Office of the Mayor and Office of the City Manager

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Office of the Mayor and Office of the City Manager

29th Floor, City Hall414 East 12th Street Kansas City, Missouri 64106

DATE: February 11, 2021

TO: Members of the City Council of Kansas City

FROM: Honorable Mayor Quinton Lucas and Brian Platt, City Manager

SUBJECT: Submitted Budget for Fiscal Year 2021-22

We are pleased to submit to you this transmittal letter that details the Submitted Budget for the City’s fiscal year beginning May 1, 2021 and ending April 30, 2022. The COVID-19 pandemic created an economic crisis unlike any other in recent memory. While reduced revenues have challenged our finances, City staff has continued to deliver the services that our residents depend on. Our city workforce is the backbone of our “City of Champions”, and just as our football team excels on the field with grit and innovative playmaking, we have persevered through tough times. We are recommending a balanced budget that, while continuing to draw fund balance, prevents layoffs, furloughs and any reductions in essential city services. We are using targeted initiatives to create a more efficient and fiscally prudent city government while maintaining, and even increasing, funding for certain critical infrastructure and services. This Submitted Budget includes more funding to focus on equity in city policies and management practices with the creation of a new Chief Equity Officer, additional professional development and training staff, and additional EEO investigation staff. Also, the Submitted Budget creates the first ever Transportation Director to help aggressively redesign streets to reduce traffic deaths and serious injuries. The budget also continues expanded snow removal operations and more than doubles funding for street resurfacing. The Submitted Budget adds one tenant advocate position. The FY 2021-22 Submitted Budget reflects total planned expenditures of $1.73 billion – reduced $36.8 million from the FY 2020-21 Adopted Budget. Revenues are anticipated to slowly recover in FY 2021-22 given the COVID-19 pandemic and are projected to decrease by $69.9 million (-3.9 percent) to $1.72 billion from the FY 2020-21 Adopted Budget. Despite the $70 million budget shortfall due to the COVID-19 pandemic and related financial crisis, the Submitted Budget focuses on funding public safety, capital improvements, and transportation – the priorities reflected in the Annual Resident Survey. Closing the budget gap

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City of Kansas City, Missouri Submitted Budget Transmittal Letter February 11, 2021 Page 2 of 13

required a long list of strategic cuts and revenue enhancements while minimizing impacts to essential city services.

Citywide Business Plan Kansas City is a recognized national leader in strategic and financial planning, resident engagement, and budgeting and planning processes. The 2020-2024 Citywide Business Plan is a four-year document designed to align with City Council terms and serves as the driver for the FY 2021-22 Budget. It includes three components: the City’s Strategic Plan, the Financial Strategic Plan, and the Five-Year Planning Model. In July 2020, the Mayor and City council met to launch the new, four-year strategic planning process and outline their priorities for the next four years. This was followed by a series of meetings with department directors and key staff to evaluate what strategies could be employed to achieve these objectives. The result is a streamlined and holistic plan with four goals, 18 objectives, and 84 strategies. It focuses on interdepartmental collaboration, access, and equity in all its components and will continue to be evaluated annually to measure its success and ensure it represents the priorities of both City Council and residents. Consistent adherence to our financial plan is a true success story leading to a $62 million increase in the City’s General Fund reserve levels since the first Citywide Business Plan was adopted seven years ago. It is only with this forward planning that the City has been able to

continue to support key services during the global COVID-19 pandemic and the correlating negative economic impact. Fund balance is estimated to continue to draw down $12.8 million in the FY 2021-22 Submitted Budget anticipating a slow recovery of the economy. This impact would have been dramatically worse absent cuts made during FY 2020-21 and strategic cuts submitted in this FY 2021-22 Budget.

Capital Improvements Plan The voters in April 2017 approved $800 million in new general obligation bond (GO KC) authority. The Submitted Budget includes for Council consideration a proposed Year 5 through 10 bond allocation. The bond authority will allow for $77.8 million in new capital spending in

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City of Kansas City, MissouriSubmitted Budget Transmittal LetterFebruary 11, 2021Page 3 of 13

The GO KC plan adds $20 million for street resurfacing funding for each of next five years for a total of $100 million.

FY 2021-22 and $293.2 million over the next five years. The GO KC plan boosts street resurfacing funding by $20 million each year for the next five years for a total of $100 millionfrom this source of funding. The Capital Improvements Plan (CIP) includes an additional $232million in traditional capital funding across several funding sources, including enterprise funds. The Public Improvements Advisory Committee (PIAC) has reviewed and commented on both the CIP and the GO KC plan pursuant to Resolution No. 160951.

In April 2018, voters also approved renewing the crucial one-percent Capital Improvements Sales Tax. The CIP maintains essential Street Preservation funding of $19.6 million, of which $500,000 will be dedicated to boulevards and $500,000 to Complete Streets development, including enhanced bike and pedestrian lanes. The CIP includes funding for the construction of a new 10 field Northland Sports Complex. Finally, the CIP includes debt financing beginning in FY 2021-22 for the vital Buck O’Neil bridge replacement.

The renewed CIP continues its longstanding allocation of 35 percent of the one-percent Capital Improvements Sales Tax to Neighborhood Conservation projects distributed equally to each council district.

Changes to the Budget: Governmental Activities

Governmental Activities, which exclude the Aviation and Water Services Departments, decrease $42.3 million (-3.6%) to $1.14 billion.

Revenue

The Submitted Budget projects Governmental Activities revenues to decrease $42.5 million (-3.7percent). The decrease is driven primarily by the sustained economic impact of COVID-19 especially in Earnings Taxes, Convention & Tourism Taxes, Sales Taxes and Service Charges.

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Earnings Taxes, the largest single revenue source supporting Governmental Activities (22.3percent), is projected to decrease by $22.9 million (-7.8 percent) below the Adopted Budget.Included in this decrease is a reserve of $12.6 million for Earnings Tax refunds for those individuals with work sites in Kansas City, Missouri, who are now telecommuting from areas outside of the City. Sales Tax represents the second largest revenue source supporting Governmental Activities (21.1 percent) and is projected to decrease $6.2 million (-2.4 percent) below the Adopted Budget. The newly approved Fire Sales Tax adds $17.4 million of new Sales Tax revenue to support necessary capital improvements while Sales Tax overall is anticipated to decrease 10% below the Adopted Budget.

The Submitted Budget also assumes a lag in the recovery of Convention and Tourism revenuegiven the many unknowns of COVID-19 travel restrictions and the vaccine roll out. Hotel/Motel Tax and Restaurant Taxes are submitted at $11.6 million (-42.0 percent) and $5.5 million (-18.0percent) below the Adopted Budget.

Property Taxes are the third largest revenue source (15.7 percent) for Governmental Activities Funds. Property Taxes are estimated in the Submitted Budget to increase $5.0 million (3 percent) for a total of $171.5 million. Local Use Tax continues to be strong as consumers purchase more online given COVID-19 restrictions. The Submitted Budget estimates an increase of $5.1 million (11.7 percent) for a total of $48.9 million.

Expenditures

Governmental Activities expenditures decrease by $42.3 million (-3.6 percent) in the FY 2021-22 Submitted Budget. Of that total, Public Safety expenditures increase $10.6 million (2.2 percent). Finance and Governance expenditures increase $0.7 million (0.6 percent) due to the pending allocation of Public Improvement Advisory Committee (“PIAC”) projects totaling an

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Revenues for Governmental Activities are projected to decrease 3.7% largely due to

decreases in Earnings, Sales, and Convention and Tourism taxes along with

Service Charges

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estimated $24.6 million to the respective department budgets that will manage the projects. This is offset by a reduction of $14.5 million in the Contingent Appropriation for a 27th pay period in FY 2020-21. All other goal areas collectively decrease $53.7 million (-4.7 percent). The Submitted Budget does not assume additional support from the federal government to support COVID-19 related costs. The budget assumes mandatory wage and benefit increases for future collective bargaining agreements (CBA) for fire and labor employees. The Submitted Budget does not increase wages for non-represented employees and employees in the Kansas City Police Department. The Submitted Budget does not include reductions of any filled position or furloughs. It does, however, include a hiring freeze of vacant positions with a base salary over $15 per hour for the fiscal year with savings estimated citywide at $7.0 million. Uniform Fire are excluded from the freeze given concerns of impact to overtime given current CBA. The budget fully funds the required payments for all city pension plans for the eighth consecutive year. Pension and health insurance benefits for City and KCPD employees increase $8.6 million in FY 2021-22 for a total cost of $166.7 million. A voluntary retirement incentive is also included in the Submitted Budget with a very conservative estimate of citywide savings of $760,000. Additional savings are anticipated to be recognized in future fiscal years from this initiative. Other significant program strategic adjustments to address the budget shortfall include, but are not limited to:

• Transitions waste removal and leaf and brush collection services in house with an estimated savings of $500,000.

• Adds two IRS Audit Analysts with an estimated generation of $1.2 million of new revenue.

• Refinances various General Fund debt for $1.8 million in savings in FY 2021-22. • Refinances KC Live debt saving $8.8 million in FY 2021-22. • Reduces lobbyist budget by $340,000. • Negotiated reductions in healthcare costs for the city and auditing existing coverage to

ensure cost effectiveness • Moves street sweeping and leaf and brush from the General Fund to the Street

Maintenance Fund. • Continues consolidation efforts to leverage duplicative functions supported by both the

City and KCPD. Vacancies held frozen for the KCPD. Both initiatives are anticipated to save $9.3 million.

• Anticipates revenue from the sale of unused or underutilized city property. This is both real estate and underutilized vehicles and equipment conservatively estimated at $1.3 million in new revenue.

• Assumes closure of the Hale Arena with an estimated savings of $1.7 million. • Reduces certain contracts with outside vendors. Notable vendor decreases include: jail

contract savings of $1.5 million, contract savings at conventions locations that are not operating events saving $500,000 for contract security and $964,000 in event support.

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Additional savings/revenue opportunities are being explored and more information may be available before the FY 2021-22 Budget’s adoption including:

• Converting streetlights to more energy efficient LED lights• Consolidating underutilized office space • Potential healthcare cost reductions while maintaining current plan coverage benefits

available to employees• Collection process review to obtain greater collection rates for departments’ accounts

receivable

Public Safety

Public Safety is the largest expense in the Governmental Activities budget, totaling $497.3 million. Expenditures increase $10.6 million (2.2 percent) in the FY 2021-22 Submitted Budget. Public Safety accounts for 72.8 percent of the General Fund operating budget, and 43.7 percent of the total Governmental Activities budget.

Police

The Submitted Budget for the Kansas City Police Department (KCPD) decreases $11.8 million (-4.3 percent) for a total Submitted Budget of $261.0 million. Wages and benefits decrease by approximately $10.8 million to include salary savings to be realized by leaving all vacant civilian and law enforcement positions unfilled, as well as estimated savings to be generated through a consolidation with the KCI Airport Police. We will keep the current number of officers on the street as there are today. This decrease is offset by increases in pension and insurance costs. KCPD workers compensation costs increase $1.9 million and debt service decreases approximately $2.4 million for the Public Safety Project Debt General Obligation 2010A and Downtown Airport - Police Helicopter.

Fire

The Submitted Budget for the Fire Department increases $23.2 Click here to enter text. million (11.9percent) from the Adopted Budget. Most of the increase, $15.5million, is for capital improvements at eleven fire stations, the Fire Training Academy, computer system upgrades for fire vehicles and new radios, wages and benefits $0.0

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increase $7.0 million in additional pension costs and $3.4 million for overtime. Fire apparatus and equipment debt payments in the Fire Sales Tax Fund remain at approximately $5.6 million. Municipal Court The Submitted Budget for Municipal Court decreases by $739,000 (-3.8 percent) from the FY 2020-21 Adopted Budget to $18.5 million. The jail contract budget decreases $1.5 million due to a combination of COVID-19, municipal criminal justice reforms and jail population at an all-time low. Indigent legal defense is decreased $85,000 (-6.3 percent). Housing violation assistance contracts increase $202,000. Municipal Court personal services costs increase $673,000 due to adding one position to the probation division, two positions to corrections and security services, and reclassifying six positions in court operations. The Court has experienced a 47% reduction of disposed cases from the previous year largely due to the COVID-19 pandemic. Even with this reduction, the Court expects FY 2021-22 revenues to rebound over the next six to nine months. The pandemic has required the Court to make technological improvements for better access to the judicial system without high costs to the City or requiring additional personnel. It is the Court’s intention to continue to utilize this technology to increase access to the judicial system while observing constitutional protections of the parties involved, even after the pandemic ends. Transportation and Infrastructure Transportation and Infrastructure includes the Public Works Department as well as bus and streetcar operations. Total funding decreases by $18.7 million (-18.7 percent) to $204.9 million in the FY 2021-22 Submitted Budget. Public Works The Public Works Department Submitted Budget totals $130.4 million. The total budget represents a $14.0 million decrease (-9.7 percent) from the Adopted 2020-21 Budget in part due to PIAC Neighborhood Project allocations representing $14.3 million. The Public Works Department retires $3.7 million in debt service for the Zona Rosa 2001 KCMAC bonds. It reduces operating expenditures by $3.4 million by outsourcing traffic signals for a savings of $480,000, reducing parking garage maintenance and operational costs by $415,000, reducing $920,000 in right-of-way mowing program, and reducing overhead in capital projects support by $800,000. Increases in capital maintenance of $7.4 million, including street resurfacing and preservation, offset reductions in Public Works' operations.

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Transportation Authorities

The FY2021-22 Budget proposes a net decrease in operational funding to RideKC of $1.8 million due to a projected shortfall in Sales Tax Revenues in both the Public Mass Transit and KCATA Sales Tax Funds; however, the Budget preserves the $4.8 million allocation to Zero-Fare transit made in FY 2020-21.

The Streetcar Authority budget totals $11.8 million and is funded primarily from revenues generated within its Transportation Development District (TDD).

Neighborhoods, Housing, and Healthy Communities

The Submitted Budget for Neighborhoods and Healthy Communities, including parks, neighborhoods, and health services, totals $197.9 million, a decrease of $14.1 million (-6.6percent) from the FY 2020-21 Adopted Budget.

Neighborhoods and Housing Services

The Neighborhoods and Housing Services (NHS) budget totals $75.5 million. The total budget represents a $5.5 million decrease (-6.8 percent) from the Adopted FY 2020-21 Budget.

Contractual services are reduced by $5.2 million due to contract reductions from the following divisions: $115,000 from Administration, $490,000 from Housing Services, $135,000 from Land Bank, $150,000 from Neighborhood Preservation, $481,000 in Neighborhood Services, and $1.7 million in Solid Waste. The Solid Waste reduction is a combination of $700,000 for the apartment rebate program elimination and auto maintenance repair savings anticipated at $800,000 due to a newer fleet. Also notable is a recent reorganization of Solid Waste to Public Works. This change will be presented as an amendment to the Submitted Budget.

Health and Medical Care

The Health Department Submitted Budget totals $31.4 million. The total budget represents a $2.3 million increase (8.1 percent) from the Adopted FY 2020-21 Budget. This includes $2.7 million in various grants and program aid offset by a decrease of $200,000 in motor vehicles. It is important to acknowledge and credit the Health Department with the tremendous amount of new challenges and work the department has faced given the COVID-19 pandemic. They have been able to meet the demands with limited impact to city resources.

The Health Department has remarkably been able to meet the challenges and demands presented by the global COVID-19 pandemic with minimal impact to City resources.

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Health and Medical Care remains relatively flat at $31.8 million. The Submitted Budget increases personnel costs for contract employees by $189,500 and an increase in employees charged-in of $40,000. The Budget decreases special project initiatives by $250,000. Parks and Recreation The Parks and Recreation Department Submitted Budget totals $59.2 million. The total budget represents a $10.9 million decrease (-15.6 percent) from the Adopted FY 2020-21 Budget in part due to PIAC neighborhood project allocations representing $6.1 million of the decrease. The Parks and Recreation Department continues to make progress to achieve a structural balance given sustained sales tax reductions as a result of COVID-19. The department’s budget submittal includes reduction of partner pass-throughs by $1.55 million. The Kansas City Museum is reduced by $350,000 as one-time startup costs included in the Adopted FY 2020-21 are eliminated. Boulevard and Parkway mowing is reduced by $300,000 aligning mowing cycles from 22 to 16 that is the equivalent to parks. Aquatics and water park service reductions are $500,000 anticipating continued COVID-19 restrictions. Golf Operations are reduced by $557,000 to be fully fee supported with Golf revenue. This is due, in part, to an investment in a water irrigation project financed in FY 2020-21 resulting in anticipated water savings of $288,000. Other Golf operating costs are reduced by $209,000. One highlight of opportunity given constraints is the department’s roll out of a quality life investment district (QLID). This is a purposeful approach to create a dedicated maintenance district within existing resources to focus on the six zip codes within Kansas City that have a life expectancy of 13-15 years less than other zip codes within the City. Capital investment is being prioritized within this same model to make the greatest impact in quality of life, at the foundation of KC Park’s mission. Planning, Zoning, and Economic Development The Submitted Budget for the Planning, Zoning, and Economic Development goal decreases $20.9 million (-14.7 percent) to $120.9 million.

The Convention and Tourism budget decreases $3.8 million (-13.6 percent) to $24.3 million, which includes decreases in payments to Visit KC due to anticipated revenue reductions in the hotel/motel tax as a result of the COVID-19 pandemic. The Convention and Entertainment Facilities budget decreases $3.6 million (-7.2 percent) to $46.7 million. Reductions include $1.7 million by closing the Hale Arena, $1.1 million in event support, and $500,000 in contractual security at the convention center.

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The City Planning and Development Budget decreases $2.1 million (10.6 percent) to $17.3 million. The budget continues to fund the development of the City’s new comprehensive plan process. The City’s current comprehensive plan, Forging Our Comprehensive Urban Strategy (FOCUS), is over 20 years old. Despite continuing to update the comprehensive plan, City Planning and Development personal services decrease $987,000 due to the elimination of seven vacant full-time positions, two vacant part-time positions, and one personnel charge-in. The Budget also reduces contractual services by $348,000 in land development inspections and $100,000 in historic building preservation.

Finance and Governance The Submitted Budget for the Finance and Governance goal increases $700,000 (0.7 percent) to $118.1 million and represents 10.3 percent of the total Governmental Activities budget. Finance and Governance includes a number of administrative departments. Contingent appropriation reduces from $20.5 million to $5.7 million. The FY 2020-21 Adopted Budget included $14.5 million for a 27th pay period which occurs once every 11 years.

The Finance Department’s Submitted Budget reduces by $1.6 million (-8.4 percent) for a total Submitted Budget of $17.3 million. Reductions include $400,000 in debt reductions for the final debt payments on the budget and revenue systems. Reductions also include $366,000 in contractual services driven primarily by consultant services for PeopleSoft Financials and the

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Independent Annual Audit. Reductions to personal services include $625,000 due to the elimination of seven vacant positions along with salary savings.

General Services’ Submitted Budget reduces $2.1 million (-5.6 percent) for a total Submitted Budget of $35.3 million. Reductions include the elimination of 12 vacant positions. The budget also decreases $200,000 in contracts with the American Jazz Museum; $428,000 in cleaning, painting, and maintenance in municipal buildings; and $270,000 in lease payments for fleet management.

The Human Relations Submitted Budget reduces $431,000 (-15.0 percent) for a total Submitted Budget of $2.4 million. Two vacant positions are eliminated along with salary savings.

The Human Resources Submitted Budget increases $143,000 (2.9 percent) for a total Submitted Budget of $5.0 million. The budget adds five positions with four to focus on conducting Equal Employment Opportunity investigations. A modest tuition reimbursement budget is funded at $100,000 to support continued employee development. This is offset in part by salary savings and a reduction in benefit consultant fees.

The Law Department Submitted Budget decreases $651,000 (-10.6 percent) with a total Submitted Budget of $5.5 million. The budget for outside attorney consulting is reduced by $115,000 along with $200,000 removed for a legal settlement resolved in the prior fiscal year.

The Office of the City Auditor’s Submitted Budget reduces $190,000 (-14.5 percent) for a submitted budget of $1.1 million. The majority of the difference is the reduction of two vacant positions. The Office of the City Clerk adds funding of $50,000 (6.9 percent) for software costs for the new legislative tracking system. The Office of Mayor and Council Submitted Budget totals $4.9 million, which represents a $220,000 (-4.3 percent) reduction. Personnel costs budgeted in FY 2020-21 reflected vacant positions due to the 2020 election. The FY 2021-22 Budget reflects wage and associated benefit projections based on currently filled positions. Additionally, the Budget decreases $340,000 for lobbying expenses.

The Office of the City Manager’s Submitted Budget increases $20.5 million (130.3 percent) for a submitted budget of $36.2 million. The majority of the increase is due to $21.9 million in PIAC allocations pending appropriation to the respective department budgets that will be managing the projects. The budgetadds an Assistant City Manager and a Chief Equity Officer Position to address issues of equity citywide. The budget decreases $615,000 in support of festivals and other public events given COVID-19.

The Submitted Budget focuses on equity in city policies and management with the creation of a Chief Equity Officer and additional Equal Employment Opportunity investigators.

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Changes to the Budget: Business-Type Activities Aviation The Submitted Budget for Aviation totals $164.9 million, a reduction of $4.9 million (-2.9 percent). It includes $900,000 in anticipated salary savings due to a citywide hiring freeze and an increase in $660,000 in equipment, mostly in motor vehicle purchases for emergency services. The capital improvements budget totals $49.3 million which includes $32.4 million for phase two of runway rehabilitation projects, $4 million in landside improvements at the Downtown Airport, $3 million in public parking rehabilitation in Lot C, $2.4 million in snow melters, $2 million in airport roadway rehabilitation, $2 million in building maintenance, $1.5 million in phase two of South Apron improvements at the overhaul base, $1 million in Taxiway A reconstruction at the Downtown Airport, and $1 million in terminal maintenance. Water Services

The Water Services Submitted Budget recommends a rate increase of 6.0 percent for Wastewater to support the Consent Decree obligations. No rate increase is proposed for Water or Stormwater. Major capital upgrades include the continued funding of capital improvements including $47.9 million in the Smart Sewer Program (Overflow Control Plan), $14 million in wastewater projects, and $30.4 million in water treatment and line projects. The Water Fund increases by $3.1 million to $179.0 million in the Budget. The Submitted FY 2021-22 Stormwater budget increases 14.9% from the previous year.

Important Dates for the FY 2021-22 Budget Deliberations For your review, the following dates are provided as key milestones in the process of deliberating and adopting the annual budget of the City under Charter requirements. Mayor and City Manager’s Budget delivered to Mayor and Council February 11 Submitted Budget Presentation – Business Session February 11 Introduction of the Budget Ordinance February 18 Neighborhood Hearing – Virtual February 20 Department Budget Presentations February 23 Public Hearing – Finance, Governance, and Public Safety Committee February 24 Second Department Budget Presentations February 25 Second Neighborhood Hearing – Municipal Arena February 27 Third Neighborhood Hearing - Virtual March 2 Second Public Hearing – Finance, Governance, and Public Safety Committee March 3 Third Department Budget Presentations March 4 Finance, Governance, and Public Safety Committee consideration of the Budget

March 17

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Business Session on the Budget March 25 City Council Adoption of the Budget Ordinance March 25

This Submitted Budget follows the lead of our Citywide Business Plan to sustain public safety enhancements and maintain basic operations. We must continue to address structural deficiencies, reserve levels, and basic service provisions in order to become a resilient organization as outlined in the Citywide Business Plan. Staff stands ready to address any questions you may have regarding the information presented in this preliminary budget. We look forward to working with you as you review it. Respectfully submitted, Quinton Lucas Brian Platt Mayor City Manager

Documents

Office of the Mayor and Office of the City Manager