Promise questions II

Here’s the last of the post. We thought there were only 60 questions, but we notice there are 68. It can’t be I’m getting older, so it must have been a mistake.

Davenport Promise Questions & Answers (continued)
November 12, 2008

31. Why not in lieu of building funds?
State law does not permit the use of School District funds for post-secondary scholarships.

32. What is the Davenport City Administration’s recommendation for the 8 million dollar deficit?
The $8.8 million projected capital program budget challenge is 3.2% of the City’s projected seven year, $278 million capital improvement budget. It is less than half of one percent of the projected City and Davenport School District budgets over the same seven year time frame.

The City Administrator’s recommendation is as follows: No cuts or deferrals of any street, sewer or essential project currently in the capital improvement program are recommended. Council approved funding levels for street and sewer projects would continue. Rather, the City Administrator recommends utilizing $2.4 million of new state road use tax funding in lieu of local taxes, applying $1.3 million of excess fund balance in the capital program account to the projected funding gap, scaling back the total of $3.7 million for new development of Centennial, Prairie Heights and Sunderbruch parks by $500,000 and establishing a target of cost savings for other projects in the capital program of $4.8 million. This $4.8 million target over seven years amounts to $685,714 a year, which is $918,893 less than the average annual cost savings in the capital program over the last four years. In short, three new park projects are scaled back slightly, no other projects are cut or deferred, projects are actively managed to reduce unnecessary expenses and the City better utilizes new state funding and existing savings in its capital program account.

To supplement this fiscally disciplined approach, the City will continue to pursue non City sources of funding for major capital projects. The City has a track record of success in these efforts, with tens of millions of state and federal aid achieved in the past seven years and tens of millions of state and federal aid currently being lobbied for.

As recommended by the Davenport Promise Task Force, the City Administrator has met with the Davenport Schools Superintendent and together they have drafted a joint resolution which, upon passage, would commit the City and School District to work together so no property tax rate increase occurs as a result of the Davenport Promise program. This resolution is on the consent agenda for passage on the November 12 City Council meeting [it passed].

Finally, the City Administrator concurs with the three, independent conclusions of the 2007 Exploratory Committee, the 2008 Davenport Promise Task Force and the Upjohn Institute that the Davenport Promise has strong potential to build population and prosperity in Davenport. While acknowledging the $8.8 million budget challenge over seven years is an issue that requires a solution, the same report projects $99.89 million of new City and School District resources over a ten year period without any property tax rate increase. The same report makes clear that the Davenport Promise is a better investment of existing public resources than the 1988 allocation to address the challenges of student enrollment decline and workforce development in a global economy.

33. What affect will the potential decrease in housing values and sales taxes have on the plan?
Sales tax revenue has almost doubled since 1991. While there have been a few years where sales tax revenue was reduced one year to the next, the clear pattern of sales tax revenue is that it grows over time, and with additional population. Housing values within the Kalamazoo Promise boundaries have been holding steady relative to housing values in similar Michigan cities that have fallen significantly. If sales tax revenue or property tax revenue declines, the City will make appropriate adjustments to its budget.

34. Why not reallocate gambling funds or hotel motel taxes for Davenport Promise?
Gaming and hotel taxes are more highly variable than sales tax, are insufficient as a major, sustainable source of funds and are otherwise committed to other uses in the City budget.

35. How much has been spent on Davenport’s Economic Development projects over the past ten years and what have been the results?
A ten year accounting of all our economic development efforts would take pages. The City partners with others to compliment a small City staff who work on economic development. The current City budget includes $90,364 for the Quad City Development Corporation, $85,000 for the Greater Davenport Redevelopment Corporation, $100,000 for Davenport One and $166,000 for economic development staff.

The overall results have been positive. After suffering population decline since the mid 1980s, Davenport has stabilized its population and even grown slightly from 2001 to 2007. Buildings that were vacant hulks for more than a decade have been revitalized, are in the process of being revitalized or have redevelopment deals pending. However, even with substantial revitalization, crime trending downward by more than a third, infrastructure investment at its highest level ever and with Davenport being recognized at a national level for livability, sustainability and operations that meet the highest professional standards, the challenges of global, sunbelt and suburban competition are significant. Persistent student enrollment decline and a growing imbalance between needed skills and the available workforce is an issue the community can and must address.

36. Exactly who is eligible, according to residence?
The Task Force’s recommended program guidelines are on page 21 of the Promise Task Force report, available on the City’s website at http://www.cityofdavenportiowa.com. The principal eligibility guideline is Davenport residency. [The City Council will be reviewing a substantially similar set of guidelines at the November 19 City Council meeting. This set of guidelines is also available on the City’s website].

37. Will private money be used to increase eligibility? For example Walcott residents who are attending Davenport Schools.
The Task Force recommends private sector and foundation support for administration and marketing of the Davenport Promise. Questions about Walcott are best be directed to Walcott. The Davenport Promise is not a Davenport School District program, except to the extent that Davenport children who attend Davenport School District schools (or other schools, consistent with the residency based guidelines) are eligible.

Thinking about the question a little differently, Davenport School District buildings outside Davenport city limits have shared in the benefits provided by the one cent school sales tax paid, in large part, by Davenport residents. Also, to the extent the Davenport Promise places the Davenport School District on a path to growth and fiscal health, students from outside Davenport will share the same benefits of a fiscally healthy school district.

38. Where did Kalamazoo get the $13.5 million?
The Kalamazoo Promise is funded by an anonymous donor(s). If we knew who he / she / they were, we would invite him / her / them to live in Davenport.

39. How much will it cost to administer Davenport Promise? Please provide a first year budget.
The Upjohn Institute recommended an administration and marketing budget of $290,000. More than half of this amount is expected to be directed to a national marketing campaign. In their first years, both Kalamazoo and El Dorado Promise programs were administered by one full time person.

39. Who are the business partners and what percentage (amount) will they be contributing?
Business support will be developed as the concept moves from the Task Force (which has no directive or authority to raise funds) to the City Council, to the voters. Prior to (and following) a referendum vote, it is expected private and foundation support would be secured as the community focuses on the Promise program as a leading economic development strategy.

40. What will other cities do to counter if Davenport does this? What then?
This is a question best directed to other cities. Other cities in the region do not appear to have a similar combination of need, capability or interest in such a program. If other cities find Davenport’s program to be successful, they may develop a similar program. In this circumstance, Davenport would still be in the lead, and would be well on its way to continuing improvement in other areas. If the question presumes the Davenport Promise is focused on decreasing population in other QC communities, this is far removed from the national marketing strategy Davenport will employ if the program is approved at referendum. The Davenport Promise is an economic development strategy of national and even international scope.

41. A potentially more likely scenario than another city in the region adopting the program is a state wide program some years into the future. The State of Iowa could use a similar funding approach by directing 5% of its five cent sales tax to an Iowa Promise program. In this circumstance, the referendum language would allow the City to shift funding for Promise scholarships back to capital improvements and, except for the 10% redirected to public safety, funding of capital projects would continue as before.

42. How will the board members who oversee Promise be chosen?
This is yet to be determined, but the expectation is the City will contract with an independent community foundation of excellent reputation to administer the program. Once the foundation has been selected through an open and competitive process [a motion is on the Nov. 19 City Council agenda to direct the City Administrator to release a request for qualifications to select the community foundation], the initial board would be appointed by the Mayor and Council.

43. What will be the procedure for increasing the amount of the grants?
Again, this is yet to be finally determined, but it is expected the oversight board would make funding adjustments known on an annual basis to each incoming class of high school students.

44. Who is responsible for any shortfall?
It is expected the oversight board would make funding adjustments known on an annual basis to each incoming class of high school students. The reallocation of local option sales tax would be capped by referendum. It would be the oversight board’s responsibility to communicate funding availability and / or obtain supplement funds if necessary from non-City sources.

45. Who will oversee the community service program for students? Cost?
This is a detail to be finalized by the community foundation and oversight board. There are any number of cost effective means to accomplish this task (web based reporting, etc.) and many service organizations already keep track of community service performed by students.

46. Who will be eligible for a community service student?
There is expected to be a “clearinghouse” of community service needs, so that individuals could make specific requests and students could select the service they may wish to perform. This could be easily achieved through a web based program. Students who have no prior preference or service commitment could be directed to a “clearinghouse” catalog of service opportunities.

47. Who will provide legal services?
The question is unclear. Individuals and organizations are and would be represented by the counsels of their choice (if necessary).

48. What exactly will be the ballot wording?

SAMPLE BALLOT
Shall the following public measure be adopted? Yes □
No □

Summary: To authorize a change in the use of the one percent (1%) local sales and services tax in the City of Davenport effective July 1, 2009.

The use of the one percent (1%) local sales and services tax shall be changed in the City of Davenport effective July 1, 2009.

PROPOSED USES OF THE TAX:
If the change is approved, revenues from the sales and services tax shall be allocated as follows:

Sixty percent (60%) for property tax relief;

The specific purposes for which the revenues shall otherwise be expended are:

Thirty percent (30%) for the Davenport Promise Program or capital improvements;

Ten percent (10%) for public safety purposes;

Davenport Promise Program is a program established by the City of Davenport to provide scholarships, grants and/or loans to eligible program participants to defray the cost of post-secondary education or training, pursuant to guidelines adopted by the City Council of the City of Davenport from time to time.

CURRENT USES OF THE TAX:

Revenues from the sales and services tax are currently allocated as follows:
Sixty percent (60%) for property tax relief;

The specific purpose for which revenues are otherwise expended is:
Forty percent (40%) for capital improvements.

49. How much of a property tax increase would be required to replace the sales tax taken by Promise?
There is no property tax increase related to the Davenport Promise. The joint City / Davenport School District resolution commits the City and School District “… to not increase their combined property tax rates for any responsibility, service, task or function directly related to the Promise program.”. The resolution further states; “…the School District and the City will identify savings, other sources of funding or property tax rate reductions to offset $1 million of shared City and Schools District expenses annually for 10 years such that the potential short term City capital budget challenge projected in the Upjohn analysis does not result in an overall property tax rate increase.”.

50. Can we put an end date on this proposal to bring it back to the voters?
Either the citizens of Davenport or the City Council can request a referendum to reconsider funding of the Davenport Promise. In either case, it would be brought back before the voters.

51. Davenport Promise has changed since it was originally proposed. Exactly what changes have been made? By whom?
The Task Force’s work is best summarized in their final report, available on the City’s website. The final report details the evolution of the Promise concept and the Task Force’s work on the program since April. The largest change since the Exploratory Committee’s work in 2007 follows from the independent analysis by the Upjohn Institute commissioned by the Task Force.
The Upjohn analysis provides specific growth (9,356 people, 1,539 students) or decline (3,933 people, 600 students) estimates and projects a greatly reduced need for reallocating local option sales tax (15% to start, growing to 25.6% in ten years).

Davenport Promise Questions & Answers
November 13, 2008

52. If this surtax can be diverted without harm to city projects and the hiring of needed police and firefighters, why was it being collected in the first place?
The local option sales tax was initiated in 1988 by the citizens of Davenport at a referendum, in an era of declining population and property values, as a supplemental source of funds for capital projects. While any city as old as Davenport will always have infrastructure to repair, things have changed since 1988.

Today, the City’s facilities, equipment and fleet are in good to excellent condition. Police, public works, parks, library and (most of) fire personnel all work in excellent facilities, with good to excellent equipment. The venerable Central Fire Station is the one significant operational building of the City that requires revitalization, and this will be attended to following appropriate study, now underway. Overall street condition is steadily, methodically, getting better, based on a comprehensive street improvement program that totals $103 million in our six year program. Recognizing no street network of 550 centerline miles in a Midwest city with tough winters will ever be perfect, the City is making progress (as evidenced by all the road work now underway). Sewer improvements are also progressing, with $64 million of sewer work in our capital program. The local option sales tax remains an important component in funding capital projects, and no one is suggesting the City stops or slows down in maintaining and improving our basic community infrastructure. The question is, can the citizens of Davenport achieve a better return on their investment with the local option sales tax?

Since 1988, local option sales tax revenue has almost doubled and the nature of economic development has shifted. A highly skilled workforce is at least as important (many say more important) to compete in a global economy as are the basics of low taxes, good services and infrastructure. In an increasingly competitive global economy, the quality and adaptability of the region’s workforce largely determines a community’s growth and prosperity. The standard of a high school education – first started in 1874 in a low tech farm and factory era – is no longer adequate to compete against cities and regions globally.

This is the setting in which the 2007 Exploratory Committee and the 2008 Davenport Promise Task Force conducted their research. Both came to the conclusion that an economic development program that addresses workforce improvement is necessary for Davenport. An independent analysis by the Upjohn Institute’s nationally respected economists came to the same conclusion – reallocating 25% of the local option sales tax to the Promise to grow the population, build the tax base, and improve the workforce is a better investment of this existing public resource than continuing the 1988 allocation. Neither the Exploratory Committee, the Task Force nor the Upjohn Institute are recommending the City ignore or give short shrift to basic services or infrastructure. All are recommending, after independent analysis, that Davenport make an adjustment in our investment and economic development strategies to accelerate growth and improve our competitive position.

In any business, or in any home, it is prudent to review how your investments are performing, and whether you should make any changes. The City is really no different, except that we do it in public view and the “kitchen table” is a collection of conversations around the community. In this case, the conversation was started by two groups of citizens who volunteered to take a look at our challenges and opportunities and make recommendations to the City Council. If the City Council places the matter on the ballot at a referendum, ultimately it will be decided by Davenport citizens.

53. If this is such a great idea, why is Kalamazoo’s private endowment the only comparison? Kalamazoo isn’t the only comparison, but they do have the longest running Promise program and share quite a few similarities (and some differences) with Davenport. The Task Force report, available on the City’s website at http://www.cityofdavenportiowa.com, has a few pages devoted to the similarities and differences, as well as the emerging best practices of Promise programs underway or in development nationally.

54. If this is such a great idea, why aren’t other cities doing the same thing and funding it on taxes?
A few states (Florida, Oklahoma, West Virginia, Georgia) and one city (Hammond, Indiana) have limited programs which use public funds. The concept is fairly new and Davenport just happens to be near the front of the pack because citizen volunteers in Davenport have come together to meet our challenges head on, and think through how some of Davenport’s unique attributes and opportunities can address our challenges.

55. Is it because they’re struggling to make the taxes stretch to cover needed services as it is?
No doubt many historic Midwest and Northeast manufacturing cities, like Davenport, are hard pressed to maintain services given global, sunbelt and suburban competition. There are any number of such cities that lost more than half of their manufacturing jobs and up to half of their population in the past few decades.

The challenge of disinvestment and decline in historic, manufacturing cities is not insignificant, but it need not be a community’s fate. Persistent student enrollment decline, job loss and growing reliance on local property tax payers can be reversed. Thinking outside the box that doomed many of even the most capable and economically powerful manufacturing cities over the last several decades, Kalamazoo appears to have found a better way forward with a time tested concept – investment in community education.

As tested by the independent economists of the Upjohn Institute, the unique alignment of challenges and opportunities in Davenport appears to be such that Davenport could distinguish itself in the national marketplace and get a better return on its investment by reallocating 25% of the historically growing one cent City sales tax to the Davenport Promise than by continuing the 1988 allocation formula.

56. Is it because that surtax may or may not be considered such a great idea by the time the kids are going to college? This is a lifetime commitment. You can’t just make the promise and then ten years down the road decide against it.
The Davenport Promise is about much more than college education. Unlike the Kalamazoo Promise or other first generation Promise programs, the Davenport Promise is a community Promise, including a City tax cap for low income senior and disabled homeowners, additional funding for public safety, a homestead grant for returning military veterans, community service required from high school students and scholarships for either advanced vocational training or college tuition. Only Davenport citizens can start, or stop, the Davenport Promise. Stopping a successful program would be rather difficult.

Davenport Promise Questions & Answers
November 14, 2008

57. Comment: Not getting private funding should tell the Task Force something.
Pages 14, 16, 17, 19, 25, 31 and 32 of the Task Force report address various aspects of private funding challenges and opportunities. In sum, in a regional business environment, a gift of tens of millions of dollars focused on a single city is inconsistent with corporate practice. The Task Force recommends private funding for program administration and marketing while letting citizens decide if reallocating a portion of the local option sales tax to the Promise program is a better investment than the allocation established in 1988. Independent economic analysis projects the reallocation is a substantially better investment of this existing tax than the allocation established in 1988.

58. Comment: Why 1 in 4 do not graduate should mean something.
It does. It means, in part, that 1 in 4 Davenport children live in poverty. It means the future of Davenport and the Quad Cities is in jeopardy. It means improvements must be made at the student, family, school district and community levels if Davenport and the Quad Cities are to sustain themselves into the future.

59. Comment: I have a hard time dealing with only saying it might delay capital improvement projects.
With more than 200 projects in the City’s multi-year capital improvement plan, it is not uncommon for a few projects to be reprogrammed into future years. Projects can, and do, move back a year or more as project design and funding challenges are worked through. At the same time, the City continues to lobby for state and federal resources to lower City costs. The City Administrator’s recommended approach, as outlined at the November 12 City Council meeting, does not defer any essential capital improvement project.

The $8.8 million projected capital program budget challenge is 3.2% of the City’s projected seven year, $278 million capital improvement budget. It is less than half of one percent of the projected City and Davenport School District budget over the same seven year time frame.

The City Administrator’s recommendation is as follows: No cuts or deferrals of any street, sewer or essential project currently in the capital improvement program are recommended. Council approved funding levels for street and sewer projects would continue. Rather, the City Administrator recommends utilizing $2.4 million of new state road use tax funding in lieu of local taxes, applying $1.3 million of excess fund balance in the capital program account to the projected funding gap, scaling back the total of $3.7 million for new development of Centennial, Prairie Heights and Sunderbruch parks by $500,000 and establishing a target of cost savings for other projects in the capital program of $4.8 million. This $4.8 million target over seven years amounts to $685,714 a year, which is $918,893 less than the average annual cost savings in the capital program over the last four years. In short, three new park projects are scaled back slightly, no other projects are cut or deferred, projects are actively managed to reduce unnecessary expenses and the City better utilizes new state funding and existing savings in its capital program account.

To supplement this fiscally disciplined approach, the City will continue to pursue non City sources of funding for major capital projects. The City has a track record of success in these efforts, with tens of millions of state and federal aid achieved in the past seven years and tens of millions of state and federal aid currently being lobbied for.

As recommended by the Davenport Promise Task Force, the City Administrator has met with the Davenport Schools Superintendent and together they have drafted a joint resolution which, upon passage, would commit the City and School District to work together so no property tax rate increase occurs as a result of the Davenport Promise program. This resolution was passed by the City Council on November 12.

Ultimately, the City Council will balance the operating budget and capital improvement budget on an annual basis. As state and federal funding is secured, and as projects move from concept to preliminary plans and final construction documents, the City Council will make necessary and prudent adjustments. No projects are expected to be cut from the capital improvement plan as a result of the Davenport Promise.

Finally, while acknowledging the $8.8 million budget challenge over seven years is an issue that requires a solution, the same report projects $99.89 million of new City and School District resources over a ten year period without any property tax rate increase. The same report makes clear that the Davenport Promise is a better investment of existing public resources than the 1988 allocation to address the real and pressing challenges of student enrollment decline and workforce development in a global economy.

60. Question: 9,400 new residents in the next decade and that will make crime go down?
Adding 9,400 new residents with an orientation toward success through education and requiring community service for high school students who wish to participate in the Davenport Promise program is a better crime reduction and prevention strategy than having 3,900 residents leave Davenport in the same time period. In addition, funding additional public safety personnel through the Davenport Promise program will help keep a growing community safe with reduced burden on property tax payers.

61. Question: They, also, assume there is not an excess of vacant homes?
Page 28 of the Upjohn report provides a range of potential outcomes. In Kalamazoo, the experience was, generally, that the supply of people who wanted to sell their homes was equal to the supply of people who wanted to purchase homes. Thus, home prices were generally stable. Applying the Kalamazoo home value experience to Davenport, however, is complicated by three significant factors.

First, the City of Davenport has far greater ability to accommodate growth within its boundaries than Kalamazoo. Without any extraordinary additional city infrastructure cost, there are at least 1,500 infill and greenfield home sites ready for construction in Davenport. There is also almost twenty square miles of land in west Davenport ready for development with the completion of the sewer diversion tunnel. Kalamazoo has nowhere near the same capacity for growth as Davenport. Secondly, the overlapping boundaries of the city and school district are fundamentally different in Davenport than Kalamazoo. The Kalamazoo Promise boundaries follow the Kalamazoo public school district boundaries and include developable land outside the City of Kalamazoo. The Davenport Promise boundaries follow the City of Davenport boundaries. Thus, Davenport Promise fueled growth will be focused within Davenport.

Finally, the state and regional economy is fundamentally different in Davenport than Kalamazoo. The Michigan economy is in dire straits, with dramatic unemployment and plummeting property values. To merely maintain property values in a Michigan city, much less add student enrollment and thousands of jobs, is an achievement.

62. Question: College tuition for up to four years about $20,000?
The Task Force recommends establishing the college tuition benefit at the equivalent of two years tuition at Scott Community College and two years at the University of Iowa. Students may attend any accredited institution, but the maximum tuition benefit would be tied to the Scott Community College / University of Iowa targets.

63. Question: How much will it cost to administer this Promise?
The Upjohn Institute estimates $290,000 annually for administration and marketing. This amount is expected to be funded through private donations and corporate / foundation grants. Both Kalamazoo and El Dorado report only one full time person is responsible for administration. With the community service requirement and homestead grant components of the Davenport Promise, and a national business attraction marketing campaign, there will likely be a need for more than one person in Davenport, hence the $290,000 annual budget that also includes marketing, funded privately.

64. Question: How does the independent community board get paid?
If the question is, how does the foundation cover its expenses, the answer will be established in a contract between the City and the foundation, which is yet to be determined. It is typically the case that such expenses are covered by a small percentage of the total cost of the program. The expectation is administrative expenses will be covered by non-City funds. If the question is do members of the oversight board get paid for their service on the board, there is no expectation that members of any oversight board would be anything but unpaid volunteers.

65. Question: Who is responsible for the shortfall?
It is unclear what “shortfall” refers to. There is a capital improvement program budget challenge, that has already been addressed. If by “shortfall”, the question is what happens if there are greater tuition payments than resources available, it is expected the oversight board would make funding adjustments known on an annual basis to each incoming class of high school students. The reallocation of local option sales tax would be capped by referendum. It would be the oversight board’s responsibility to communicate funding availability and / or obtain supplement funds if necessary from non-City sources.

66. Question: If taxes do not go up – what about assessed value?
As previously described, the Kalamazoo experience was the number of home buyers and sellers was roughly equivalent so property values remained stable (in a state economy where values were and are dropping). Property value is established by sale prices. The Upjohn analysis does not include incremental assessed value increases in Davenport, although Table 17 does describe a range of impact related to the elasticity of residential property values to population.

If property values rise in Davenport as a result of the Davenport Promise, the City Council and School Board will have the option of reducing tax rates, improving services, or some combination thereof.

67. Question: If taxes do not go up, why are they capping taxes for low income seniors and disabled homeowners?
Because it seems to be the right thing to do, because the City already provides exemptions from some fees for low income senior homeowners and because, with a growing and prospering community, the City could afford to do so.

68. Comment: After we pay for the students’ tuition, we have no guarantee they will stay in the area.
We have clear, compelling evidence that college graduates burdened with student debt are leaving Iowa in droves. We know Iowa college students rank second in the nation in percentage of students with college debt and sixth in average debt per student. We have clear, compelling evidence that Davenport is getting older, and poorer. We know the workforce of the future requires post-secondary education and that retirements of the Baby Boom generation are leaving area companies hard pressed to find skilled replacement workers. We know it is not uncommon for manufacturing cities north of the Mason-Dixon line and east of the Great Plains to lose more than half of their high wage manufacturing jobs and more than a third of their population by failing to respond to global, sunbelt and suburban competition.

There are no guarantees in the life of a community except this; in a globally competitive economy, the quality of the workforce defines a community’s prosperity.

The focus of the Davenport Promise is economic development through workforce improvement. It has an education benefit as a component of this economic development strategy. It also has a community service requirement designed, in part, to have high schoolers build strong ties to the community, and repay the community before they receive their first dollar of benefit.

Some college grads will continue to leave for experience in other places. When they return in their late twenties to late thirties as homeowners and parents to participate in the next generation of the Davenport Promise, their experience in other places can only help build a vital community. Homeowners attracted to a community focused on education and the future, and businesses attracted to a community capable of fielding a world class workforce, are the keys to the Davenport Promise program.

Comments are always welcome.