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BUDGET 2014-2015
2014-2015 Proposed Annual Operating Budget [PDF]
Listen to Mayor's Budget Speech [MP3]
Budget Info for 2014
Transcript of Mayor Madeline Rogero's speech on the proposed budget

City of Knoxville's fiscal year 2014-2015

April 24, 2014
Christenberry Ball Park

Good afternoon. Thank you for joining me on this beautiful day in Knoxville, at this very special place. For years, the Christenberry ball fields have been the center of activity for so many children and families, including my own.

My children and I lived in this neighborhood in the mid-80s and I had the honor of serving as this district's County Commissioner from 1990-1998.

My son Damian and daughter Carmen both played ball on these fields - starting with tee-ball and on up through high school baseball and softball as Fulton Falcons. Over the course of 13 years, I spent many wonderful hours along these sidelines as I watched my children and their friends play ball and learn valuable life lessons.

Former Councilman Larry Cox deserves special recognition as a long-time supporter of the Baby Falcons and Christenberry youth athletics. He has given of his time, energy, and financial resources to make this a reality. Thank you, Larry, and to all the commission volunteers and coaches!

Thanks to Councilman Campen, Reverend Bailes, the Knoxville Police Department Honor Guard, the students of Christenberry Elementary School, Lar'Juanette Williams, and the Knoxville Community Band for your participation here today.

Mayor Tim Burchett, I appreciate your friendship, your good humor, and our working relationship, not to mention the good-natured "Try that" mayoral challenges on Twitter. Thank you for being here.

To all the current and former elected officials who have already been recognized, let me also thank you for your presence and your public service.

I have now completed more than two years of my four-year term, and I still truly love my job! I respect the great responsibility you have given me to move us forward, while representing the many diverse interests of our city.

One of the reasons that being Mayor is so enjoyable is that we have an outstanding City Council. Thanks so much to all of you.

Vice Mayor Pavlis, thank you for the great leadership you demonstrate as our Vice Mayor and as my own city councilman from South Knoxville.

I also work every day with outstanding people, so I want to recognize those staff and department directors who are present, and acknowledge my senior leadership team, led by Deputies to the Mayor Christi Branscom and Bill Lyons, Police Chief David Rausch, Fire Chief Stan Sharp, Community Relations Director Tank Strickland, Finance Director Jim York, and Law Director Charles Swanson.

With Charles is a very special guest - his wife Pamela Reeves who was recently sworn in as a federal judge of the United States District Court for the Eastern District of Tennessee. She is the first female judge in the Eastern District.

A very special recognition goes to my executive assistant Terry Alexander. Those of you who have called my office already know what a treasure she is.

Finally, I am so happy that two fine women whom I have admired for a very long time have also joined me at my table: Mrs. Margaret Gaiter and Mrs. Norma Kelley. Both of these women have been my friends for a long time and both were part of a dynamic duo with their late husbands, Mr. Felix Gaiter and Mr. Paul Kelley. Their individual and family contributions to our city are legendary. Thank you both.

Review of the Past Year's Accomplishments

This is my third budget address and the 26th annual Mayor's Budget luncheon. This event today continues a long tradition of coming together annually to review the state of the city and to chart a course and budget for the coming year.

We have enjoyed a year of progress on many fronts and I remain as enthusiastic as ever about Knoxville's momentum.

Our first goal is to be good stewards of taxpayers' money - your money - and secondly, to deliver good services and spur opportunities that make Knoxville a great city in which to live and a more competitive city for the jobs and talents of tomorrow.

In fact, "what makes a great city" is the theme around which I have crafted my vision and articulated our goals and strategies since my inauguration.

So let's start with a quick overview of our accomplishments over the past year:

Many of the services that a City government provides every day aren't glamorous, but they are vital to making Knoxville a place where people want to live, work, raise a family, and invest.

Our 311 Call Center alone handled 190,000 calls last year from people requesting services, reporting a problem, or seeking information.

As mayor I am fortunate to work with nearly 1,600 energetic, dedicated men and women. Some of our employees literally chase down and apprehend the bad guys, while others run into burning buildings to save lives and property. City employees enforce neighborhood codes and mitigate blight; maintain our parks, streets and sidewalks; work weekends and holidays for special events; go out in snowstorms to keep our streets passable; and so much more.

Most of them are behind the scenes and receive little recognition, but if you look around at how the city functions day in and day out, you will see how they contribute to our quality of life here in Knoxville.

In addition to these daily city services, there are a few special achievements that I will highlight now:

The South Waterfront Vision Plan is beginning to be realized. The largest announcement came from a private developer who will build a $165 million mixed-use development at the former Baptist Hospital site. The development will include a public river walk and public plaza. Demolition is underway.

The City finalized the design of Suttree Landing Park, a 5-acre public park and a new street for easy access to the waterfront. Construction will begin this year.

At the eastern end of the district, a new apartment complex will bring 134 units of new housing.

We are working on entrance improvements at Fort Dickerson Park which will make this jewel of a park more attractive and accessible to everyone, and will connect it to the growing Urban Wilderness Corridor.

Several events this year helped ensure the future of the Urban Wilderness. The Wood family generously donated 100 forested acres to Legacy Parks Foundation, which was followed shortly thereafter by a $200,000 grant from the Governor for development of trails on the property.

And the board of the Transportation Planning Organization joined with me to vote to stop the proposed extension of the James White Parkway, which would have cut right through the heart of the Urban Wilderness and destroyed this economic strategy for an outdoor recreation destination.

The City's redevelopment focus on moving from disinvestment to investment in downtown and then out along its commercial corridors is proving to be very successful. With the strategic use of TIFs, PILOTS, and public improvements, we have leveraged significant private development along Gay Street, Central, Jackson, and lower Magnolia.

We negotiated the purchase of the old McClung Warehouses on Jackson Avenue that had been mired in bankruptcy and legal issues for many years. We are in the public process phase before issuing a Request for Proposals from private developers to redevelop that property.

The City completed the expansion of the State Street Garage to better accommodate downtown visitors and residents.

We provided land for the development of the Walnut Street Garage, which will be privately owned and managed, and the city will have access for public parking on nights and weekends.

To the east, a design contract for streetscape improvements to Magnolia Avenue was completed and submitted for public review. And to the west, planning continued on our $17 million redesign of the Cumberland Avenue Corridor. Construction will start this year.

That proposed development has already spurred more than $100 million in private investment, including the University Commons retail complex on a former brownfield site just west of the University.

The Knoxville Entrepreneur Center completed its first year of operation. KEC staff or volunteers met with 125 different companies or individuals seeking help with a new business concept. Of those, 93 continued to work with KEC on their business concept throughout the year and 15 successfully completed one of the two KEC accelerator programs. KEC is now launching a new business accelerator called MediaWorks for digital media start-ups.

Knoxville Locomotive Works announced that it will invest $6.1 million in a plant in North Knoxville that will produce environmentally friendly locomotives and employ 203 workers over the next three years.

Fresenius Medical Care will invest up to $140 million to locate a manufacturing facility in the Forks of the River Industrial Park and create approximately 665 jobs during the next several years.

The State completed the transfer of the Lakeshore property to the City and we updated the master plan for Lakeshore Park following an extensive public process. Demolition and site work is in process.

City Engineering oversaw $9.4 million in road, sidewalk and other construction projects.

The Public Service Department continued its modernization efforts, including the purchase of new software to track and manage work orders, and the $15 million Public Works Complex is in the design phase.

The City's Office of Neighborhoods hosted a successful Neighborhood Awards luncheon in March. The office also launched an 11-week training program for neighborhood leaders, which graduated a class of 18 participants.

Our Office of Sustainability continued its efforts to promote energy efficiency and sustainable practices. In May, we hosted a three-week visit from an IBM Smarter Cities Challenge team, to help us align emergency utility bill assistance with weatherization and energy retrofit programs. A stakeholder council has been formed to implement the action plan.

That is just a snapshot of our many activities and accomplishments in 2013. You will notice that our work involves many partners: neighborhood residents, private investors, nonprofits, and other governmental entities. A great city is made through the collective efforts of all of us, inside and outside of government, working together.

Budget Realities

A budget is not just about finances. It's really about a vision for our city - how we will grow, what services we will provide, and what quality of life we will enjoy. It's about making choices that address both our current needs and the needs of tomorrow and future generations. It's about being practical, strategic, and visionary.

Pension. Our major budget challenge this year is the unfunded pension liability, an issue this Council and I inherited as a result of major investment losses during the recession a few years ago. We have a legal obligation to our vested employees and retirees, and this is something we have been addressing pro-actively since day one of my administration. It's something you have heard me discuss many times.

We started first with pension reform. We worked with City Council to create a hybrid pension plan for new employees that significantly reduces future costs and market risk to taxpayers, while still providing competitive benefits for city employees. City voters passed this new plan with 76% of the vote and the new plan began in January 2013.

Council also approved my request to move $10 million from the city's fund balance to pay down pension debt as a one-time strategy to delay the significant increase in operating expenses that are now required this year. My goal was to give the economy and city taxpayers more time to recover from the worst of the recession before facing the pension impact on our General Fund.

In order to keep the pension plan actuarially sound, this budget must include a $7.38 million increase for a total pension contribution of $23.39 million.

Salaries. Knoxville city government at its most basic level is a service organization that exists first and foremost to provide for public safety and to deliver desired city services. In fact, 73% of city employees are in the police, fire, and public service departments, and 70% of the General Fund is allocated to personnel salary and benefits.

Like most organizations, our effectiveness is ultimately based on the talent of our workforce. And like smart businesses, we must invest in the recruitment, training, and retention of a talented workforce.

This budget includes a 2.5% salary increase for city employees. For my senior management who make over $100,000 per year, I am capping the increase at $2,500.

Like most employers, we also face increasing costs for health care benefits.

Budget Options. In anticipation of these and other budgetary pressures, I asked department directors to prepare two different budgets for my review. The first would be a "normal budget" that assumed little or no growth but that continued the same level of service and identified where resources might be more effectively deployed.

The second was a budget with 6 percent reductions. I did this to push each department to work hard to find any fat and to re-evaluate their priorities, staffing, and services.

We poured over these budgets through several days of budget hearings. It became clear that 6% cuts would mean a severe reduction in city services and staff, including police officers and fire fighters. Relying on budget cuts to balance this budget would harm the fabric and safety of the city.

With years of fairly flat revenues yet increasing costs and no tax increases, city departments have by necessity squeezed every penny and found innovative ways to deliver more and better services.

For example, we adopted an Automatic Vehicle Locator (AVL) system for city vehicles that allows us to track and make better use of our resources. Through a re-organization of existing staff in Public Service, we created an Urban Forestry division with the expertise to make better decisions in the field. We are adopting better technology and investing in the right type of equipment to increase efficiencies in Public Service.

We put KAT under our self-insured programs to lower costs for liability and vehicle damage insurance, and for workers compensation. KAT was able to maintain current service levels yet reduce city funding by $1 million due to new grant funding. We identified positions that were vacant and those will be transferred to other departments with demonstrated need.

The Fund Balance and Financial Responsibility

At the same time that operating expenses are facing significant increases, the City of Knoxville maintains a healthy fund balance, which is really the city's savings account. The city's fund balance is about $60 million today.

In line with municipal accounting principles, our adopted policy requires that the fund balance be at least 20% of the annual budget for the General Fund (the main operating fund). This creates a "rainy day fund" for hard times or emergencies.

Funds in excess of the 20% provide the City with what I call an "opportunity fund" that allows the Mayor with Council approval to act quickly to take advantage of opportunities that arise during the budget year.

For example, an opportunity arose last year to purchase land for a new parking garage downtown. By partnering with a private developer who will make a significant investment to build and own the garage, the city's smaller contribution will yield public parking on nights and weekends, and help leverage additional parking that is critically needed for key office buildings downtown.

Another example: For years, previous administrations had tried to address blight and support redevelopment of the McClung Warehouses property on Jackson Avenue. When the property owner finally landed in Bankruptcy Court, we were able to take swift action and negotiate a purchase of the property for $1.45 million from the fund balance.

It is absolutely critical that we have a sound fund balance, both for emergencies and for those opportunities that offer a strong return on investment and build our future tax base.

Tax Rates. It has been ten years since Mayor Haslam presented his first budget to Council with a recommended 35 cents tax increase.

Mayor Haslam's adopted tax rate of $3.05 as adjusted for reappraisals and inflation would be worth $3.38 today. However, our current tax rate today is one dollar less at $2.3857. Clearly our tax rate has not kept up with inflation and this current rate is the lowest effective rate in about 30 years.

Bond Ratings. A major indicator of a city's financial stability and fiscal management is reflected in its bond ratings. I am very pleased to report that Fitch Ratings recently affirmed our AAA bond rating, which is their highest possible rating.

According to Fitch, "Knoxville's sound operating results and solid reserve levels are the result of its strong financial management, prudent fiscal policies and history of conservative budgeting practices."

A high level of liquidity is also cited: "Consistent high levels of reserves and cash balances bolster the city's financial flexibility." Other factors include the city's broad economy, affordable debt burden, and well-managed pension obligations.

So, despite occasional alarmist claims to the contrary, we are not about to fall off a financial cliff like some cities have. We have the capacity to address our financial obligations and maintain our excellent bond ratings.

Choices. As I prepared this budget I kept fundamental principles in mind. We must meet our pension obligations, fairly compensate employees, maintain a healthy fund balance, not spend the fund balance on recurring expenses, keep operating expenses under tight control, and maximize capital expenditures to bring solid returns on investment.

So given those principles, we face these choices: significantly reduce city services and staffing, reduce infrastructure improvements and capital projects, drain the fund balance, raise taxes, or some combination of these four.

After careful consideration, I am recommending a budget that continues to build on the excitement and momentum in our city, a budget that delivers the city services that people have come to expect and demand, and a budget that invests in critical public infrastructure and strategically leverages private investment.

I am recommending a tax increase of 34 cents, which will bring the tax rate to $2.7257 ($2.73 rounded). When adjusted for the impact of inflation and countywide reappraisals, the proposed tax rate is actually lower than it was ten years ago.

This rate assures that we can meet our pension obligations, provide sufficient operating and capital budgets, maintain a reasonable fund balance, and not put our bond ratings in jeopardy.

For a house appraised at $100,000, this is an increase of $85 per year or roughly $7 per month.

The proposed General Fund (our operating budget) will be $200,502,560. The capital budget totals $28,645,660.

I realize that a property tax increase places a burden on property owners. But I also realize the burden we place on our residents when we cut police and fire service, when we let our streets and sidewalks deteriorate, and when we stop investing in our future.

This budget will continue our vision of building a great city by achieving our goals of Strong, Safe, and Connected Neighborhoods; Living Green and Working Green; An Energized Downtown and Center City; and Job Creation and Retention.

I will now detail how this budget will be allocated to achieve these goals.

Strong, Safe, and Connected Neighborhoods

As in the past, the largest portion of the budget is devoted to Police and Fire. Approximately $3 million in new capital funding is provided for KPD for improvements at various police facilities, enhanced training facilities, and new equipment.

Funding is provided for on-going maintenance at various fire stations throughout the city, as well as renovations to the historic Lonas Fire Station #12. Funds are also allocated to begin the planning of badly-needed new fire training facilities.

It is important that neighborhoods also have quality infrastructure and are free from blight. This budget provides $500,000 to address chronic problem and blighted properties, and $800,000 to KCDC for the redevelopment of the Walter P. Taylor homes project in the Five Points/Park City area. This is the 6th year of a multi-year commitment to this neighborhood.

We will continue to support Historic Preservation with $100,000 for the "demolition by neglect" program. In addition, I am establishing a new Historic Preservation Fund with an initial commitment of $500,000 that will be used to address some of our most difficult preservation challenges.

Strengthening the social fabric and ensuring success for families and youth are also essential elements of a great neighborhood. The budget provides $100,000 to assist Community Schools in center city neighborhoods. The Boys and Girls Clubs of the Tennessee Valley will receive $250,000 for their capital campaign to expand recreational facilities at their Caswell Avenue campus.

We will continue to support CAC in their delivery of critical social services for the most needy in our city with a total of $830,640 in capital and operating funds. Additional nonprofit grants and service contracts for vital community-based social services total more than $350,000.

City Council adopted the new community plan to address homelessness that was developed by the Mayor's Roundtable on Homelessness. I am committing an additional $200,000 in this year's budget to implement strategies identified in the plan, for a total homelessness budget of almost $800,000.

Great neighborhoods also have access to parks, greenways, natural areas, and recreational opportunities. They safely accommodate pedestrians, bicycles, public transit, and vehicles.

This budget includes funds for ball field, tennis court, and greenway maintenance and improvements, as well as $1,000,000 for the development of greenways.

The budget allots an additional $2 million to fund necessary utility improvements at Lakeshore Park, and $100,000 for capital improvements at Ijams Nature Center.

Legacy Parks Foundation, an important partner in conserving the Urban Wilderness and promoting outdoor recreation, will receive operating funds of $75,000. I am also budgeting $250,000 toward finding a long-term solution to the water quality and management issues at the Fountain City Lake.

A total of $2.18 million is allocated to sidewalks and crosswalks including $350,000 to begin design and land acquisition for sidewalks on Old Broadway at I-640. This is a critical walking and bicycle linkage that we are committed to building.

Also funded is $285,000 in bicycle infrastructure improvements. These funds are part of the city's goal of complete streets that provide safe facilities for bicyclists, pedestrians, and public transit.

The budget continues to invest in KAT, Knoxville's public transit system, in the amount of $10.3 million in direct city support and grant match funding to operate buses, trolleys and para-transit service across the city.

To support the City's on-going program to pave and maintain streets on a regular schedule, this budget includes $5.8 million along with funds for alley-paving, roadway safety, bridge replacement, traffic signal improvements, and traffic calming projects.

Intersection improvements at Merchants Drive and Clinton Highway are budgeted at $1.44 million.

Infrastructure projects such as these are complicated and time-consuming. This budget includes funding for two new positions in the Engineering Department - one to focus on the completion of city capital projects which have backlogged, and the other for infrastructure projects throughout the city formerly bonded by developers but left unfinished. The city is responsible for completing these projects.

A position has also been added to speed up right-of-way acquisition, a task that has bottlenecked projects for Engineering, Redevelopment, and Community Development.

This budget continues to fund the Office of Neighborhoods and the Neighborhood Coordinator who works with neighborhood groups to help them improve the quality of their neighborhoods. For 6 years David Massey has been the only full-time employee assigned to this office, even as the demands and our own lofty goals have escalated exponentially. David has labored passionately and without complaint but we are long overdue to provide him with full-time assistance. This budget includes that full-time position as well as $30,000 for capacity-building for neighborhood organizations.

Living Green and Working Green

I am committed to making Knoxville a more environmentally friendly and sustainable city. This budget continues to fund the Office of Sustainability which guides our comprehensive sustainability efforts across all city departments and activities. Funding is also provided for the continuation of electric vehicle charging stations in public facilities, and the acquisition of a new energy management system.

The budget again funds $500,000 for match grants for an advanced traffic management system (ATMS). When implemented the new system should enhance traffic flow and again result in lower fuel consumption and pollution.

We are supporting the new Center for Urban Agriculture at the Knoxville Botanical Gardens and Arboretum with a $250,000 capital grant. This initiative will be a model for permaculture and sustainable living practices that will provide both economic and ecological benefits to our city and its residents.

An Energized Downtown and Center City

Downtown is "everybody's neighborhood" as it is the cultural and economic hub of our city and region. The budget allocates $250,000 for much-needed restrooms near Market Square, $130,000 for other downtown improvements, and $850,000 for public infrastructure improvements near the new Marble Alley development.

The downtown revitalization strategy includes continued reinvestment along the commercial spines that extend from downtown - north, south, east, and west. New allocations include $50,000 for projects in Downtown North, $300,000 for the Magnolia Corridor model blocks design, and $500,000 for commercial façade improvements.

The Urban Land Institute, or ULI, assists cities in dealing with use and design issues for key areas and properties. I have budgeted $125,000 to bring ULI to Knoxville to work with us as we engage the community in determining the future of the State Supreme Court Site, Jackson Avenue between Broadway and Gay, possibilities in and around World's Fair Park, and other downtown redevelopment.

Job Creation and Retention

Creating a business friendly city where entrepreneurs are successful and businesses grow and produce good jobs is an important goal of my administration. This budget includes continued funding for Innovation Valley and for economic development efforts on behalf of the City by the Knoxville Chamber.

The budget continues the funding of the Office of Business Support and the Business Liaison whose job is to assist businesses and cut the red tape in dealing with city government.

Arts and culture are the heart and soul of a community, but they are also an economic driver themselves, and a key strategy in economic development and business relocations. Operating grants totaling $374,500 will go to 26 arts and cultural groups; $50,000 to the Museum of Art capital campaign, and $290,870 for the Arts and Culture Alliance Emporium Lease. I am also starting a new Public Art Fund with an initial investment of $250,000.

This brings the City's total investment in the Arts to $965,370 which represents 2 and 1/4 cents on the tax rate.

A Great City Aspires to be even Greater

Everywhere I go I hear that we are on the right track. There is an excitement and a buzz for the good things happening in Knoxville. We need to stay on track. We need to keep the momentum building. We need to continue to invest in building a great city.

Leaders know that there is a time to listen, a time to decide, and a time to act. I have listened throughout my time as mayor, and especially as we prepared this budget. I have presented you with a plan that is practical, strategic, and that takes inspiration from our hopes and our vision.

As we prepare for our next fiscal year, I will stay focused on making our government responsive, efficient, open, and fair. I will remain focused on giving our taxpayers the best possible value. I will remain focused on making sure we continue to invest in our people and our future.

Today I ask you to support this budget and to continue with us on this journey. It is a journey that stems from the better angels of our nature, the best of who we are. It is a journey that recognizes and celebrates our diversity as it draws us together.

It is a journey that leads us to fulfill our great potential as a community. It is the journey that great cities take.

Thank you so much for coming today. Please be safe as you return to your homes or work.
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