Forecasts  Baseline Forecast  Alternative Forecast  Revenues  Expenditures  Personnel Costs  Outsourcing of Service  Salaries  Bargaining Units  Wellness  Retiree Insurance  Health Insurance Plan Design 79 138  Revenue and Expenditure Projections Revenue and Expenditure Forecast With the beginning of the Great Recession, the City’s General Fund Balance dramatically declined from $2,161,911 in 2008 to only $22,169 in 2010. Since then, the City has succeeded in growing the fund balance to meet the City’s policy to maintain a balance of 25% of expenditures. General Fund Balance History $9,123,076 $8,374,964 $9,061,359 $8,018,755 $5,916,598 $5,177,514 $4,669,218 $2,161,911 $2,692,928 $416,652 $22,169 2008 2009 2010 2011 2012 2013 2014 2015 2016 2016.5 2017 Budget Total General Fund revenues from 2013 to 2016 have averaged 4.77% annual growth, while total General Fund expenditures have averaged 3.43% annual growth over the same period. However, General Fund Major Revenues (net of property tax) for FY2018 is projected to increase by 2.2%. Five Year Revenue and Expenditures Trend - General Fund $33,081,944 $35,175,019 $33,034,933 $28,898,412 $30,725,816 $30,744,360 $34,383,474 $31,655,635 $27,876,868 $29,010,286 2013 Actual 2014 Actual 2015 Actual 2016 Actual 2017 Budget Total Revenue, excluding transfers Total Expenditures, excluding transfers 80 139 The State of Illinois budget further complicates future revenue projections. The State reduced the local share of the Local Government Distributive Fund (LGDF) by 10% for State Fiscal Year 2018 and implemented a 2% administrative fee for local home rule sales taxes. The State consistently shows a willingness to consider reductions to other shared revenues. Listed below are General Fund major revenue trends. General Fund Major Revenue Trends Major Revenue Trend FY 2017 Budget FYE 2017 FY18 Projection FY18 v. FYE17 %/- Property Tax ↑ 5,565,384 5,565,384 5,937,357 6.7% Municipal Sales Tax ↑ 5,364,944 5,364,944 5,420,467 1.0% Home Rule Sales Tax ↑ 6,512,000 6,642,770 6,707,185 1.0% Local Use Tax ↑ 1,034,705 1,100,750 1,144,780 4.0% Income Tax ↓ 4,513,075 4,289,362 4,418,043 3.0% Restaurant & Bar Tax ↑ 1,935,000 1,964,381 2,003,668 2.0% Hotel/Motel Tax ↓ 290,000 261,241 261,241 0.0% Utility Tax ↓ 2,550,000 2,520,000 2,517,019 -0.1% Telecommunications Tax ↓ 819,000 752,347 737,595 -2.0% Crime Free Registration ↔ 195,000 195,000 195,000 0.0% Video Gaming Tax ↑ 205,000 208,021 245,000 17.8% Ambulance User Fees ↑ 1,060,000 1,103,829 1,269,403 15.0% Fire Services ↑ 910,000 969,951 1,004,000 3.5% TOTAL 30,954,108 30,937,980 31,860,758 3.0% TOTAL (Net Property Tax) 25,388,724 25,372,596 25,923,401 2.2% Baseline Forecast A baseline projection through 2023 was created using the following assumptions. Property tax increases cover projected Police and Fire Pensions. Sales and Use taxes increase annually by 2.5% and other revenues increase by 1.90%. Expenditures increase by 3.5% annually and Equalized Assessed Valuation (EAV) grows 2% annually. Inflation Assumptions 2018 2019 2020 2021 2022 2023 Property taxes 6.77% 5.00% 5.00% 5.00% 5.00% 5.00% Sales & Use taxes 2.50% 2.50% 2.50% 2.50% 2.50% 2.50% Other Revenues 1.90% 1.90% 1.90% 1.90% 1.90% 1.90% Investment Income 0.50% 0.50% 0.50% 0.50% 0.75% 0.75% Expenditures 3.50% 3.50% 3.50% 3.50% 3.50% 3.50% EAV growth 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% Note: Police & Fire Pensions Levy Increase. Other levies only increase as TIF EAV realized. 81 140  Projection 2017 - 2023 Revenues, Expenditures & Fund Balance $50,000,000 $40,000,000 $30,000,000 $20,000,000 $10,000,000 $0 2017 2018 2019 2020 2021 2022 2023 -$10,000,000 Revenues Expenses Net Transfers In/Out Fund Balance (unassigned) Given the assumptions, each year results in deficits with the fund balance declining dramatically and depleted by 2023. Projected 2017 2018 2019 2020 2021 2022 2023 Revenues $35,175,019 $35,818,606 $36,747,847 $37,820,013 $38,824,798 $39,825,194 $41,102,873 Expenses $34,383,475 $35,766,619 $37,106,422 $38,497,519 $39,941,923 $41,441,730 $42,999,122 Net Transfers In/Out (390,863) (408,958) (399,514) (500,495) (495,767) (483,794) (1,149,978) Fund Balance (unassigned) $9,061,353 $8,704,382 $7,946,293 $6,768,292 $5,155,400 $3,055,070 $8,843 Projection 2017 - 2023 Fund Balance Decline $10,000,000 30% $8,000,000 25% 20% $6,000,000 15% $4,000,000 10% $2,000,000 5% $0 0% 2017 2018 2019 2020 2021 2022 2023 Fund Balance (unassigned) % of Fund Balance to Expense With 2% EAV growth, the property tax rate would increase from 1.2% to 1.4% to maintain annual pension levy increases of 5.0%. 82 141  Projection 2017-2023 Property Tax Rate $10,000,000 1.45% 1.40% $8,000,000 1.35% $6,000,000 1.30% $4,000,000 1.25% 1.20% $2,000,000 1.15% $0 1.10% 2017 2018 2019 2020 2021 2022 2023 Property Tax Levy Tax Rate Note: Assumption 2% annual EAV growth Projection 2017-2023 Pension Levy Increase $8,000,000 16% $7,000,000 14% $6,000,000 12% $5,000,000 10% $4,000,000 8% $3,000,000 6% $2,000,000 4% $1,000,000 2% $0 0% 2017 2018 2019 2020 2021 2022 2023 Pension Levy Pension Levy Increase Annual % Increase Note: Assumption only pension levy increase until TIF expiration in 2023 83 142  Projection 2017-2023 Pension Levy Increase $8,000,000 8% $7,000,000 7% $6,000,000 6% $5,000,000 5% $4,000,000 4% $3,000,000 3% $2,000,000 2% $1,000,000 1% $0 0% 2017 2018 2019 2020 2021 2022 2023 Police Pension Fire Pension Total Police & Fire Pension Annual % Increase The total Police and Fire Pension levy increases from $5,492,904 in 2017 to $7,485,234 in 2023. Pension levy is affected depending on an actuarial reports, actuarial assumptions, retirements and payroll of Police and Fire personnel. Alternative Forecast Below is an alternate projection through 2023. The projection was created to maintain General Fund balance near 25%. The following assumptions were utilized. Property tax increases to cover Police and Fire Pensions. Sales and Use Taxes increase annually by 5.0% and other revenues increase by 2.0%. Expenditures increase by 3.0% annually and Equalized Assessed Valuation (EAV) grows 2% annually. Inflation Assumptions 2018 2019 2020 2021 2022 2023 Property taxes 6.77% 5.00% 5.00% 5.00% 5.00% 5.00% Sales & Use taxes 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% Other Revenues 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% Investment Income 0.50% 0.50% 0.50% 0.50% 0.75% 0.75% Expenditures 3.00% 3.00% 3.00% 3.00% 3.00% 3.00% EAV growth 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% Note: Police & Fire Pensions Levy Increase Only. Other levies only increase as TIF EAV realized. 84 143  Projection 2017 - 2023 Revenues, Expenditures & Fund Balance $50,000,000 $40,000,000 $30,000,000 $20,000,000 $10,000,000 $0 2017 2018 2019 2020 2021 2022 2023 -$10,000,000 Revenues Expenses Net Transfers In/Out Fund Balance (unassigned) Projected 2017 2018 2019 2020 2021 2022 2023 Revenues $35,175,019 $35,818,606 $37,208,044 $38,774,546 $40,309,775 $41,912,116 $43,820,631 Expenses $34,383,475 $35,622,165 $36,808,125 $38,035,531 $39,305,919 $40,620,883 $41,982,086 Net Transfers In/Out (390,863) (408,958) (399,514) (500,495) (495,767) (485,505) (1,153,511) Fund Balance (unassigned) $9,061,353 $8,848,836 $8,849,241 $9,087,761 $9,595,850 $10,401,578 $11,086,612 With these assumptions, minimal deficits occur and the fund balance is maintained at 25%. However, 5% growth of sales and use taxes is extremely aggressive with lower growth rates in sales tax between 2012 and 2016. Projection 2017-2023 Fund Balance Trend $12,000,000 $10,000,000 26.4% 26.4% $8,000,000 25.6% $6,000,000 24.8% 24.4% $4,000,000 24.0% 23.9% $2,000,000 $0 2017 2018 2019 2020 2021 2022 2023 Fund Balance (unassigned) % of Fund Balance to Expense 85 144 Revenues The General Fund’s major revenue categories are shown below. General Fund Revenue Sources 1. Sales & Use Taxes (41%) 6. Transfers in (4%) 2. Property Taxes (15%) 7. Other Income (3%) 3. Intergovernmental Revenues (14%) 8. Licenses & Permits (3%) 4. Franchise & Utility Tax (10%) 9. Fines (2%) 5. Service Charges & Fees (6%) DeKalb revenue is reliant on elastic funding sources for 85% of its revenue sources. With intergovernmental revenues dependent on the State Legislator and State budget, this category is more elastic than in the past. Home Rule Sales Tax History $6,673,332 $5,804,331 $6,794,013 $5,920,753 $6,511,982 $5,745,008 $5,948,654 $5,852,867 $4,248,925 $4,274,684 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 86 145 Home Rules Sales Tax has fluctuated over the last four years. The State of Illinois has also implemented a 2% collection fee starting SFY2018. State Sales Tax has flattened since 2015. State Sales Tax History $5,422,936 $5,289,536 $4,220,495 $3,621,333 $3,957,767 $4,458,400 $4,126,391 $3,782,236 $3,950,721 $3,871,872 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 87 146  Distribution of Sales Tax by SIC Code Reporting Agriculture &Manufacturers General All Others 7% Merchandise 6% Drugs & Misc. 24% Retail 15% Automotive & Food Filling Stations 12% 13% Lumber. Bldg, Furniture & Drinking and Hardware H.H & Radio Apparel Eating Place 5% 4% 2% 12% The chart above shows the type of local sales activity by percentage that generate sales tax for DeKalb. Components of the City Property Tax Levy $7,000,000 $6,000,000 $5,000,000 $4,000,000 $3,000,000 $2,000,000 $1,000,000 $0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Corporate GO Bonds IMRF Fire Pension Police Pension Social Security 88 147 The majority of the City’s property tax levy is dedicated to Police and Fire Pensions. The corporate levy for 2015 and 2016 is also dedicated to Police and Fire Pensions. Levies for Social Security and IMRF pension have been nearly eliminated. The General Obligation (GO) Bonds shown in 2013 through 2016 are dedicated to the construction of the Library on behalf of the Library Board. Income and Use Tax History $5,434,596 $5,503,607 $4,918,760 $4,982,520 $4,592,427 $4,225,360 $4,835,866 $4,246,923 $4,389,337 $4,017,481 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Income and Use Tax have shown flat growth. Telecommunications Tax History $1,073,724 $1,008,801 $948,051 $876,405 $849,837 2012 2013 2014 2015 2016 The Telecommunications Tax is consistently declining. 89 148 Expenditures The General Fund’s expenditures by departments are shown below. A combined 74% is expended on Public Safety and Public Works. General Fund Expenditures 1. Police (35%) 6. Community Development (4%) 11. Legislative (.5%) 2. Fire (29%) 7. City Manager Office (3%) 3. Public Works (10%) 8. IT (3%) 4. General Fund Support (7%) 9. Finance (2%) 5. Transfers Out (5%) 10. Human Resources (1%) Total General Fund revenues from 2013 to 2016 have averaged 4.77% annual growth. Five Year Revenue and Expenditures Trend - General Fund $33,081,944 $35,175,019 $33,034,933 $28,898,412 $30,725,816 $30,744,360 $34,383,474 $31,655,635 $27,876,868 $29,010,286 2013 Actual 2014 Actual 2015 Actual 2016 Actual 2017 Budget Total Revenue, excluding transfers Total Expenditures, excluding transfers 90 149 Outstanding Bonded Debt (As of 7/17/2017) Original Current Final Optional Par Amount Outstanding Coupon Range Maturity Redemption General Obligation Bonds, Series 2010A (Downtown TIF, 12 Yr bonds) $ 10,800,000 $ 5,200,000 4.00% - 4.00% 12/1/2021 Non-Callable General Obligation Refunding Bonds, Series 2010B (Pub. Works, 18 Yr Refi CAB bonds) $ 3,905,000 $ 3,905,000 4.25% - 4.75% 1/1/2028 Non-Callable Taxable General Obligation Refunding Bonds, Series 2010C (Pub. Works, PD station, 13 Yr Refi bonds) $ 5,415,000 $ 4,065,000 4.35% - 5.90% 1/1/2023 Non-Callable General Obligation Bonds, Series 2012A (PD station, 17 Yr bonds) $ 9,905,000 $ 7,405,000 2.00% - 2.63% 1/1/2030 1/1/2023 General Obligation Bonds, Series 2013A (DeKalb Library, 20 Yr bonds) $ 6,685,000 $ 5,870,000 3.00% - 4.00% 1/1/2033 1/1/2023 General Obligation Bonds, Series 2013B (PD station, 9 Yr bonds) $ 2,380,000 $ 2,320,000 1.50% - 3.00% 1/1/2022 Non-Callable $ 28,765,000 DeKalb’s debt service payments decline in 2023 with expiration of Downtown TIF bonds. Other General Obligation debt continues steady until 2027 after which debt payment reduce from nearly $2.5 million to $1.5 million. Debt Payments - Total Principal & Interest 4,000,000 3,500,000 3,000,000 2,500,000 2,000,000 1,500,000 1,000,000 500,000 0 2010A 2010B 2010C 2012A 2013A 2013B Personnel Costs The biggest single driver of City operating expenditures is personnel costs and particularly employee salaries. Municipal government is mostly service based and labor intensive. In large departments such as the Police and Fire Departments, personnel costs make up over 95% of operating budget expenditures. The current City’s workforce is comprised of 221 full-time equivalent (FTE) positions breakdown as follows: 40.5% from Police, 26.7% from Fire, 19.3% from Public Works and 13.5% from all other departments (Community Development, Finance, Human Resources, Information Technology and the City Manager’s Office). Since FY08, the City’s workforce has been reduced by approximately 13%. There have been 91 150 several reductions in force since FY08, and there were fewer City positions budgeted in FY17 than there were in FY08. Compared to FY08, the pre-recession era, the City is doing more with less in order to continue to provide responsive City services to the community. The City has shifted personnel costs from full-time to part-time positions. Compared to FY08, full-time positions were reduced by 15.3%, while part-time positions increased by 15%. Size of the City’s Workforce Size City's Workforce Fiscal FT PT FTEs 300 Year FY08 234 40 254 200 FY09 225 33 241.5 100 FY10 218 33 234.5 0 FY11 188 32 204 FY12 186 34 203 Fiscal Year FY13 187 53 213.5 FY14 195 58 224 FT PT FTEs FY15 197 63 228.5 FY16 199 65 231.5 FY16.5 200 65 232.5 FY17 198 46* 221 *Decrease due crossing guard services being outsourced in August 2017. The size of the City’s workforce data does not include DeKalb Sycamore Area Transportation Study (DSATS) personnel. DSATS staff salaries and benefits are funded entirely through federal and state grants. The City budget does not include any reimbursements from the General Fund for these positions. Wage Growth- All funds $17,275,013 $16,992,928 $15,545,704 $17,378,294 $18,368,083 $16,410,946 $16,650,470 $17,656,341 $16,744,278 $16,741,218 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 92 151  Outsourcing of Services The City of DeKalb continues to explore and evaluate opportunities to outsource services. During FY14, the City outsourced certain aspects of the Building Division and Crossing Guard services during FY17. Salaries The City of DeKalb employs a range of personnel in a variety of capacities, in order to provide the public with City services. To attract and retain the quality work force necessary for delivering quality services, the City seeks to remain competitive with neighboring jurisdictions and the labor market in general. In 2014, a Pay and Compensation Study was commissioned by the City Council to address compensation inequalities between collective bargaining units and non-bargaining unit employees. From FY02 to FY17, the compounded annual compensation increases for collective bargaining unit employees have exceeded the compensation increases for non-bargaining unit employees by 36.66%. NBU AFSCME FOP IAFF Increase Increase Differential Increase Differential Increase Differential FY02 2.00% 5.00% (3.00%) 5.00% (3.00%) 5.50% (3.50%) FY03 2.00% 5.00% (3.00%) 5.00% (3.00%) 5.00% (3.00%) FY04 2.00% 2.00% 0.00% 5.00% (3.00%) 5.00% (3.00%) FY05 0.00% 4.00% * (4.00%) 4.00% (4.00%) 5.00% (5.00%) FY06 2.00% 4.00% * (2.00%) 3.75% (1.75%) 4.00% (2.00%) FY07 0.00% 4.00% * (4.00%) 3.75% (3.75%) 3.50% (3.50%) * FY08 3.16% 6.00% * (2.84%) 4.00% (0.84%) 5.00% (1.84%) FY09 3.73% 4.00% (0.27%) 3.00% 0.73% 4.00% (0.27%) FY10 0.00% 4.00% (4.00%) 0.00% 0.00% 4.00% (4.00%) FY11 0.00% 1.50% (1.50%) 2.50% (2.50%) 4.00% (4.00%) FY12 1.33% 1.50% (0.17%) 2.50% (1.17%) 0.00% 1.33% FY13 2.00% 2.00% 0.00% 2.50% (0.50%) 2.00% 0.00% FY14 2.00% 2.00% 0.00% 2.50% (0.50%) 2.50% (0.50%) FY15 1.50% 2.00% (0.50%) 2.50% (1.00%) 2.25% (0.75%) FY16 2.50% 2.25% 0.25% 2.50% 0.00% 2.50% 0.00% FY16.5 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% FY17 2.50% 2.00% 0.50% 1.25% 1.25% 1.25% 1.25% Average 1.67% 3.20% (1.53%) 3.11% (1.44%) 3.47% (1.80%) Compd. Avg. 30.22% 65.37% (35.15%) 63.00% (32.78%) 72.26% (42.04%) Average Differential (36.66%) * AFSCME increases were 2% in July and 2% in January 93 152  ** AFSCME increases were 2% in July 2007 and 4% in January 2008 Based on the Study recommendations and approval by the Council, the City made adjustments to its compensation policy to ensure that compensation and benefits afforded to non- bargaining unit employees were commensurate with internal data, market data and wage policies from comparable municipalities. In addition to maintaining the pay plans, the City has also implemented a performance management program that will assist in transitioning to a pay for performance model. When the pay for performance system is fully implemented, non-bargaining unit employees will only receive performance based pay increases. As a note, non-bargaining unit employees previously received both an economic adjustment each year and a merit increase on their anniversary. This practice was eliminated during FY16 as a result of the Pay and Compensation Study because salaries were made more market competitive. Over the past two years, total employee salary costs have increased by 2.5% on average. In the five‐year baseline forecast, employee salaries are projected to increase by 2.5% per year in the next three years. The appropriate maintenance of the City’s pay plans and the establishment of a performance management program aligns with the DeKalb 2025 Strategic Plan vision of efficient, quality, responsive services and the goal of achieving the highest possible standards of public administration through sound Human Resources practices. The City must maintain its competitiveness with other municipalities and internal equity with bargaining units in order to retain and recruit a talented work force. Bargaining Units Employees of the City of DeKalb are represented by three bargaining units:  AFSCME: American Federation of State, County and Municipal Employees Union Local #813 represents all employees from Public Works, Finance, Information Technology and Police Telecommunications and Records, except managerial, supervisory, professional and confidential positions. AFSCME represents a total of 46 employees.  IAFF: International Association of Firefighters, Local 1236 represents all active full- time employees of the Fire Department who holds certificate of appointment by the Board of Fire and Police Commissioners, excluding the Fire Chief and Deputy Fire Chiefs. IAFF represents a total of 54 employees.  FOP: Fraternal Order of Police Lodge 115 represents all Sergeants and Police Officers. FOP represents a total of 58 employees. Bargaining unit increases are based upon collective bargaining agreements. Bargaining unit employees receive a wage adjustment each year in addition to step increase. The step 94 153 increase is an advancement in the salary schedule on anniversary date of appointment. Bargaining unit members reach the top of the pay range within eight years of employment. Negotiated bargaining unit increases are as follows: FY18 FY19 FY20 Average AFSCME 2.25% 2.50% 2.50% 2.42% IAFF 2.50% 2.50% 2.50% 2.50% FOP 2.50% 2.50% n/a 2.50% Wellness The City recognizes that our most valuable resource is our employees, and their health and wellness has a direct impact on the continued success of the City of DeKalb in the delivery of City services and is directly linked to healthcare costs. In 2017, the City initiated a Wellbeing Program. Representatives from all City department, including bargaining unit and non- bargaining unit employees, comprise the Wellbeing Team. The team’s goal is to promote and support wellness programs that encourage emotional, physical, financial, social and career wellbeing for its employee and families. Through the City’s membership with the Intergovernmental Personnel Benefits Cooperative (IPBC), the City introduced a comprehensive and integrated health management and preventive wellness solution. In 2017, biometric screenings were offered to all City employees and dependents covered through the City’s health insurance plan. While the program is in its infancy, based on our historical knowledge of the healthcare industry, the City believes a comprehensive and progressive wellness program has the opportunity to yield long term cost savings. The program also serves to engage employees and all covered lives in cost reduction and their own wellbeing. Retiree Insurance In December 2008, the City commissioned Executive Partners, Inc. (EPI) to review and evaluate the financial practices of the City. EPI recommended steps that could be taken to reverse the City’s budget deficit and create a sustainable long-term financial plan. One of EPI’s key recommendations was that the City eliminate the retiree health subsidy. The City has made progress in reducing its financial exposure for retiree insurance benefits. In 2014, the City concluded a five year phase out of subsidized retiree dependent coverage. Previously, retirees paid only a portion of the cost for dependent coverage. As of March 1, 2014 any retiree electing dependent coverage is required to pay the full premium cost. In 2012, the City implemented a plan to reduce future obligations for retiree insurance benefits. This plan provides a phase out of subsidized benefits based on an employee’s hire date. Under 95 154 this plan, the City has no obligation to subsidize benefits for future employees. Retiree Benefit after Medicare FOP Retiree Benefit until Medicare Age Age Hired Prior to 50% employee/20% spouse/0% 100% employee/0% spouse/0% Tier 1 3/1/86 dependent dependent Hired 3/1/86 to 50% employee/20% spouse/0% $2,000/year for Medicare Tier 2 7/1/01 dependent Supplement Hired 7/1/01 to $2,000 deferred comp match while Tier 3 7/1/11 employed No City Contribution Hired on/after Tier 4 7/1/11 No City Contribution No City Contribution Retiree Benefit after Medicare IAFF Retiree Benefit until Medicare Age Age Hired Prior to 50% employee/20% spouse/0% 100% employee/0% spouse/0% Tier 1 3/1/86 dependent dependent Hired 3/1/86 to 50% employee/20% spouse/0% $2,000/year for Medicare Tier 2 7/1/01 dependent Supplement Hired 7/1/01 to $2,000 deferred comp match while Tier 3 7/1/11 employed No City Contribution Hired on/after Tier 4 7/1/11 No City Contribution No City Contribution Retiree Benefit after Medicare AFSCME Retiree Benefit until Medicare Age Age Tier 1 N/A N/A N/A Hired Prior to $2,000/year for Medicare Tier 2 1/1/91 80% employee Supplement $2,000 deferred comp match while employed Hired 1/1/91 to $3,000 deferred comp match while Tier 3 12/31/11 employed No City Contribution 96 155  Hired on/after Tier 4 1/1/12 No City Contribution No City Contribution Retiree Benefit after Medicare NBU Retiree Benefit until Medicare Age Age Hired Prior to Tier 1 3/1/86 80% employee 100% employee $2,000 deferred comp match while employed Hired 3/1/86 to $2,000/year for Medicare Tier 2 12/31/01 80% employee Supplement $2,000 deferred comp match while employed Hired 1/1/02 to $3,000 deferred comp match while Tier 3 12/31/11 employed No City Contribution Hired on/after Tier 4 1/1/12 No City Contribution No City Contribution Health Insurance Plan Design In 2014, the City added a Medicare supplement plan for retirees over age 65. The reduced premium costs and plan design have provided a significant savings to the City, as well as retirees. In 2016, the City implemented various cost-saving options for health insurance benefits. A HMO and HDHP (high deductible health plan) were added to allow for cost-savings for the City as well as the employee. A HDHP provides a higher deductible and a lower premium cost than a traditional insurance plan. The IRS defines a HDHP as any plan with a deductible of at least $1,300 for single coverage or $2,600 for family coverage. The HDHP offers a health savings account that allows employees to contribute pre-tax dollars to use for current or future medical expenses. In 2016, IAFF employee contributions changed from a percent of base salary to a percent of premium. This change in contribution allows the City to better budget health insurance costs. It also allows for a change in contribution based on the premium increase each year, rather than a salary increase. FOP will change to percent of premium in 2018. In 2017, the City added an insurance opt-out program. Employees that choose to decline City 97 156 insurance coverage and can provide proof of other coverage will receive an incentive. This is a significant savings compared to the cost of the annual insurance premium. The City could see a savings up to 94% of the premium cost. The City continues to research benefit options that will reduce the cost for the City and employees. Health Insurance Cost Year Employee Coverage Retiree Coverage Total 2012 $3,361,590 $1,261,041 $4,622,631 2013 $3,699,413 $1,024,727 $4,724,140 2014 $3,625,770 $1,243,473 $4,869,243 2015 $3,593,477 $1,258,057 $4,851,534 2016 $3,598,465 $1,222,298 $4,820,763 2016.5 $1,715,882 $718,024 $2,433,906 2017 Budget $3,880,570 $1,316,700 $5,197,270 Health Insurance Costs $6,000,000 $5,000,000 $4,000,000 Retiree Coverage $3,000,000 Employee Coverage $2,000,000 $1,000,000 $0 2012 2013 2014 2015 2016 2016.5 2017 Budget 98 157 Streets and Fleet Analysis 99 158  Streets and Fleet Analysis  Fleet Inventory  Fleet Condition Assessment  Level of Service  Replacement Cost  Street Inventory  Pavement Condition Assessment  Level of Service  Pavement Management Plan 100 159  Streets and Fleet Analysis – Preliminary Asset Management Plan In 2017, the Public Works and Finance Departments, along with consultants from Engineering Enterprises, Inc. (EEI) and Ehlers, Inc. (Ehlers), developed a preliminary Asset Management Plan (AMP) for Streets and Fleet. EEI was engaged to perform the street portion of the plan. EEI has performed similar evaluations for other municipalities using the same software used by the City. The preliminary, high-level AMP examines the City’s needs for maintaining streets and replacing fleet over the next 10 years. The AMP also presents options for dedicated revenue sources to fund the improvements including local gas tax, vehicle stickers, trash hauler fees and sales tax with resident rebate. Staff and the consultants presented the preliminary plan at the Special Committee of the Whole on August 31, 2017. The preliminary AMP is a first draft of ideas for addressing the deterioration of the City’s streets and fleet. It incorporates input from residents received during two public outreach meetings, even though only eight residents attended these meetings. As a background, Asset Management (AM) is a set of coordinated activities designed to optimize the benefits derived from an asset. At its core, AM is about effectively managing City- owned assets over the long-term. The AMP sets forth ideas and principles to manage municipal infrastructure in a financially sustainable manner that meets the needs and expectations of residents. The preliminary AMP consists of four primary elements: 1. Asset Inventory and Condition Assessment 2. Expected Level of Service 3. Asset Management Strategy 4. Financial Strategy The asset inventory and condition assessment define the asset in terms of type, age, value, maintenance and other key characteristics. The expected level of service defines the performance goals of the asset. Together, the condition assessment and expected level of service are used to determine the financial resources required to meet expectations. The financial strategy lays out the funding plan for investing in the asset at the level required to meet the level of service objectives. Fleet Inventory The Public Works Department maintains a fleet database that includes the following information for all City vehicles: Equipment ID Chassis Description Asset Type Purchase Price 101 160  Purchase Year Age Useful Life Replacement Year Current Replacement Value Mileage (or Hours of Service) Cost of Maintenance Cost of Fuel Total Operating Cost The data was reviewed and evaluated as part of the fleet inventory. The current fleet consists of 173 units with a replacement value of approximately $12 million. The table below shows the number of units, percentage of total number of units, replacement cost and percentage of total replacement costs for nine categories. Category No. of Units % Replacement Cost % Fire Trucks 11 6.3% $3,934,842 32.8% Dump Trucks 23 13.3% $2,165,276 18.1% Trucks MD/HD 25 14.5% $1,756,722 14.7% SUV 33 19.1% $1,070,714 8.9% Construction 15 8.7% $1,018,477 8.5% L. Duty/Van 16 9.2% $706,001 5.9% Sedans 29 16.8% $664,750 5.5% Other 12 6.9% $406,883 3.4% Grounds Eq. 9 5.2% $258,761 2.2% TOTALS 173 $11,982,426 Each unit in the fleet was assigned to one of the nine general fleet categories described below. Fire Trucks – These are highly specialized vehicles used to respond to emergencies. Currently, the City owns 11 units with a replacement value of over $3.9 Million. The average age of the Fire Trucks is 13 years. The useful lives range between 15 to 20 years. Trucks Medium Duty/Heavy Duty – This class of vehicle includes light dump trucks, heavy duty pick-up trucks and specialty trucks. Uses for the light dump trucks include road repairs, asphalt hauling and storm water inlet construction. The heavy duty pick-ups are used to haul personnel, materials and equipment to and from work sites. The specialty trucks include aviation fuel trucks, de-icing truck, ambulances, flatbeds, aerial trucks, vac-all and the Police paddy wagon. These types of vehicles are used by Airport (3), Fire (6), Street (9), Police (1) and Utilities (6). The average age of the Medium and Heavy Duty Trucks is 14.8 years. Useful life ranges from 7 to 10 years for ambulances, heavy duty pick-ups and light dump trucks and 10 to 20 years for specialty trucks. Heavy Dump Trucks – These vehicles have a gross vehicle weight (GVW) of at least 33,000 pounds and a load carrying capacity of 10 tons. Heavy dump trucks are used to tow leaf 102 161 vacuums and leaf boxes during the fall season, large loads of rock salt during the winter and heavy loads and tow equipment trailers throughout the year. The exposure to salt causes the frame and other steel parts of these dump trucks to deteriorate faster than normal vehicles. The Utility Division has one heavy dump truck and the Airport has three older (more than 20 years old) heavy dump trucks. The Street Division requires at least 16 heavy dump trucks during the fall and winter for leaf and snow plowing/salting. Currently, the Street Division has 19 units on hand, two of which are 20 years old. The average age of the Street Division Heavy Dump Trucks is 12.6 years. The useful life of a heavy dump truck is 10 years. Construction – These units are mobile on-road and off-road equipment that is used to dig, load and carry large loads over short distances. The inventory includes tractors, backhoes, loaders, graders, vibratory rollers and excavators. These type of vehicles are used by Street (11) and Utilities (4). The average age of the construction equipment is 16.5 years. The useful life of this equipment is generally from 10 to 15 years. SUV – These four wheel drive sports utility vehicles are larger than, and provide more passenger room and better off road performance than traditional sedans or pick-up trucks. Because of their size, SUVs are highly visible and provide the operator with better visibility than sedans. These type of vehicles are used in the City Hall pool (3), IT (1), CD (1), Airport (2), DSATS (1), Fire (8), Street (5), Police (7) and Utilities (3). Six of the vehicles used by the Police Department are used for patrol cars. The average age of SUVs is 11.6 years. The useful lives for this class of vehicle is generally 10 years. Light Duty Trucks/Vans – This class of vehicle may be equipped with either two or four wheel drive and may have an extended cab capable of carrying a crew of five personnel along with light hand equipment or materials. These type of vehicles are used by Airport (2), Fire (1), Street (7), Police (2) and Utilities (4). The average age of these vehicles is 12.6 years. The typical useful life of this class of vehicle is 10 years. Sedans – This class of vehicle is used as almost exclusively by the Police Department. Currently, 26 of the 29 sedans are used by the Police Department. One is assigned to the Airport as a courtesy car and two are assigned to Community Development. The vehicles are used by detectives, commanders, school resources officers and for the resident officer program. Three of these vehicles are used as patrol cars. The older sedans are reassigned to the Community Development Department. The average age of these vehicles is 6.4 years. The typical useful life of this class of vehicle is eight to 10 years and four years for patrol cars. Other – These units include specialized equipment including two Harley Davidson motorcycles, two street sweepers, three forklifts, floor cleaner, scissor lift and a line laser truck used for roadway striping. These units are used by Airport (1), Street (6), Police (4) and Utilities (2). The average age of these vehicles is 11.4 years. The typical useful life of this class is seven to 15 years. Grounds Equipment – The equipment of this class includes tractors, motorized mowing 103 162 equipment and a motorized Airport runway broom. These units are used by Airport (5), Street (2) and Utilities (2). The average age of these vehicles is 13.9 years. The typical useful life of this class is five to 15 years. A summary of the number of units assigned to various departments and divisions is presented in the table below. Category Street Police Fire Utilities Airport Other TOTALS Fire Trucks - - 11 - - - 11 Dump Trucks 19 - - 1 3 - 23 Trucks MD/HD 9 1 6 6 3 - 25 SUV 5 7 8 3 2 8 33 Construction 11 - - 4 - - 15 L. Duty/Van 7 2 1 4 2 - 16 Sedans - 26 - - 1 2 29 Other 6 4 - 1 1 - 12 Grounds Eq. 2 - - 2 5 - 9 TOTALS 59 40 26 21 17 10 173 Fleet Condition Assessment Based on the input from residents, the condition of the fleet was evaluated using age, useful life, mileage (or hours of service) and annual maintenance costs. Historical trends such as average age, number of units beyond the recommended useful life and annual maintenance were also evaluated. These historical data indicate a declining fleet condition since about 2006. The decline corresponds to the same time that the City stopped systematically replacing vehicles beyond the useful life. Prior to 2006, the City replaced most of its fleet at the end of its useful life. The average age of the fleet increased from 5.7 years to 10.7 years between 2006 and 2016 as shown by the graph to the right. This trend is a consequence of allowing vehicles to age beyond their useful life before replacing them. The consistent increase in average age from year to year indicates this practice continued for several years. 104 163 The number of vehicles that are beyond their useful life also increased from 2006 to 2016. The graph to the right shows that in 2006 there were 18 vehicles in the fleet that were beyond their useful life. That number steadily increased to 95 in 2016. There are 173 units in the fleet. Currently about 55% of the fleet is beyond its useful life. This trend suggests there were on average seven to eight vehicles per year that were not being replaced during the last 10 years. Older vehicles require frequent maintenance and major repairs. The graph of total annual costs to maintain the fleet confirms this. It shows that from 2006 to 2016 the annual maintenance cost of the fleet increased from about $220,000 per year to about $312,000 per year. If the fleet is allowed to continue to age, maintenance costs will continue to increase. However, the greater concern is the impact of breakdowns on the delivery of services, particularly with respect to public safety. Staff evaluated each unit in the fleet using a condition rating system. These type of systems are commonly used by municipalities for fleet evaluations. Using this system, staff assigned points for age of the unit compared to useful life, mileage or hours of service and annual maintenance costs compared to value. The table below summarizes the point system. Criteria Points Age 1 point for every 10% of useful life, plus 2 points per year in service beyond the useful life. Use 1 point for every 10,000 miles or 300 hours of service. Maintenance Cost 1 point for maintenance cost <14% of value 2 points for maintenance costs 15 to 29% of value 3 points for maintenance costs 30 to 44% of value 4 points for maintenance costs 45 to 59% of value 5 points for maintenance costs 60 to 74% of value 105 164  6 points for maintenance costs 75 to 89% of value 7 points for maintenance costs 90 to 99% of value 2 points for every 5% beyond 100% To illustrate this system, consider a unit that is at the end of its useful life. That unit would receive 10 points for age (one point for every 10% of the useful life). Additionally, assume the unit has 150,000 miles (or 4,500 hours of service), which are both high amounts. The unit would be assessed another 15 points. Lastly, assume the amount of annual maintenance on the unit was equal to the value of the unit. That would earn the unit another 7 points for a total of 32 points. That unit would be at the entry point of the declining category using the following rating system. Rating Points Good <16 Average 16 – 31 Declining 32 – 42 (needs replacing) Critical 43+ (needs replacing) The result of applying this scoring system to the City fleet is shown on the 38% adjacent graph. Approximately 36% of 26% the fleet is in declining or critical 20% condition. Replacing the units that are 16% in declining or critical conditions would cost approximately $4.3 million, given the total fleet value is $12 million. <16 16 - 31 32 - 42 43+ The decline in condition of the fleet Good Average Declining Critical corresponds to a reduction in fleet replacement expenditures. The following graph illustrates fleet expenditures that were planned based on replacing vehicles at, or near, their useful life versus actual expenditures. The graph demonstrates a significant reduction in fleet replacement expenditures since 2008. From 2002 to 2007, fleet expenditures average about $710,000. Adjusting for inflation, that level of spending (in 2007) is the equivalent of about $860,000 today. From 2008 to 2017, fleet expenditures average just under $300,000. The difference between planned and actual expenditures increases after 2009. Prior to 2009, the difference is about $190,000, whereas, after 2009, the difference is about $500,000. 106 165  Fleet Cost (Planned) Fleet Cost (Actual) $2.0 Millions $1.5 $1.0 $0.5 $0.0 2002 2004 2006 2008 2010 2012 2014 2016 Level of Service Public meetings on May 23 and 25, 2017 solicited residents’ input on several aspects of the preliminary AMP for streets and fleet. During the meetings, staff presented the planning process and preliminary findings from the asset inventory and condition assessment. The meeting featured an interactive format in which staff presented information and the audience indicated their preference regarding several options. Staff also presented information concerning historical funding for fleet replacement. The following planning principles were identified as important to the participants of the survey.  The most important criteria for assessing vehicle condition are Useful Life and Maintenance Costs.  The most important criterion for fleet level of service is Safety followed by Reliability and Functionality. The most important policy for fleet replacement is Availability of Funds followed by Maintenance Costs.  Nearly all respondents agreed that annual maintenance costs of a particular vehicle should not exceed the value of the vehicle. Based on these planning principles the following preliminary levels of service are proposed. 1. Fleet vehicles should be replaced before they reach the end of their useful life unless there are specific reasons to keep the vehicles. 2. Fleet vehicles should be evaluated for safety, reliability and functionality as part of routine maintenance. 107 166  3. Fleet replacement schedules should be adjusted regularly to accommodate the availability of funds. 4. Replacement schedules should include consideration of maintenance costs. 5. Fleet vehicles that cost more to maintain than they are worth should be given priority in the fleet replacement schedule. Replacement Cost Each City department submitted a fleet replacement schedule based on replacing most of the units that were beyond their useful life over the next three years. The cost of this aggressive replacement schedule is shown graphically below. The replacement schedule assumes that some vehicles being replaced will be retained for use as pool cars. The first year of this replacement schedule is just over $2.5 million. The second and subsequent years of the schedule are closer to $1.5 million. The average over five years is $1.65 million. The impact of this aggressive replacement schedule on the average age of the fleet is shown on the following graph. It shows that the average age of the vehicles used by Street, Police and Fire would be reduced from current higher than desired levels to near the same average age of vehicles in 2006. Namely, for Street, the average age of vehicles would drop from 14.5 to 7.2 years. The average age in 2006 was 7.1 years. Likewise, for Police, the average age would drop from 6.1 to 3.7 years. The average age was 3.3 years in 2006. Lastly, for Fire, it would reduce the average age of vehicles from 11.1 to 6.7 years. The average age in 2006 was 4.8 years. 108 167  Street Police Fire 16 14 Average Age (Years) 12 10 8 6 4 2 0 2006 2008 2010 2012 2014 2016 2018 2020 2022 Recognizing that an average expenditure of $1.65 million per year for fleet may not be attainable. A more conservative replacement schedule was developed. In this scenario, each department reevaluated their needs, limiting replacement requests to those that were considered critical. The resulting replacement cost schedule is shown graphically below. The average age of the fleet in this scenario increases by about one year in 2022 compared to the aggressive replacement scenario. 109 168 Street Inventory The inventory and condition assessment of City-owned streets was conducted by EEI using data collected by Infrastructure Management Services, Inc. (IMS) during three separate surveys conducted over the past four years. As part of the surveys, IMS identified all roadways in the City’s network, assigned them a unique identifier, listed their physical characteristics (length, width, etc.) and attributes (pavement type, traffic and functional classification) and linked the network to the City’s GIS map. The condition of the roads was evaluated using specialized survey equipment referred to as a Laser Road Surface Tester (RST). This equipment was used to collect observations on the condition of the pavement surface, as well as collect digital imagery and spatial coordinate information. Additionally, deflection testing and analysis was performed to measure the strength of the pavement base. There are approximately 130 centerline miles of roads owned and maintained by the City. The functional classification of these roads are shown on the map and listed below:  Residential: 97.3 miles (74.8%)  Collector: 10.1 miles (7.7%)  Arterial: 22.7 miles (17.5%) Pavement Condition Assessment The key pavement condition data elements collected by the Laser RST include roughness (bumps per mile) and distress (cracking, potholes, raveling, etc.). The condition data for each City block was used to create a single score representing the overall condition of the pavement for that City block. The scores, ranging from 10 to 100, are referred to as the Pavement Condition Index (PCI). The PCI of a road can be used to characterize the condition of the pavement using the following six categories: PCI Rating 86 – 100 Excellent 80 – 85 Very Good 70 – 79 Good 60 – 69 Fair 40 – 59 Poor 10 – 39 Very Poor 110 169 The following pictures and descriptions of road surface, remaining life and maintenance activities are representative of several qualitative rating categories. Very Good to Excellent (PCI 80 – 100) Near perfect condition. Very minor defects may be present. Comfortable to drive. The remaining life is 15 to 25 years. Little to no maintenance required when new. Requires routine maintenance such as crack and joint sealing. Good (PCI 70-79) Structurally sound. Cracking and other minor distresses are present. Road still feels smooth to drive. The remaining life is 12 to 18 years. Routine maintenance such as patching and crack sealing with surface treatments. Fair (60-69) Structural damage may be present. Cracking and other minor distresses are extensive. Road may feel rough. The remaining life is 8 to 15 years. Heavier surface treatments and thin overlays. Localized panel replacements. Poor (PCI 40 – 59) Structural damage is extensive. The road is very rough. The remaining life is 5 to 10 years. Heavy surface-based inlays or overlays with localized repairs. Moderate to extensive panel replacements. 111 170 The table and graph below illustrate the distribution of pavement condition for the roadway network in DeKalb using the scale described previously. The average PCI for the City’s road network is currently 78. Approximately 25.7 miles of roads have a PCI less than 70. These roads need immediate maintenance to prevent further degradation. If the roads are allowed to continue to deteriorate, they will require higher levels maintenance (or reconstruction) at higher costs in the future. PCI Rating Miles % 86 - 100 Excellent 13.9 10.7% 80 – 85 Very Good 49.7 38.2% 70 - 79 Good 40.8 31.4% 60 - 69 Fair 16.3 12.5% 40 – 59 Poor 7.4 5.7% 10 - 39 Very Poor 2.0 1.5% 38.2% 31.4% 10.7% 12.5% 5.7% 1.5% 86 - 100 80 – 85 70 - 79 60 - 69 40 – 59 10 - 39 Pavement Condition Index The need for immediate maintenance on 25.7 miles of City streets is largely the result of a lack of funding for street maintenance over the past several years. The next graph shows street maintenance expenditures per year from 1992 to 2007. The average annual expenditure for this period is $860,000 per year. If inflation is considered, the $1.0 million spent in 1994 is the 112 171 equivalent of about $1.65 million in today’s dollars. $2.0 Aggregate MFT Local Gas Tax TIF Funds Millions $1.5 $1.0 $0.5 $0.0 2017 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 Level of Service Public meetings were held on May 23 and 25, 2017, to solicit resident’s preferences and opinions on several aspects of the preliminary AMP for streets and fleet. The following planning principles were identified as more important to the participants of the survey.  Most respondents believe the PCI of City streets is between 60 and 70 (on a scale of 10 to 100). The calculated PCI is 78.  Seventy-five percent (75%) of respondents believe the average PCI of City streets should be 10 points higher than it is now.  Most respondents believe 10% of City streets should have a PCI rating of less than 60. Currently, 18% of City streets have a PCI of less than 60.  Respondents believe funds should be prioritized to address Arterials and Collectors, ahead of Residential streets.  The majority of respondents believe it should take five years to “fix” DeKalb’s streets. Based on these planning principles, the following preliminary levels of service are proposed: 1. The average PCI for City streets should be 75 to 80. 2. No more than 10% of City streets should be in Poor condition or lower (PCI less than 60). 3. Annual street maintenance programs should prioritize Arterials and Collectors, ahead of Residential streets. 113 172  4. Street maintenance should significantly improve the conditions of City streets in five years or less. Pavement Management Plan A Pavement Management System (PMS) is a planning tool used to assist municipalities with the task of building and maintaining roadways. A PMS provides a means to collect, store, organize and analyze pavement condition information and help plan for preventative and future maintenance. Research and experience has shown it is far less expensive to maintain a road in good condition than it is to allow a road to deteriorate before repairing it as outlined in the graph below. Pavement Management Systems place priority on maintaining these good condition roads, which over the long-term will effectively provide a higher condition roadway at a lower cost. 120 100 Time for Preventative Time for Measures ($0.15-$1.00/SF) Resurfacing ($1.50 - $4.00/SF) 80 Time for Reconstruction RANK ($6.00 - $12.00/SF) 60 Standard Pavement Rank Reduction Curve 40 20 0 0 5 10 15 20 25 Time (Years) The IMS software used to store the street inventory and pavement condition data was employed in simulating several pavement maintenance scenarios along and estimating the associated costs. The scenarios were completed using certain rehabilitation strategies, average regional unit rates and pavement performance curves. A total of eight scenarios were evaluated. The scenario description, average annual street maintenance expenditures and the average road network PCI rating after five years and after 10 years are presented in the following chart. 114 173  Maintenance Scenarios with Resulting Average Expenditures Average Annual Street Avg. Avg. No. Scenario Description Maintenance PCI @ PCI @ Expenditures 5Yrs 10Yrs 1 Maintain the current rank of 78* $7,052,400 78 71 2 Maintain the rank at 70 $7,021,300 76 70 3 Increase rank to 80** $6,931,500 79 71 Maintain current spending amount 4 $1,403,200 70 59 ($1.2M + engineering) Resurface entire system over 20 years 5 $3,830,300 72 63 ($29.28/SY) Double amount in Scenario 5/Year 1, 6 then split the remaining costs over 19 $3,940,800 73 64 yrs. 7 Maintain the rank at 65 $4,622,400 73 65 8 Spend $2.5M per year $2,587,100 71 61 Notes: 1) These scenarios were run with only a resurfacing (3"/3") option. No reconstruction option was included. * Not achievable at 10 years without reconstruction. Estimate $13 million including reconstruction. ** Not achievable at five years without reconstruction. Estimate $13.5 million including reconstruction. The average annual street maintenance expenditures for each of the scenarios above is graphed versus average PCI for the road network at five and 10 years below. At Year 5 At Year 10 85 Average Pavement Condition Index 80 75 70 65 60 55 50 $0.0 $2.0 $4.0 $6.0 $8.0 Average Annual Street Maintenance Expenditure (Millions) 115 174 The red squares represent the average PCI at the end of five years given the corresponding average street maintenance expenditures of a particular scenario. The red dashed line shows the best-fit linear trend. Similarly, the blue circles represent the average PCI at the end of 10 years given the corresponding average street maintenance expenditures of a particular scenario. The blue dashed line shows the best-fit linear trend. The scenarios that meet resident’s level of service expectations after five years include scenarios 1, 2 and 3. These scenarios require over $7 million dollars of expenditures on street maintenance per year. Given the current maintenance program is only $1.3 million, it may not be reasonable to expect such a large increase in annual expenditures to be possible. Therefore, a more conservative scenario has been selected for inclusion in the preliminary financial management plan. Scenario 5, with an average annual expenditure of approximately $3.8 million, is included in the preliminary financial management plan. This scenario keeps the average PCI for City streets above 70 for the next five years. It represents a significant increase in current street maintenance expenditures and would produce noticeable improvements throughout the City. 116 175  Alternative Funding 117 176  Alternative Funding  Intergovernmental Agreements – Revenue Sharing  DeKalb Market Square Agreements  Peace Road Interchange Improvements  DeKalb County Home Agreement  Sycamore Boundary Agreement  General Fund Stabilization – Property Tax Levy  Streets and Fleet Funding  Streets and Fleet Conclusions  Alternative Funding Policy Conclusions 118 177  Alternative Funding Policy Considerations Intergovernmental Agreements – Revenue Sharing In the past, the City approved revenue sharing agreements with DeKalb County and the City of Sycamore. The intended purpose of each agreement with DeKalb County was to facilitate economic development projects or provide infrastructure. The intent of the boundary agreement with the City of Sycamore was also to enhance economic development and intergovernmental cooperation through revenue sharing within a specific area bordering both communities. Listed below is a short synopsis of each agreement and its associated financial impact to date and projected to the end of the agreements. In particular, the City should more thoroughly review the Peace Road Interchange Improvement agreement with DeKalb County for opportunities to end the agreement. DeKalb Market Square Agreements and the Peace Road Interchange Resolution 1993-115, Passed October 11, 1993 – An intergovernmental agreement and annexation agreement was approved by the City and the County (owner of the property) including 138 acres of property located at Barber Greene Road and Route 23. The 40 year agreement is effective from the date of passage on October 11, 1993. The City and the County agreed to equally share sales tax revenues generated from development on the property. The following sales taxes are shared equally: City’s Municipal Retailers’ Occupation Tax (1%), City’s Home Rule Sales Tax (.75%) and the County’s Sales Tax (.25%). The City’s payments (“City Share”) to the County have been at least $1.1 million per year since 2011 with 2014 being an exception. The County’s payments (“County Share”) to the City have been at least $125,000 since 2011 with 2014 being an exception. The net amount paid by the City to the County has been close to $1 million per year since 2010. Through 2016, a total of $20.7 million has been paid to the County and a total of $2.3 million has been received from the County since the start of this agreement. Projections to the end of the agreement in October of 2033, indicate the City will pay the County $40,352,840 and the County will pay the City $4,619,953. The net payments by the City are projected to total $35,732,866. 119 178 Tax Sharing Analysis DeKalb Market Square Resolution 93-115 City Share County Share Net Paid Year 50% Sales Tax 50% Sales Tax by City 1997 $235,977.31 $24,609.01 $211,368.30 1998 $753,761.50 $78,200.50 $675,561.00 1999 $765,779.00 $88,675.00 $677,104.00 2000 $821,661.00 $94,010.00 $727,651.00 2001 $850,154.00 $95,830.00 $754,324.00 2002 $926,726.86 $103,109.55 $823,617.31 2003 $719,600.24 $79,154.67 $640,445.57 2004 $943,515.07 $110,438.81 $833,076.26 2005 $1,235,943.83 $138,331.04 $1,097,612.79 2006 $1,615,006.07 $176,888.42 $1,438,117.65 2007 $1,383,536.02 $158,899.70 $1,224,636.32 2008 $1,358,715.06 $154,820.40 $1,203,894.66 2009 $1,294,528.23 $146,850.08 $1,147,678.15 2010 $1,239,505.92 $141,975.89 $1,097,530.03 2011 $1,197,385.48 $136,050.00 $1,061,335.48 2012 $1,120,365.00 $128,907.51 $991,457.49 2013 $1,099,069.24 $126,550.39 $972,518.85 2014 $866,898.03 $104,902.54 $761,995.49 2015 $1,110,996.20 $128,538.97 $982,457.23 2016 $1,152,013.88 $129,107.75 $1,022,906.13 Projected 2017 $1,111,000.00 $128,500.00 $982,500.00 Projected 2018 $1,116,555.00 $129,142.50 $987,412.50 Projected 2019 $1,122,137.78 $129,788.21 $992,349.56 Projected 2020 $1,127,748.46 $130,437.15 $997,311.31 Projected 2021 $1,133,387.21 $131,089.34 $1,002,297.87 Projected 2022 $1,139,054.14 $131,744.79 $1,007,309.36 Projected 2023 $1,144,749.41 $132,403.51 $1,012,345.90 Projected 2024 $1,150,473.16 $133,065.53 $1,017,407.63 Projected 2025 $1,156,225.53 $133,730.86 $1,022,494.67 Projected 2026 $1,162,006.65 $134,399.51 $1,027,607.14 Projected 2027 $1,167,816.69 $135,071.51 $1,032,745.18 Projected 2028 $1,173,655.77 $135,746.86 $1,037,908.91 Projected 2029 $1,179,524.05 $136,425.60 $1,043,098.45 Projected 2030 $1,185,421.67 $137,107.73 $1,048,313.94 Projected 2031 $1,191,348.78 $137,793.27 $1,053,555.51 Projected 2032 $1,197,305.52 $138,482.23 $1,058,823.29 Projected 2033 $1,203,292.05 $139,174.64 $1,064,117.41 Total $40,352,839.80 $4,619,953.46 $35,732,886.34 120 179 Resolution 1996-001, Passed January 8, 1996 – An addendum to the original 1993 Intergovernmental Agreement. Walmart is listed as a “known” store to develop on the property. The City and the County agreed to each expend $500,000 toward public improvements. Resolution 2002-095, Passed October 14, 2002 – A second amendment to the original 1993 Intergovernmental Agreement. The amendment is limited to Lot #12 of DeKalb Market Square (Kohl’s). The City and the County agreed to jointly fund and share equally in the cost of infrastructure improvements up to a total of $1,550,000 to be paid in cash or in the form of sales tax rebates of one-half of City/County sales tax receipts for a period of up to eight years following the opening of the store. The last payment to Kohl’s was on September 27, 2013 for the period of December 2012 through February 2013. The total paid to Kohl’s was $609,301.16. Resolution 02-95 COMPLETED in 2013 City Share Kohl's Res. 02-95 Year 50% Sales Tax $80,000.00 2004 $21,187.87 $70,000.00 2005 $64,016.04 $60,000.00 2006 $71,979.01 $50,000.00 2007 $75,603.30 $40,000.00 2008 $72,393.37 $30,000.00 2009 $67,552.96 $20,000.00 2010 $66,058.59 $10,000.00 2011 $64,521.24 $0.00 2012 $55,369.67 City Share 2013 $50,619.11 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Total $609,301.16 Peace Road Interchange Improvements Peace Road Interchange - Resolution 2004-031, Passed May 24, 2004 – A second intergovernmental agreement with DeKalb County was passed to share the City’s Home Rule Sales Tax generated at the DeKalb Market Square property. The City’s payments cover costs associated with the Illinois Toll Highway Authority installing Peace Road Interchange Improvements. In December 1997, the City entered into an agreement with the Illinois Toll Highway Authority agreeing to pay them in excess of $2,300,000 by June 2004. The County agreed to participate in repayment of the City’s debt. However, the City would provide additional City Home Rule Sales Tax revenues to the County. The City increased the City’s Home Rule Sales Tax from .75% to 1.25%. The City and County equally share the additional .50% City Home Rule Sales Tax. The agreement has a clause stipulating in the event the City repeals the .50% sales tax increase, every payment made to the County from the City would be applied to the principal balance due to the County. Thus, each payment made reduces the principal dollar for dollar. At the time the City repeals the .50% sales tax, the remaining balance, if any, would be subject to a 4% 121 180 simple interest. However, no additional interest would accrue beyond May 24, 2014 (10 years from execution of agreement). The terms of this agreement continue throughout the 40 year term set in the original 1993 DeKalb Market Square Intergovernmental Agreement. Approximately $250,000 is paid annually to the County and a total of approximately $3.4 million has been paid between 2004 and 2016. The table shows the City has paid more than $3.4 million dollars versus the $2.3 million provided by the County in 2004. As of 2012, the City met the obligation by paying $2,410,343. Peace Road Interchange Improvements Resolution 04-31 City Share City Share Year 50% Sales Tax To Date 2004 $110,838.00 $110,838.00 2005 $290,174.00 $401,012.00 2006 $279,098.00 $680,110.00 2007 $317,791.00 $997,901.00 2008 $309,581.00 $1,307,482.00 2009 $293,161.00 $1,600,643.00 2010 $283,920.00 $1,884,563.00 2011 $267,385.00 $2,151,948.00 2012 $258,395.00 $2,410,343.00 2013 $253,101.00 $2,663,444.00 2014 $251,248.00 $2,914,692.00 2015 $255,784.00 $3,170,476.00 2016 $215,566.00 $3,386,042.00 Projected 2017 $250,000.00 $3,636,042.00 Projected 2018 $251,250.00 $3,887,292.00 Projected 2019 $252,506.25 $4,139,798.25 Projected 2020 $253,768.78 $4,393,567.03 Projected 2021 $255,037.63 $4,648,604.66 Projected 2022 $256,312.81 $4,904,917.47 Projected 2023 $257,594.38 $5,162,511.85 Projected 2024 $258,882.35 $5,421,394.20 Projected 2025 $260,176.76 $5,681,570.96 Projected 2026 $261,477.64 $5,943,048.60 Projected 2027 $262,785.03 $6,205,833.64 Projected 2028 $264,098.96 $6,469,932.59 Projected 2029 $265,419.45 $6,735,352.05 Projected 2030 $266,746.55 $7,002,098.60 Projected 2031 $268,080.28 $7,270,178.88 Projected 2032 $269,420.68 $7,539,599.56 Projected 2033 $270,767.79 $7,810,367.35 Total $7,810,367.35 For perspective, if the City had borrowed $2.3 million in 2004 at a 4% interest rate and 10 year term, annual payments would have been $283,569 and principal and interest payments for 10 122 181 years would total $2,835,691 (reference below – $2.3M Loan table). However, the City’s actual payments to the County totaled $2,914,691 by year 2014 (reference above – Peace Road Interchange Improvement table). As another example, if the City had borrowed $2.3 million in 2004 at a 4% interest rate and 12 year term, annual payments would have been $245,070 and principal and interest payments for 10 years would total $2,940,839 (reference below - $2.3M Loan table). However, the City’s actual payments to the County totaled $3,170,476 by year 2015 (reference above– Peace Road Improvement table). $ 2,300,000 Loan with Annual Payments $ 2,300,000 Loan with Annual Payments 4% Interest Rate Compounded Annually 4% Interest Rate Compounded Annually 10 Years 12 Years Year Payment Principal Paid Interest Paid Remaining Balance Year Payment Principal Paid Interest Paid Remaining Balance 1 $283,569.17 $191,569.17 $92,000.00 $2,108,430.83 1 $245,070.00 $153,070.00 $92,000.00 $2,146,930.00 2 $283,569.17 $199,231.94 $84,337.23 $1,909,198.89 2 $245,070.00 $159,192.80 $85,877.20 $1,987,737.20 3 $283,569.17 $207,201.21 $76,367.96 $1,701,997.68 3 $245,070.00 $165,560.51 $79,509.49 $1,822,176.69 4 $283,569.17 $215,489.26 $68,079.91 $1,486,508.42 4 $245,070.00 $172,182.93 $72,887.07 $1,649,993.76 5 $283,569.17 $224,108.83 $59,460.34 $1,262,399.59 5 $245,070.00 $179,070.25 $65,999.75 $1,470,923.51 6 $283,569.17 $233,073.19 $50,495.98 $1,029,326.40 6 $245,070.00 $186,233.06 $58,836.94 $1,284,690.45 7 $283,569.17 $242,396.11 $41,173.06 $786,930.29 7 $245,070.00 $193,682.38 $51,387.62 $1,091,008.07 8 $283,569.17 $252,091.96 $31,477.21 $534,838.33 8 $245,070.00 $201,429.68 $43,640.32 $889,578.39 9 $283,569.17 $262,175.64 $21,393.53 $272,662.69 9 $245,070.00 $209,486.86 $35,583.14 $680,091.53 10 $283,569.20 $272,662.69 $10,906.51 $0.00 10 $245,070.00 $217,866.34 $27,203.66 $462,225.19 11 $245,070.00 $226,580.99 $18,489.01 $235,644.20 Totals $2,835,691.73 $2,300,000.00 $535,691.73 12 $245,069.97 $235,644.20 $9,425.77 $0.00 Totals $2,940,839.97 $2,300,000.00 $640,839.97 It appears the City has fully paid the debt intended by this agreement. The City should thoroughly review the Peace Road Interchange Improvement agreement with DeKalb County for the opportunity to end the agreement. Otherwise, if the agreement and trend continues until expiration of the original 1993 Intergovernmental Agreement, the City could pay a total of approximately $7.8 million through Year 2033 for the benefit of $2.3 million received in 2004. DeKalb Market Square Res. 93-115/Peace Road Interchange Improvements Res. 04-31 $1,800,000.00 $1,600,000.00 $1,400,000.00 $1,200,000.00 $1,000,000.00 $800,000.00 $600,000.00 $400,000.00 $200,000.00 $0.00 City Share 50% Sales Tax County Share 50% Sales Tax City Share 50% Sales Tax 123 182 DeKalb County Home Agreement Resolution 1999-038, Passed June 28, 1999 – An Intergovernmental Agreement entered into with DeKalb County. DeKalb County agreed to purchase a 9.8 acre parcel of property to construct and relocate a new County Nursing Home and Health Center. The nursing home location at that time was a prime location for economic development. The nursing home was vacated and the property was developed for commercial development. The City agreed to assist the County with its bond obligations for the new County Nursing Home by equally sharing sales tax revenues of City’s Municipal Retailers’ Occupation Tax (1%), City’s Home Rule Sales Tax (as amended, currently 1.75%) and the County’s Sales Tax (.25%) for a term of 20 years from the issuance of the first occupancy permit for a minimum of 50,000 square feet. The County shares its property lease proceeds with the City. The City also receives an annual credit for municipal services ranging from $25,000 to $40,000 during the 20 year agreement. The City’s payments to the County have averaged $225,000 per year. However, the City receives an average of $108,000 from the County each year for a net average payment of $117,000 per year to the County. From 2002 to 2016, a total of $2.8 million has been paid to the County and a total of $1.54 million has been received from the County. If trends continue as shown below, at the end of the agreement in 2021, the City will pay the County a total of $4,045,728 and receive $2,115,016 from the County for estimated net total payments to the County totaling $1,930,723. DeKalb County Home Resolution 99-38 Year 2021 End Date City Share County Share Lease Proceeds Municipal Svcs County to City City Year 50% Sales Tax 50% Sales Tax to City to City Total Net Total 2002 $72,146.13 $10,280.58 $52,500 $25,000 $87,781 ($15,634) 2003 $84,028.35 $11,969.10 $87,500 $25,000 $124,469 ($40,441) 2004 $122,215.52 $16,360.92 $52,500 $25,000 $93,861 $28,355 2005 $157,362.68 $17,409.29 $52,500 $25,000 $94,909 $62,453 2006 $180,165.30 $19,926.52 $48,000 $25,000 $92,927 $87,239 2007 $184,270.57 $20,404.94 $39,375 $30,000 $89,780 $94,491 2008 $173,493.28 $19,165.66 $58,875 $30,000 $108,041 $65,453 2009 $249,102.04 $23,356.16 $52,500 $30,000 $105,856 $143,246 2010 $245,499.10 $22,246.75 $52,500 $30,000 $104,747 $140,752 2011 $242,740.74 $21,982.53 $52,500 $30,000 $104,483 $138,258 2012 $229,871.86 $20,798.79 $52,500 $35,000 $108,299 $121,573 2013 $208,928.50 $18,898.86 $52,500 $35,000 $106,399 $102,530 2014 $178,886.32 $16,221.79 $52,500 $35,000 $103,722 $75,165 2015 $212,804.26 $19,193.98 $52,500 $35,000 $106,694 $106,110 2016 $254,223.44 $23,049.65 $52,500 $35,000 $110,550 $143,674 Projected 2017 $250,000.00 $22,000.00 $52,500 $40,000 $114,500 $135,500 Projected 2018 $250,000.00 $22,000.00 $52,500 $40,000 $114,500 $135,500 Projected 2019 $250,000.00 $22,000.00 $52,500 $40,000 $114,500 $135,500 Projected 2020 $250,000.00 $22,000.00 $52,500 $40,000 $114,500 $135,500 Projected 2021 $250,000.00 $22,000.00 $52,500 $40,000 $114,500 $135,500 Total $4,045,738.09 $391,265.52 $1,073,750 $650,000 $2,115,016 $1,930,723 124 183  DeKalb County Home Res. 99-38 $300,000.00 $250,000.00 $200,000.00 $150,000.00 $100,000.00 $50,000.00 $0.00 City Share 50% Sales Tax County Share 50% Sales Tax Lease Proceeds to City Municipal Svcs to City County to City Total DeKalb County Home Res. 99-38 $300,000.00 $250,000.00 $200,000.00 $150,000.00 $100,000.00 $50,000.00 $0.00 City Share 50% Sales Tax County to City Total Ordinance 2012-019, Passed March 26, 2012 – A Development Agreement with First Rockford Group for Ulta retail store includes a 50/50 sales tax rebate of both the City’s share and the County’s share of sales tax proceeds to First Rockford to offset build-out costs incurred. The maximum rebate would be the lesser of $153,125 or 20% of the documented build-out costs. Through 2016, $15,798 has been paid by the City and $11,271 has been paid by the County for a total of $27,070. 125 184 126 185 Sycamore Boundary Agreement The City of DeKalb and the City of Sycamore entered into an Intergovernmental Boundary Line Agreement on August 31, 1995. The current Agreement had an initial term of 20 years and was set to expire on August 31, 2015. Prior to its expiration, either party could extend it for an additional 20 year period by giving written notice to the other party within 30 days of the expiration of the initial term. At its August 17, 2015 City Council Meeting, the City of Sycamore approved Resolution 639 authorizing the extension of the Intergovernmental Boundary Line Agreement between the City of Sycamore and the City of DeKalb. This extends the Agreement for another 20 years. City staff between both municipalities have had discussions regarding revisions and will continue to do so. Any changes that both municipalities can negotiate will be brought back to both City Councils for review and action. In the interim, the existing Agreement continues. 127 186  Sycamore Boundary Agreement $45,000 $40,000 $35,000 $30,000 $25,000 $20,000 $15,000 $10,000 $5,000 $0 2014 2015 2016 DeKalb Paid to Sycamore Sycamore Paid to DeKalb Note: Original Approval August 31, 1995 and 20 Year Renewal August 31, 2015 General Fund Stabilization – Property Tax Levy Previously in this report, a projection through 2023 was created using the following assumptions. Property tax increases cover projected Police and Fire Pensions. Sales and Use Taxes increase annually by 2.5% and other revenues increase by 1.90%. Expenditures increase by 3.5% annually and Equalized Assessed Valuation (EAV) grows 2% annually. Given the assumptions, each year results in deficits with the fund balance declining dramatically and depleted by 2023. Projected 2017 2018 2019 2020 2021 2022 2023 Revenues $35,175,019 $35,818,606 $36,747,847 $37,820,013 $38,824,798 $39,825,194 $41,102,873 Expenses $34,383,475 $35,766,619 $37,106,422 $38,497,519 $39,941,923 $41,441,730 $42,999,122 Net Transfers In/Out (390,863) (408,958) (399,514) (500,495) (495,767) (483,794) (1,149,978) Fund Balance (unassigned) $9,061,353 $8,704,382 $7,946,293 $6,768,292 $5,155,400 $3,055,070 $8,843 For policy consideration, the following projection was created using the following assumptions. Property tax increases cover projected Police and Fire Pensions. A Corporate Property tax of $900,000 is levied for FY2019 and increased annually by 2%. Sales and Use Taxes increase annually by 2.75% and other revenues increase by 2.00%. Expenditures increase by 3.0% annually and Equalized Assessed Valuation (EAV) grows 3.50% annually. This scenario holds the property tax rate under 1.5% and maintains the General Fund balance above 25% through 2022. Any EAV growth would lower projected property tax rate. 128 187 Inflation Assumptions 2018 2019 2020 2021 2022 2023 Property taxes 6.77% 5.00% 5.00% 5.00% 5.00% 5.00% Corporate taxes $900,000 2.00% 2.00% 2.00% 2.00% Sales & Use taxes 2.75% 2.75% 2.75% 2.75% 2.75% 2.75% Other Revenues 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% Investment Income 0.50% 0.50% 0.50% 0.50% 0.75% 0.75% Expenditures 3.00% 3.00% 3.00% 3.00% 3.00% 3.00% EAV growth 3.50% 3.50% 3.50% 3.50% 3.50% 3.50% Note: Police & Fire Pensions 5%/yr, $900,000 corporate initial 2019 + 2%/yr) Projection 2017 - 2023 Revenues, Expenditures & Fund Balance $50,000,000 $40,000,000 $30,000,000 $20,000,000 $10,000,000 $0 2017 2018 2019 2020 2021 2022 2023 -$10,000,000 Revenues Expenses Net Transfers In/Out Fund Balance (unassigned) Projected 2017 2018 2019 2020 2021 2022 2023 Revenues $35,175,019 $35,818,606 $37,703,405 $38,851,906 $40,051,722 $41,288,478 $42,111,232 Expenses $34,383,475 $35,622,165 $36,808,125 $38,035,531 $39,305,919 $40,620,883 $41,982,086 Net Transfers In/Out (390,863) (408,958) (399,514) (500,495) (495,767) (485,505) (1,153,511) Fund Balance (unassigned) $9,061,353 $8,848,836 $9,344,602 $9,660,482 $9,910,518 $10,092,608 $9,633,621 129 188  Projection 2017-2023 Fund Balance $10,500,000 27% $10,000,000 26% 25% $9,500,000 24% $9,000,000 23% $8,500,000 22% $8,000,000 21% 2017 2018 2019 2020 2021 2022 2023 Fund Balance (unassigned) % of Fund Balance to Expense Projected 2017 2018 2019 2020 2021 2022 2023 Fund Balance (unassigned) $9,061,353 $8,848,836 $9,344,602 $9,660,482 $9,910,518 $10,092,608 $9,633,621 % of Fund Balance to Expense 26% 25% 25% 25% 25% 25% 23% Projection 2017-2023 Property Tax Rate $12,000,000 1.60% 1.40% $10,000,000 1.20% $8,000,000 1.00% $6,000,000 0.80% 0.60% $4,000,000 0.40% $2,000,000 0.20% $0 0.00% 2017 2018 2019 2020 2021 2022 2023 Property Tax Levy Tax Rate Projected 2017 2018 2019 2020 2021 2022 2023 Property Tax Levy $6,052,009 $6,425,432 $7,619,826 $8,059,780 $8,517,453 $8,993,667 $10,054,664 Tax Rate 1.20% 1.23% 1.41% 1.41% 1.44% 1.46% 1.46% EAV growth 7.60% 3.50% 3.50% 3.50% 3.50% 3.50% 3.50% 130 189 Streets and Fleet Funding A preliminary financial impact has been developed by Ehlers to evaluate the impact of a dedicated funding source for fleet replacement and street maintenance. The objectives of the plan are to identify additional dedicated revenue for fleet replacement and street maintenance and develop a 10-year plan for implementing the improvements while preserving the City’s bond rating. The financial management plan was developed using a spreadsheet-based model that includes several City funds including the general fund, motor fuel tax fund, capital project fund, capital project debt service fund, vehicle and equipment fund, vehicle and equipment debt service fund, Police Pension Fund and Fire Pension Fund. Inputs to the model can be changed to simulate the impact of various scenarios. In addition, the model can be updated based on actual revenues and expenditures. Thus, the model provides the City a long-term financial forecasting tool. There are a few key assumptions made in creating the financial model. These include: 1. General Fund pays for government operations, such as public safety, community development administration and public works. 2. Fund balance policy maintained at minimum of 25% of annual expenses. Adherence is needed to maintain reserves and bond rating. 3. Revenues keep pace with expenditures, i.e. there is no structural imbalance. Assumes 2.5% increase in annual sales tax revenues, 1.9% increase annually for other revenue categories, 2.0% expense increase in all categories. 4. Revenue sources are diversified but vulnerable to annual state budget decisions and elastic. 5. Major capital projects are not funded with the General Fund revenues. 6. Levy increases 6.77% in 2018 and 5% thereafter to fund rising Pension liability. 131 190  General Fund Revenue Sources Intergovernmental… Property taxes… Other Income 7% Sales and Use Charges Taxes for Service 26% State Income 7% Tax 13% Other Taxes 11% A total of 59% of the General Fund revenue sources are within elastic categories: sales and use taxes (26%), intergovernmental (20%) and state income tax (13%). Property Tax Primarily Pays for Pension Obligations Projected Property Tax Levy 12,000,000 10,000,000 8,000,000 6,000,000 4,000,000 2,000,000 0 Pensions Library Bonds TIF Replacement Social Security The projected Property Tax Rate:  Assumes 2% EAV growth annually  Models in TIF Districts expiring in 2020 and 2023  Assumes 5% levy increase each year for Pensions 132 191  1.6000% 1.4000% 1.2000% 1.0000% 0.8000% 0.6000% 0.4000% 0.2000% 0.0000% Annual capital expenditures between 2018 and 2022 average $7 million. That amount includes the conservative fleet replacement schedule (average annual cost $1.4 million) and the street maintenance scenario 5 (average annual cost $3.8 million) presented earlier in this plan. Other capital expenditures include other capital improvement projects (average annual cost $0.5 million), projects funded by motor fuel tax (average annual cost $1.0 million) and equipment (average annual cost $0.3 million). The capital expenditures were inflated by 3% per year. Other key assumptions in the model include no revenue growth for home rule motor fuel tax nor for the state motor fuel tax. Other revenues are assumed to increase by 1%. The existing funding sources for capital expenditures include motor fuel tax, home rule fuel tax and existing fund balances in the motor fuel tax and the equipment funds. The annual capital expenditures described above are shown graphically along with existing funding sources for a 10-year period in the graph below. The funding gap illustrated by the graph averages about $5.4 million per year. Capital Needs vs. Existing Funding Sources Total Capital Projects Existing funding sources 10,000,000 8,000,000 6,000,000 4,000,000 2,000,000 - 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 133 192 Several options for new funding sources were considered as part of the financial management plan. These options are described below. Option 1: Increase the Local Motor Fuel Tax  Current local tax is 2 cents per gallon  Generates $360,000 per year  Model assumes a 4 cent increase per gallon for a total local tax of 6 cents per gallon  Will generate an additional $720,000 per year The arguments for this option are drivers will pay for streets and this represents about $0.68 on a tank of gas. The arguments against this option are revenue does not increase over time and it’s a tax increase Option 2: Vehicle Stickers  Residents would purchase vehicle stickers  Model assumes sticker is $50 per year  Estimated to generate $1,000,000 per year The arguments for this option include: drivers will pay for streets; it is increasingly common in Illinois communities; and it can increase over time with fee adjustments. The arguments against this option include: it does not capture revenue from non-residents; it is a significant time to administer; and it’s a fee increase. Option 3: Trash Hauler Fee  Rationale: Trash haulers create disproportionate wear on residential streets  Fee would be established to generate $400,000 per year  If passed through to customers staff estimates would be about $4 per billing cycle The arguments for this option include: in a competitive environment, the full cost may not be passed on to residents and businesses; and it can increase over time with fee adjustments. The arguments against this option include: it does not capture revenue from non-residents; and it’s a fee increase. The following graph illustrates the revenues generated by implementing options 1, 2 and 3. This amount is shown in addition to the existing funding sources and the total proposed capital expenditures to illustrate the gap between sources and uses of funding. 134 193  Capital Needs vs. Existing and New Revenues Total Capital Projects Existing funding sources Proposed New Revenues 10,000,000 8,000,000 6,000,000 4,000,000 2,000,000 - 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 The fourth and final option considered in the financial management plan is a sales tax with resident rebate. The characteristics of this option are described below along with the pros and cons. Option 4: Sales Tax with Resident Rebate  Goal is to generate revenue from all people who put demands on City infrastructure, not just residents  Increase Home Rule Sales Tax from 1.75% to 2.75%  Rebate a portion of sales tax to residents  Rebate based on $4,500 purchases within City per year  Rebate may be given as credit on utility bills  Not provided if past due on utilities  Requires annual application and administration  Estimated to generate $3,155,000 per year  Would be applied to pay debt service on bonds that finance streets and fleet The arguments for this options include: all users of City infrastructure help pay for it; and a rebate program softens impact on residents. The arguments against this option include: it is a tax increase; and a new administrative process would be needed for rebate program. The funding from the sales tax with residential rebate option is modeled as bond proceeds received every two years. The results of applying this options along with options 1, 2 and 3 are illustrated by the following graph. 135 194  Proposed Funding Strategy Total Capital Projects Existing funding sources Proposed New Revenues Bond Proceeds 14,000,000 12,000,000 10,000,000 8,000,000 6,000,000 4,000,000 2,000,000 - 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 The implications of a near-term bond issuance may prevent the City from pursuing this option in the near future. The Municipal Advisors at Ehlers are concerned that taking on additional debt may overburden the City, particularly in light of the recent downgrading of the City’s General Obligations bonds in May 2017. As an alternative, the City could delay the first debt issuance until 2020 or later. That would allow some of the current debt to be retired and provide a history of sales tax collections to be established. This alternative would require a reduction in capital expenditures in 2018 and 2019 as shown below. Vehicles and Streets Equipment Planned 2018 and 2019 CIP $9,225,000 $4,175,000 Reduced 2018 and 2019 CIP $5,725,000 $1,425,000 Streets and Fleet Conclusions The level of funding for fleet replacement over the past 10 years has not been sufficient to sustain the overall condition of this asset. Vehicle replacement has averaged about $300,000 per year since 2006. That level is about $500,000 per year less than the amount needed to sustain the overall fleet condition of 2006. Currently, the fleet backlog is about $4.3 million. The fleet condition of 2006 can be attained in about five years with an investment of about 136 195  $1.65 million per year. A more conservative fleet replacement schedule averaging about $1.4 million per year was used in the financial model. The funding for street maintenance has averaged $860,000 per year over the past 25 years. The current funding level is $1.3 million and the average PCI of City streets is 78. Continuing to invest $1.3 million in street maintenance will result in the average PCI dropping to 70 in five years and 59 in 10 years. Based on the scenarios evaluated using the PMS, it would cost about $13 million per year to maintain a PCI of 78. The scenario used in the financial model includes about $3.8 million per year in street maintenance. This would result in the average PCI dropping from 78 to 72 in five years and to 63 in 10 years. A 10-year financial model of revenues and expenditures from the General Fund and other capital funds was used to evaluate the impact of an annual increase in capital expenditures of about $7.5 million. Options for funding the increased capital expenditures included fees and taxes (local motor fuel tax, city stickers, and waste hauler fees) in an amount of $2.12 million and a sales tax with local rebate generating $3.155 million per year. The recent downgrade of the City’s bond rating will impact the ability to issue bonds for capital improvement prior to 2020. The City could implement the capital improvement program as a pay-as-you-go program in 2018 and 2019 with an issuance of bonds in 2020 or later. Alternative Funding Policy Conclusions Peace Road Interchange Agreement The City should thoroughly review the Peace Road Interchange Improvement agreement with DeKalb County for the opportunity to end the agreement. City has fully paid the debt intended by this agreement. Otherwise, if the agreement and trend continues until expiration of the original 1993 Intergovernmental Agreement, the City could pay a total of approximately $7.8 million through Year 2033 for the benefit of $2.3 million received in 2004. Streets and Fleet Funding The recent downgrade of the City’s bond rating will impact the ability to issue bonds for capital improvement prior to 2020. The City could implement the capital improvement program as a pay-as-you-go program in 2018 and 2019 with an issuance of bonds in 2020 or later. General Fund Stabilization – Property Tax Levy Given projections, each year results in deficits with the fund balance declining dramatically and depleted by 2023. A Corporate Property tax of $900,000 should be considered for FY2019 and increased annually by 2%. With Equalized Assessed Valuation (EAV) growth of 3.50% annually, the projected scenario holds the property tax rate under 1.5% and maintains the General Fund balance above 25% through 2022. Any EAV growth greater than 3.5% would lower projected property tax rate. 137 RETURN TO AGENDA 196 DATE: January 12, 2018 TO: Mike Peddle, Chair Finance Advisory Committee FROM: Anne Marie Gaura, City Manager Molly Talkington, Finance Director SUBJECT: Finance Advisory Committee Operations Policy I. Summary: The Finance Advisory Committee (FAC) first discussed an Operations Policy in July 2016. This policy was outlined in Chair Peddle’s statements. During the FAC meetings in October and November 2017, a portion of this potential policy was discussed regarding committee member handouts at the meeting. Attached is a draft FAC Operations Policy for review and potential adoption. II. Background: The Operations Policy address seven areas as follows: 1. The public participation portion of the meeting will be moved to the first substantive item on each meeting’s agenda. Public comment will be limited to three minutes per speaker as is true at City Council meetings. Public comment forms will be made available for members of the public to register for participation, a sufficient but not necessary condition to be recognized to speak. 2. City staff will prepare a memo to the City Council relating any recommendations of the FAC to the City Council for action at a subsequent City Council meeting. This will include memos relating to the outcomes of joint meetings between the Council and the FAC. This memo may or may not be accompanied by the minutes of the meeting at which the recommendations were made. 3. Minutes of joint meetings of the City Council and FAC will require the approval of both bodies in order to become the official record of a meeting. Should the second body approving the minutes make any changes to the minutes, those changes will be sent back to the first body for reconfirmation of their approval. 4. Legal counsel will normally be present at all joint meetings of the City Council and the FAC. 197 5. Any attendance by members of the FAC at meetings of the City Council where germane city business is being discussed needs to be in compliance with the Open Meetings Act (OMA). The Public Access Counselor now recommends that a majority of a quorum of a board or commission not even be present at a City Council meeting so as to avoid any possibility of a challenge through the OMA as to whether that constitutes a public meeting of the board or commission. 6. Each staff memo to the City Council on behalf of the FAC will include the names of the members of the FAC (no more than two) who will represent the FAC at a given council meeting if so required. In compliance with the OMA, those one or two members may address or discuss a pertinent item with the City Council as required or requested or otherwise deemed appropriate. 7. In the interests of transparency and effective deliberative decisions, committee members who wish to have an item on a meeting agenda or provide their own back- up materials for an agenda item should do so 4 business days prior to the meeting date for the agenda to be posted in compliance with the OMA. The chair has the power under parliamentary procedure to rule such items out of order or non-actionable at a given meeting. III. Recommendation: FAC review the attached Operations Policy for potential adoption. Attachment – Finance Advisory Committee Operations Policy Page |2 198 Finance Advisory Committee Operations Policy ______________________________________________________________________________ Policy Number: FAC‐01 Date: Purpose: The following practices will be part of the normal operations of the Finance Advisory Committee (FAC) and its meetings until such time as changes are found to be necessary by the FAC or the advice of legal counsel: 1. The public participation portion of the meeting will be moved to the first substantive item on each meeting’s agenda. Public comment will be limited to three minutes per speaker as is true at City Council meetings. Public comment forms will be made available for members of the public to register for participation, a sufficient but not necessary condition to be recognized to speak. 2. City staff will prepare a memo to the City Council relating any recommendations of the FAC to the City Council for action at a subsequent City Council meeting. This will include memos relating to the outcomes of joint meetings between the Council and the FAC. This memo may or may not be accompanied by the minutes of the meeting at which the recommendations were made. 3. Minutes of joint meetings of the City Council and FAC will require the approval of both bodies in order to become the official record of a meeting. Should the second body approving the minutes make any changes to the minutes, those changes will be sent back to the first body for reconfirmation of their approval. 4. Legal counsel will normally be present at all joint meetings of the City Council and the FAC. 5. Any attendance by members of the FAC at meetings of the City Council where germane city business is being discussed needs to be in compliance with the Open Meetings Act. The Public Access Counselor now recommends that a majority of a quorum of a board or commission not even be present at a City Council meeting so as to avoid any possibility of a challenge through the Open Meetings Act (OMA) as to whether that constitutes a public meeting of the board or commission. 6. Each staff memo to the City Council on behalf of the FAC will include the names of the members of the FAC (no more than two) who will represent the FAC at a given Council 1 199  meeting if so required. In compliance with the OMA, those one or two members may address or discuss a pertinent item with the City Council as required or requested or otherwise deemed appropriate. 7. In the interests of transparency and effective deliberative decisions, committee members who wish to have an item on a meeting agenda or provide their own back‐up materials for an agenda item should do so 4 business days prior to the meeting date for the agenda to be posted in compliance with the OMA. The chair has the power under parliamentary procedure to rule such items out of order or non‐actionable at a given meeting. 2 200 RETURN TO AGENDA