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Home My WebLink About09/02/2014 08 Utility Tax Options DiscussionITEM TITLE: SUBMITTED BY: SUMMARY EXPLANATION: See attached BUSINESS OF THE CITY COUNCIL YAKIMA, WASHINGTON AGENDA STATEMENT Item No. 8. For Meeting of: September 02, 2014 Discussion regarding utility tax options Tony O'Rourke, City Manager Resolution: Ordinance: Other (Specify): Contract: Contract Term: Start Date: End Date: Item Budgeted: Amount: Funding Source/Fiscal Impact: Strategic Priority: Insurance Required? No Mail to: Phone: APPROVED FOR SUBMITTAL: RECOMMENDATION: ATTACHMENTS: Description City Manager Upload Date Auq. 28 memo 8/28/2014 Total utility tax 8/28/2014 Utility tax approved 8/28/2014 Cost containment proposal 8/28/2014 Type Cover Memo Cover Memo Cover Memo Cover Memo MEMORANDUM To: Honorable Mayor and Members of the Yakima City Council From: Tony O'Rourke, City Manager Date: August 28, 2014 RE: Utility tax In December 2011, the City Council approved a 6% utility tax increase on City water, wastewater, refuse, storm water, Nob Hill Water, and Yakima Waste Systems. The 6% tax was projected to generate $2,100,000 annually for police, fire, and gang free initiative (GFI) services. The attached audit of the 6% utility tax increase reflects that the 6% utility tax now generates $2.4 million and is being spent on its intended purposes. On July 15, 2014, the City Council requested the staff to assess the viability of reducing the 6% utility tax increase by 2% or approximately $800,000 annually. The 2% utility tax reduction would represent an approximate saving of $24.00 annually or $2.00 monthly to our 33,000 utilities' customers. Based on a survey of 172 Washington cities conducted by the Association of Washington Cities (AWC), the average monthly single-family water fee was $33.81 compared to $26.93 in Yakima, or 25% more than Yakima. The same AWC survey of 167 Washington cities found the average monthly single-family sewer fee was $46.97, compared to $40.69 in Yakima, or 15% more. The AWC survey also surveyed the utility tax rates of 104 cities. The average utility tax was 9% versus 20% for Yakima. According to AWC's survey, the average monthly combined water, sewer, and utility tax rate for a single-family home was $88.21 versus $81.14 for Yakima, or 8.7% more than Yakima. While 2014 general fund revenue has rebounded from recession levels, it cannot absorb an $800,000 reduction without corresponding general fund expenditure reductions. To that end, staff proposes the attached $800,000 permanent cost reduction plan to offset a 2% utility tax reduction. The staff has exempted all police, fire, and indigent defense costs from the $800,000 cut. This constitutes $44 million or 66.5% of the general fund. Therefore, the $800,000 savings will come from the balance of the general fund, which is $23.1 million or 35% of the general fund. The $800,000 savings would represent 3.4% of the $23.1 million. The attached $800,000 savings plan includes: • Elimination of eight (8) vacant, budgeted positions in Information Technology, Engineering, Municipal Court, Community Development, and Public Works for a projected annual saving of $615,700 • Reduction in force (RIF) of two (2) current positions in public works saving $114,300 • Modify advertising of public meetings saving $10,000 • Reduce outside GFI consulting contract saving $65,000 • Reduce jail medical service cost based on recent request for proposal saving $40,000 • Redistribute Public Works Administration cost allocation saving $60,000 • These total savings are particularly offset by a contract for paving condition assessment services and two temporary employees needed in Community Development and Municipal Court. The end result is a total planned saving of $810,000. Since the start of the recession in 2009, the general fund staffing level has only been reduced by one position from 432 to 431. Accordingly, the elimination of these ten (10) positions will not significantly affect the City's ability to deliver core services. Prior to making a decision on reducing the utility tax by 2% or $800,000, the City Council should be aware of the following financial demands on the City. 1) Outstanding unfunded liabilities - $67.5 million The combined pre-LEOFF Police and Fire unfunded pension liabilities are $15,527,000. The LEOFF 1 Police and Fire unfunded medical liabilities are $52,689,000. The City is currently engaged in a pay-as-you-go funding of these liabilities. In FY 2014, $2,517,963 was budgeted for these pensions and medical liabilities. Assuming no changes to medical or pension cost, it will take 26.8 years to pay off these liabilities. 2) General Fund Deferred Capital Investment. The City's parks and recreation assets have a book value of $21.9 million. Over the past 10 years, the City has averaged $200,000 in capital improvements to our parks and recreation assets. At this rate, the replacement rate of the City's parks and recreation assets is 100 years. The fire department has $14.6 million in capital assets. We invested $406,210 in fire assets in 2014. At that rate, the fire department assets will be fully replaced in 36 years. The police department has $23.0 million in capital assets. In 2014, we replaced $1,070,037 in police assets, with the majority, $789,037, in the purchase of 74 police assigned vehicles. At this investment rate, we will replace police assets in 21.5 years. The 800 lane miles of City streets have an asset value of $267 million. In FY 2014, we invested $2.9 million in our streets, the majority related to the debt service on 120 lane miles of repaved roads. At this investment rate, we will replace our current street inventory in 92 years. The Capitol Theatre has a deferred capital improvement need of $1.8 million. If the $800,000 were used for capital debt purposes, based on current interest rates and a 20 -year term, $800,000 in annual debt service could support a $10.9 million general obligation bond. 3) Pending infrastructure needs In addition to the scheduled and routine replacement of our core City general fund capital assets, the City is currently looking at the following needed capital investments. • Police / City Attorney / Court / Jail expansion - $23 million to $105 million • Fire station upgrades - $10 million • New aquatic facilities - $5 to 8 million • Streets — 70 lane miles needing improvements prior to 2020 - $12.2 million • Regional soccer complex - $10 million • Stormwater master plan - $648 million o Phase 1 - $18.7 million o Phase 2 - $21.4 million o Phase 3 - $37.2 million o Phase 4 - $5-9 million 4) Risk Management Fund The City's current Risk Management fund for litigation and claims against the City has a current reserve of approximately $720,000 and should have a balance that will cover any outstanding liabilities. At the end of the fiscal year, if the balance is below the outstanding liability amount, then the fund balance will be negative. Historically, the balance has been around $1 million. In summary, the City Council can reduce the 2015 general fund budget by $800,000 without any adverse impacts on the delivery of core City services. The City Council has several options for the disposition of these savings. These options include the following: 1. Reduce the 2015 utility tax rate on City water, wastewater, refuse, stormwater, Nob Hill Water, and Yakima Waste Systems by 2% and save the average Yakima utility household customer $24.00 annually. 2. Maintain 6% utility tax rate increase, but apply the $800,000 proposed general fund savings to one or more of the following: a. Police / fire unfunded pension and medical liability - $67.5 million b. New soccer complex - $10 million c. Police / City Attorney / Court expansion needs - $23-$100 million d. Fire department renovations - $10 million e. Bury North 1st Street utility lines - $1.5 million (in addition to the $500,000 from Lincoln Avenue underpass litigation) f. New downtown plaza - $9 to $11 million g. Downtown parking improvements on 3rd Avenue, 2nd Avenue, and Chestnut - $5 million h. Risk management fund investment to offset City litigation expenses City of Yakima Wastewater, Water, Refuse, Stormwater In Lieu Utility Tax Analysis Total by Utility 2011 Rate 2010 Actual 2011 Actual Internal: Water 14% $ 977,222 $ 951,036 $1,661,565 $1,204,635 $ 456,930 $1,636,242 $1,145,369 $ 490,873 $1,730,000 $1,211,000 $ 519,000 Wastewater 14% 2,156,011 1,978,323 3,508,656 2,543,775 964,880 3,665,226 2,565,658 1,099,568 3,955,000 2,768,500 1,186,500 Refuse 9% 444,115 433,062 766,375 485,371 281,004 823,578 494,147 329,431 850,000 510,000 340,000 Stormwater - 129,962 129,962 129,977 129,977 130,000 130,000 Subtotal City Util. 3,577,348 3,362,421 6,066,558 4,233,781 1,832,777 6,255,023 4,205,174 2,049,849 6,665,000 4,489,500 2,175,500 2012 Actual Total Old rate New 6% 2013 Actual Total Old rate New 6% 2014 Estimate Total Old rate New 6% Outside: Nob Hill Water 14% 328,326 Yakima Waste 10% 321,325 343,446 322,054 523,092 379,242 143,850 504,053 330,785 173,268 569,972 398,980 170,992 516,282 322,676 193,606 570,000 399,000 171,000 525,000 328,125 196,875 Total $ 4,226,999 $4,027,920 $ 7,093,703 $4,943,808 $ 2,149,895 $7,341,277 $4,926,831 $2,414,446 $7,760,000 $5,216,625 $ 2,543,375 City of Yakima Wastewater, Water, Refuse, Stormwater In Lieu Utility Tax Analysis Total by Utility 2011 Rate 2010 Actual 2011 Actual Internal: Water 14% $ 977,222 $ 951,036 $1,661,565 $1,204,635 $ 456,930 $1,636,242 $1,145,369 $ 490,873 $1,664,000 $1,164,800 $ 499,200 Wastewater 14% 2,156,011 1,978,323 3,508,656 2,543,775 964,880 3,665,226 2,565,658 1,099,568 3,832,500 2,682,750 1,149,750 Refuse 9% 444,115 433,062 766,375 485,371 281,004 823,578 494,147 329,431 830,000 498,000 332,000 Stormwater - 129,962 129,962 129,977 129,977 130,000 130,000 Subtotal City Util. 3,577,348 3,362,421 6,066,558 4,233,781 1,832,777 6,255,023 4,205,174 2,049,849 6,456,500 4,345,550 2,110,950 2012 Actual Total Old rate New 6% 2013 Actual Total Old rate New 6% 2014 Estimate Total Old rate New 6% Outside: Nob Hill Water 14% 328,326 Yakima Waste 10% 321,325 343,446 322,054 523,092 379,242 143,850 504,053 330,785 173,268 569,972 398,980 170,992 516,282 322,676 193,606 540,000 378,000 162,000 510,000 318,750 191,250 Total $ 4,226,999 $4,027,920 $ 7,093,703 $4,943,808 $ 2,149,895 $7,341,277 $4,926,831 $2,414,446 $7,506,500 $5,042,300 $ 2,464,200 City of Yakima Wastewater, Water, Refuse, Stormwater In Lieu Utility Tax Analysis Total by Utility 2011 Rate 2010 Actual 2011 Actual Internal: Water 14% $ 977,222 $ 951,036 $1,661,565 $1,204,635 $ 456,930 $1,600,000 $1,120,000 $ 480,000 $1,664,000 $1,164,800 $ 499,200 Wastewater 14% 2,156,011 1,978,323 3,508,656 2,543,775 964,880 3,650,000 2,555,000 1,095,000 3,832,500 2,682,750 1,149,750 Refuse 9% 444,115 433,062 766,375 485,371 281,004 825,000 495,000 330,000 830,000 498,000 332,000 Stormwater - 129,962 129,962 130,000 130,000 130,000 130,000 Subtotal City Util. 3,577,348 3,362,421 6,066,558 4,233,781 1,832,777 6,205,000 4,170,000 2,035,000 6,456,500 4,345,550 2,110,950 2012 Actual Total Old rate New 6% 2013 Estimate Total Old rate New 6% 2014 Estimate Total Old rate New 6% Outside: Nob Hill Water 14% 328,326 Yakima Waste 10% 321,325 343,446 322,054 523,092 379,242 143,850 504,053 330,785 173,268 540,000 378,000 162,000 510,000 318,750 191,250 540,000 510,000 378,000 162,000 318,750 191,250 Total $ 4,226,999 $4,027,920 $ 7,093,703 $4,943,808 $ 2,149,895 $7,255,000 $4,866,750 $2,388,250 $7,506,500 $5,042,300 $ 2,464,200 Total by Utility 2011 Rate Internal: Water 14% Wastewater 14% Refuse 9% Stormwater Subtotal City Util. Outside: Nob Hill Water 14% Yakima Waste 10% Total City of Yakima Wastewater, Water, Refuse, Stormwater In Lieu Utility Tax Analysis 2010 Actual 2011 Actual Total 2012 Actual New 6% Parks Total 2013 Estimate New 6% Parks Total 2014 Estimate New 6% Old rate Old rate Old rate $ 977,222 $ 951,036 $ 1,661,565 $1,204,635 $ 456,930 $ 301,159 $1,695,000 $ 1,186,500 $ 508,500 $ 296,625 $1,694,000 $ 1,185,800 $ 508,200 2,156,011 1,978,323 3,508,656 2,543,775 964,880 $ 635,944 3,750,000 2,625,000 1,125,000 $ 656,250 3,932,500 2,752,750 1,179,750 444,115 433,062 766,375 485,371 281,004 $ 188,755 825,000 495,000 330,000 $ 192,500 830,000 498,000 332,000 - - 129,962 129,962 130,000 130,000 130,000 130,000 3,577,348 3,362,421 6,066,558 4,233,781 1,832,777 1,125,858 6,400,000 4,306,500 2,093,500 1,145,375 6,586,500 4,436,550 2,149,950 328,326 343,446 523,092 379,242 143,850 $ 94,810 540,000 378,000 162,000 $ 94,500 540,000 378,000 162,000 321,325 322,054 504,053 330,785 173,268 $ 115,775 510,000 318,750 191,250 $ 111,563 510,000 318,750 191,250 $ 4,226,999 $4,027,920 $ 7,093,703 $4,943,808 $ 2,149,895 $ 1,336,443 $7,450,000 $ 5,003,250 $2,446,750 $1,351,438 $7,636,500 $ 5,133,300 $ 2,503,200 City of Yakima Use of 6% utility tax approved in December, 2011 Per Councilmember Ettl's memo Cost for 12 Additonal Police officers per year Cost to outfit and train (one time) - enhance service (future) Secretarial Help For Prosecutor Restore Firefighter Position Gang Free Program Implementation Money set aside to offset anticipated state cuts Total 6% Utility Tax Description 2012 Actual 2013 Est 2014 Budget $ 1,100,000 Estimate of new officers One-time use of salary savings: Dispatch console SWAT vehicle/Masks Expand Motorcycle Patrol 500,000 Uniforms Vehicles Equipment Training Recruitment Expense North 1st Street Emphasis Patrol Expand Downtown bike/foot patrol 80,000 One full-time position and temporary support 80,000 140,000 Add to $75,000 already budgeted 200,000 Liquor Profits and Excise taxes compared to 2011 Officers rolling off COPS Grant --from Fund 152 Cumulative affect Balance of available tax --portion of negotiated YPPA settlement $ 620,000 $ 900,000 $ 1,155,000 420,284 137,153 133,617 92,903 15,000 208,000 60,000 366,923 30,000 40,000 10,000 10,000 20,000 30,000 60,000 64,800 80,000 80,000 80,000 81,200 85,700 91,700 10,882 304,049 258,105 0 194,000 50,000 304,000 600,000 209,703 104,731 94,595 $ 2,100,000 $ 2,149,895 $ 2,388,250 $ 2,464,200 Total 11 Total 12 Total 13 Total 14 Total 1 Total 2 Total 3 Total 4 Total 5 Total 6 Total 7 Total 8 Total 9 Total 031 952 Salaries Overtime Special Pay Leave Cashouts Total Salaries Benefits Supplies Professional Svcs Intergovt (jail) Equipment Debt Service Principal Debt Service Interest Interfund (ins. & cars) 2011 12,507,834 965,670 399,723 179,194 2012 Chg 13,048,153 540,319 928,904 (36,766) 416,368 16,645 183,962 4,768 14,052,421 3,527,733 830,383 1,275,533 2,301,398 424,699 22,412,167 0 14,577,387 4,117,126 988,503 1,488,099 2,450,861 116,086 732,169 24, 470, 231 208000 524,966 589,393 158,120 212,566 149,463 116,086 307,470 2,058,064 2013 chg 2014 Chg 13,538,379 490,226 14,944,908 1,406,529 959,000 30,096 910,818 (48,182) 437,595 21,227 482,669 45,074 191,300 7,338 44,800 (146,500) 15,128, 287 548,887 16, 385, 209 1,256,921 4,243,789 126,663 4,137,185 (106,604) 924,417 (64,086) 879,000 (45,417) 1,661,054 172,955 1,500,030 (161,024) 2,322,000 (128,861) 1,998,000 (324,000) 420,284 304,198 (420,284) - 639,593 639,593 55,843 55,843 149,444 93,601 406,860 (325,309) 371,140 (35,720) 25,160,522 690,290 26,057,587 897,066 City of Yakima 2015 Contingency Budget Reductions/Savings as of 8/21 General City Administration Includes Legal, City Council, City Manager, City Clerk, Human Resources, Info.Tech., Econ. Dev., GFI Information Technology Eliminate Computer Operations Technician City Clerk Modify advertising of Public Meetings (15k bud, 2k to date) Vacant/ Filled Personnel Non -Personnel V $ (60,000) $ (10,000) GFI-Reduce Outside Consultant (65,000) Engineering Eliminate City Engineer V (110,700) Eliminate Traffic Tech- II (Step B) V (67,700) Eliminate Traffic Tech- II (Step E plus longevity) F (78,700) Contract for Traffic Pavement Condition analysis Supervising Street Engineer V (94,000) Municipal Court Reduce Cashier from Full-time to Temporary Eliminate Cashier V (52,200) Replace with Temp 27,000 Jail 80,000 Medical Services Contract Savings -new RFP (40,000) Community and Economic Development Code Administration Eliminate Code Inspection Office Administrator V (88,000) Eliminate Strategic Project Manager V (140,000) Add Dept. Assistant II -Temporary 44,000 Public Works (General Government Funds) Parks Recalculate Public Works Admin allocation (60,000) Eliminate Building Superintendent F (9,500) Streets Recalculate Public Works Admin allocation (10,700) 15,000 Eliminate Building Superintendent F (26,100) Eliminate Street Maintenance Specialist V (63,400) Total 2015 General Government Expense Reductions/Savings $ (730,000) $ (80,000) $ (810,000) 1 c 8/28/2014