Good evening and thank you so much for the giving of your time to attend my sixth "State of the

City" message. Much has happened in our City since 2007 when I was first elected as your Mayor. We have met and coped with many financial challenges, unprecedented in modern times. In spite of these challenges, my optimism continues to grow, as I am very pleased to tell you that we are succeeding! Where Elkhart once stood at the top of the Nation's economic downturn, we now lead the Nation in recovery! As each financial hurdle is thrown in our way we catapult over it and gain strength as we reach the next. With the strength and determination of the people of the City of Elkhart by my side, 2013 will not offer any challenge we cannot overcome. Like nearly every City in Indiana, the loss of property tax revenue and other factors beyond the City's control, has affected the traditional ways of funding the provision of City services. So I begin the next portion of my message to you with the details of our City's finances. The cash balance of the City's treasury at the end of 2012 was $98,509,205, an increase of $7,157,583 from 2011. A number of factors attributed to this increase which included a reduction in personal services expenditures; an increase in the Major Moves fund balance due to the fact and we had borrowed from it to complete the Lerner Theatre project and paid it back early with interest; there was a receipt of grant funds for airport improvements; a set aside for the Combined Sewer Overflow Long Term Control Plan; and we received a distribution of excess levy funds that the State failed to distribute in 2011. One hundred sixty two (162) of the City's one hundred sixty three (163) funds maintained a positive cash balance at the end of the year. The one negative fund is

1

a reimbursable fund which is expected to accrue a negative cash balance pending reimbursement by the granting entity. We continue to note the difference between expected revenue and actual revenue. The original civil City budget contemplated receipt of revenues in the amount of $59.6 million. Actual receipts, less inter-fund transfers, totaled $53.7 million, $5.9 million less than expected for the year mostly because of our frugalness. Of the $35.2 million dollar property tax levy for the 2012 civil City budget, dollars that we were allowed to collect, only $25.9 million was collected and $9.3 million or 26-44% remained uncollected. $8.5 million or 24.18% of the total levy was uncollected due to the effects of the circuit breaker caps. $799,549 or 2.26% was uncollected by the County for other reasons. By comparison, the loss of property tax revenue due to the circuit breaker caps in 2011 was $5.9 million. The effects of the circuit breaker caps continue to rise. The loss is expected to be even higher in 2013 and continue on into 2015· The approved gross budget for 2012 of $54 million less inter-fund transfers of $460,000 comprised a net civil City budget of $53.5 appropriated among twenty-eight (28) funds. This is to be compared with the 2008 budget of $57.4 million. Actual expenditures and encumbrances were $55.1 million or 95% of the net-working civil City budget. The City realized a reduction in operational costs of $2.8 million in 2012 (a 5% reduction). Excluding the water and wastewater utility bonds and the tax increment financing district bonds, the City had long term debt in the amount of $10.3 million aggregated between two revenue bonds on January 1, 2012. Principal and interest in the amount of $552,764 was paid during the year. Outstanding debt on the remaining bonds
2

was $10.1 million on December 31, 2012. This amounts to just 25% of our allowable debt by law. While the City has strong fund balances and an A+ credit rating, we must continue with the philosophy that you cannot borrow your way out of debt. Enough about the big numbers for now and let's talk about one of my favorite subjects, the Lerner. The first full year for the Lerner was even stronger than anyone anticipated. In
2012, we hosted 278

events of which 26% were ticketed, 8% non-ticketed, and 60% were

Crystal Ballroom events. If you have not had the opportunity to attend a function in the Crystal Ballroom you're really missing something special. But don't take my word for it, just ask anyone who has. Now, letme drop a few big names. Willie Nelson, Hal Holbrook, Bobby Knight, Loretta Lynn, REO Speedwagon, and Bob Ralston from the Lawrence Welk Show who brought to life our famous Kimball organ and recently Vicci Lawrence. All of these great artists and entertainers, along with many more, have performed on stage at the Lerner. I can't talk about the success of the Lerner without mentioning the Elkhart Municipal Band, the Elkhart County Symphony, and of course our resident theatre group, Premier Arts. At least five times a year, Premier Arts seems to just magically appear from the Lerner's basement with one outstanding performance after another. It gives me great pleasure to inform you that the Lerner and Crystal Ballroom events, coupled with Premiers Arts activities, brought over through the Lerner and into downtown Elkhart in 2012. The Lerner returned
27% away from $440,630 to 100,000

people

City, exceeding all expectations! That's just

being totally self-sufficient and that's just the first full year folks! My hat

goes off to the Lerner Theatre Governing Board, Manager and staff.

3

Speaking of good people, our Human Resources Department manages some of the best. I am of course talking about our City employees. Our employees are literally the life blood of our City. Maintaining a strong and competent workforce eliminates the need for expensive job outsourcing and allows us the flexibility to deploy manpower at a moment's notice for the maximum benefit to those we serve. In 2012, our Human Resources Department coordinated a City employee well ness program with Get Fit Get Healthy. 402 full-time employees completed a wellness strategies set by the City to earn a discounted premium. Our main goal is for our employees and their families to enjoy an enhanced overall quality of life through better heath. The byproduct of Get Fit Get Healthy was a refund the City received from our health insurance carrier in 2012 of
$60,921.

Department leaders having a clear understanding of our City's financial challenges is the key to accomplishing more with less. Our Fire Department is a good example of a department following the Mayor's guidelines for budgeting and austerity planning. Austerity begins by separating ones wants from ones needs. In 2012, the Fire Department did not spend $227,589 of their budget and returned it to the City's general fund. An additional $125,000.00 was also returned by the Fire Department in the City's self-insurance fund. Reliable radio communications are paramount when lives are at stake. A new agreement between the City and Emergency Radio Service improved communications making it safer for all emergency personnel responding. Our Fire Inspectors performed
1,067 inspections,

conducted 50

fire

investigations, 5,947 men women and children visited the Survive Alive House, and
8,009 participated in fire safety/fire prevention appearances. Adding in all of the other
4

public education programs conducted by the Elkhart City Fire Department in 2012, 22,000 citizens were impacted. All Fire Department emergency units responded a total of 15,232 times. The responsibility of maintaining over seventy five (7S) City properties and thirty (30) buildings, including the new Lerner Theatre, falls on the shoulders of the Buildings and Grounds Department. This highly skilled group of City employees is trained in a variety of facility maintenance techniques. With just 2S full time employees and some seasonal, this department maintains all park areas, trails, medians, green spaces and many other City owned recreation facilities in the most functional, attractive, clean, sanitary and safe condition as possible. Through their efforts, the City of Elkhart was awarded the Tree City USA Award for the 24th consecutive year! They grew over 27,000 annuals and soo perennials from seed. They planted 1,400 bulbs throughout City flower beds. They designed, planted and maintained the sixth annual 1,600 square foot quilt garden. They installed the City's first flower carpet including an observation platform. They removed, trimmed and planted hundreds of trees. The weekly brush pick-up was improved and 20,000 cubic yards of brush went to the bio-solids pad for the composting operation. The City Grants Department continues to be successful in securing grant funds for our City. More than so% of the grant applications submitted in 2012 resulted in an award. We received grants in various amounts from the Indiana Department of Environmental Management, Department of Homeland Security, Indiana Arts Commission, U.S. Dept. of Justice, Indiana Humanities, U.S. Bureau of Justice Assistance, and Indiana Landmarks. 2012 began a new era in grant administration. The change can be summed in one word - competition. After the American Recovery
5

and Reinvestment Act, or Stimulus ended the Congressional moratorium on earmarks began. An additional constraint is that Federal grant guidance is written with very narrow, exclusive threshold requirements, which disqualify Elkhart. It would appear that most Federal guidance is written with particular recipients already in mind. It is important to note that funding from the Humanities, Arts Commission, and Landmarks were first time awards. The City now has its "foot in the door" with each of these grant makers. Future applications will have a greater probability of being funded. Although the award amounts are small, the impact is great. Another department feeling the pinch from budget shortfalls is our Information
& Technologies Department. The I.T. Department has been working in ((break - fix"

mode and doing a good job of maintaining the network in its current state only replacing equipment that it must. This year, LT. will be upgrading our outdated server system, restore and upgrading the Riverwalk Wi-Fi, and overseeing the migration of all first responders to the air card system. As always, the LT. Department will continue to look for ways to reduce the overall operating cost of the City's network infrastructure while maintaining or improving the level of service. Our Building and Code Department is seeing more signs of economic recovery based on the gradual increase in the number of commercial and industrial permits being sought. 1,984 permits were issued in 2012 earning $93,657 in income for the City. The City invested $100,000.00 for the demolition of 19 unsafe structures. Through rental registration program fees and other fees, the Building Department collected a total of $30,174.64. Inspectors conducted 3,150 mechanical inspections and 19,836 code inspections. 196 board-ups were ordered, 1,570 clean ups and just over 1,400 mowing's. They also
6

received 691 code complaints. They issued $62,175 in fines, and conducted 11,300 follow up inspections. In spite of the fact that the State legislature is currently considering making it unlawful to charge fees for rental registration or allow for the inspection of rental properties, the Building Department is working on improving the Rental Registration Program. Landlords who have ignored the law and failed to register in the past will be found and held to their obligation. Our Public Utility Department formed a Trash Committee in 2012 to brainstorm trash collection cost saving opportunities. The committee devised a service modification plan that was very successful resulting in a savings of $142,600. City residents recycled
960-4 tons of recycling materials in 2012, which was 66 tons more than in 2011. Over 4,400 people attended events and programs presented by or hosted at the Elkhart

Environmental Center during 2012. This includes environmental education programs presented to over 1,300 local elementary school children and EnviroFest, which was attended by over 1,150 area citizens and featured over 40 displayers and vendors. The Water Utility treated and distributed 3.2 billion gallons of safe, clean drinking water through 346 miles of water mains. The Service Department has now replaced 99% of the old meter reading devices. The Public Utilities Maintenance Department saved over $150,000 by rebuilding the plant's thirty year old primary effluent screw pumps. The Wastewater Utility treated and released just less than
5 billion gallons of wastewater to the St. Joseph River in 2012. Efforts to collect fees

owed to the taxpayers resulted in collecting over $26,000 in past due accounts. Additionally, $44,310 in sewer liens has been filed as part of this ongoing collection process. Injoining with the rest of the City in responding to the Mayor's challenge to continue to reduce budgets, Public Works reduced work outsourcing costs by and saved
7

$790,000 in engineering fees by doing work with our in-house staff. The 40 year old Bent Oak retention pond has been rebuilt and the Pierre Moran Neighborhood Project separated combined sewers that have contributed to local basement flooding for many years. Our Engineering group stepped up our efforts toward completion ofthe American Disabilities Act implementation program for the City. Engineering is guiding the City in the implementation of these plans. Again, rather than outsourcing this work, a savings of up to $200,000 has been realized so far by performing this work in-house and by existing City employees. The Prairie Street Overpass Project is now at a point where it can be put out for bid later this year. In 2012, the design was submitted to INDOT, the final Federal funding was secured, and the Federal environmental requirements were met. When completed, the long lines of vehicles waiting for 120 trains that pass through that crossing everyday will be a thing of the past. Significant amounts of exhaust emissions, gone, loud train whistles, gone, delays in getting from north to south and vice versa, gone! Construction is expected to start in early 2014 and will be completed sometime in 2017. Just over $16 million in Federal funds are dedicated to this $20 million dollar project. Quite a large number of construction projects were completed by Public Works in 2012 and we're looking through the windshield rather than the rear view mirror for 2013. Included on the list are the SR-19 Water/Sewer Extension and continuing work on eliminating sewage overflows during heavy rainfall and there will be more water main construction and bank stabilization.

8

Moving onto the Emergency Management Department, these dedicated volunteers served 2,793 hours in 2012,
246

more than

2011.

Fulfilling duties once

carried out mostly by Police Officers, a real savings of $62,000 can be directly attributed to the Emergency Management Department. In addition to working fires, accidents, downed power lines, special events, training, and more, Emergency Management took on a special project in 2012. When it was discovered that Grace Lawn Cemetery was the final resting place of Union Army Captain Orville Chamberlain, a Civil War Congressional Medal of Honor recipient, a detail of Emergency Management volunteers renovated the grave. The Emergency Management Department embodies the spirit of giving back to the community. Enforcing our laws and deterring crime while providing a safe environment through police and citizen partnerships with integrity, fairness, and professionalism in a nut shell is the mission of the Elkhart Police Department. The Patrol Division continues to enhance community safety by understanding and addressing current quality of life issues. The number of traffic accidents in the City, when compared to the previous year, dropped 38% in 2012. The Community Affairs Bureau was very busy in
2012.

The unit took part in a

number of community events that included bicycle patrol, downtown foot patrol, Riverwalk and Segway patrol. They also participated in Motorcycle Ride with a Cop, Night Out Against Crime and Project 365. The drug unit was fully established and up and running. The Department of Child Services workers were assigned to the Elkhart Police Department. This allows for more open interaction between the Department of Child Services, the Prosecutors Office, and Child and Family Advocacy Center.
9

911

ride, Shop

There were no significant changes in crime levels in our City in

2012.

Working

our way through our new reporting system and with changes in what constitutes a particular crime here locally and by the FBI makes the numbers more difficult to understand. Hopefully these things will not always be in transition but leadership changes and ideas change with it. The Redevelopment Commission approved contracts for work related to refinancing
2001

and

2002

TIF bonds. By keeping close track to the bond market,

interest rates, and other factors, we realized that by refinancing these bonds the City would save
$314,000

over the life of the bonds! Subjects of staff reports included: the

Southeast Gateway TIF, the Neighborhood Stabilization Program, Southwest TIF infrastructure projects, North Elkhart Gateway, Shoppes on Six, and brownfield projects and from the SoMa study group. Commissioners approved a small grant to Indiana Landmarks to assess the
200

North Main Street property known by many names

including the A&P, the roller rink and the Armory. Ownership of the remainder of the City Centre/Central Park site was transferred from the Redevelopment Commission to the Board of Public Works. Two TIF appropriations were approved up to North Pointe II and up to
$600,000

from the Cassopolis Corridor TIF for

$600,000

from the Pierre Moran TIF for infrastructure

improvements. Redevelopment Commissioners also gave approval to a development agreement with Habitat for Humanity for the
1032

East Beardsley project. Proposals

were approved that included a contract for a SoMa implementation strategy, an NSP marketing brochure, an appropriation from Aeroplex TIF funds for improvements to airport taxiways, and an appropriation from the Downtown TIF to help fund an adaptive reuse study of the Depot. The Redevelopment Commission approved the purchase and
10

demolition of 125 Division Street, funds for the East Franklin Street parking lot and Main Street lighting and funding to improve Newland Village Park, Barnes Park, and Sterling Park. The Redevelopment Commission transferred ownership of the parking lot on NIBCO Parkway to the Board of Works and approved an inter-local agreement with Elkhart County for a lead hazard control program. Our Cemetery Department kept busy making these very sacred places just that. There is always mowing, trimming and leaf pickup. There were 287 burials and

entombments within our three cemeteries. These are the times wherein family and friends must feel comfortable with their loved ones place of rest. While meeting their own daily departmental responsibilities they also served alongside the Aviation Department, Park Department, Building and Grounds, Public Works and the Street Department at different times throughout the year by providing both manpower and equipment to help with the completion of various projects throughout the City. The Department is now open for burials and entombments on all legal holidays except Thanksgiving and Christmas. For years erosion has been gradually destroying the riverbank along the west side of Grace Lawn Cemetery. During the summer of 2012, this Administration took the first steps in ending the ongoing erosion problem by completing the Grace Lawn Cemetery Bank Stabilization Project in which 125 feet of the river bank was destabilized to protect the slope from any further erosion in the future. The Cemeteries generated revenue of $269,478.00 in 2012. Our Parks Department faced some difficult challenges in 2012. The property tax losses continue to take their toll in our ability to provide services. The Sims Oak Hills Golf Course was permanently closed and facility hours were cut, resulting in less
11

employees being hired. Consistent with other courses nationwide during the economic down turn, play at the course had been dwindling over the past five years reducing the income. Without reserve funds to shore up the shortfall the course had to be closed. The hope is that a new owner can be found who will convert its use into something positive. The Bicentennial Bridge west section had to be replaced and is once again a safe crossing to Island Park. Volunteers were organized to help with the sprucing up of one of Elkhart's older historical neighborhoods - Division and State Streets. Added properties include Sterling and Barnes Park. Barnes, a pocket park, offers residents a place to hold picnics and reflect and enjoy quiet times. The old Labour property, renamed Sterling Park, has come a long way. Trees, keystone planters, raised flower boxes, planted flowers, paved paths and shelters are now part of this major make-over. Hundreds of volunteer hours have been logged, plus two Eagle Scout projects were completed. One of two shelters was built along with three shade structures over the repurposed granite tables and benches. Look for the dedication of Sterling Park in the spring of 2013. After an absence of nearly five years, the Labor Day Parade took formation under the Parks Department's leadership. Both sides of South Main Street were lined with spectators. The Central Garage was busy as usual in 2012 completing nearly 2,500 work orders. Due to budget cuts, employees are all now on first shift. The up side to this change is a savings on electricity and shift pay. Sixteen new pieces of equipment replaced 16 old. Our employees have taken advantage of the National CASE) Automotive Service Excellence Certification program. Currently nine out of twelve employees have retained ASE certifications. Since implementing our new fleet maintenance software the
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Central Garage can better manage parts inventory. This has resulted in less equipment down time and fewer infrequently used parts taking up space and inventory. In
2012,

the Elkhart City Communications Center processed

101,050

calls for

service and events including 84,148 calls for police assistance and

8,459

Fire and EMS

calls and 8,443 miscellaneous calls. The Communications Center, along with the Police and Fire Department, installed an used when the State
800 800

MHz conventional back up radio system to be

MHz system is out of service. Dispatcher training is ongoing
9-1-1

and never ceases. Looking at the future we will prepare for next generation prepare future. In
2012,

and the

a

schedule

for

equipment

and

technology

needs

for

the Human Relations Department continued to provide information

throughout the City in the areas of housing and employment. They updated brochures, guidebooks and streamlined the forms that are used in notifications and investigations. In
2012,

Human Relations experienced an increase in telephone and walk in traffic to

the department. Averaging approximately 63 contacts per month from citizens with questions and concerns relating to fair housing, equal employment, and other issues are answered. The majority of the calls were from citizens facing possible eviction for non­ payment of rent or termination from their employment for just cause. Human Relations often works hand in hand with Code Enforcement Officers by providing information on housing rights and the Landlord-Tenant Guidelines. As part of the departments outreach and education, a quarterly newsletter was developed. The newsletter highlights programs and services provided by the City. It also included recent information, legal updates, and cases regarding equal employment and fair housing. In
2012,

the

13

department was able to print and distribute over books and other printed materials.

3,600

brochures, landlord-tenant

The National New York Central Railroad Museum had a year of dynamic growth and change in
2012.

The Museum's revenue continues to increase across the board.

The success of the Museum is due in part to the many contributions from dedicated groups of people, our employees, volunteers, members, visitors, and other assistance when needed from other City departments. Every month in surpassed those of the year before. In state and net
16 2012, 2012

admissions fees

a record

7,426

visitors from nearly every

foreign countries came to our museum. Concession revenues generated a Revenue of
$6,670.75

$4,967.03.

from the gift shop has more than doubled from

2011.

Museum customer satisfaction surveys returned high marks in customer

relations, cleanliness and overall satisfaction with the museum experience. Our Model Railroad display is considered a "World Class HiRail Layout." The NIBCO Express, a 2 foot gauge train began service again in 2012. A great deal of clean up took place first, a "barn" for the train was built, and additional track was laid by the City Buildings and Grounds Department. At the same time inside at the Central Garage, our NIBCO Express train engine was being overhauled, and the cars were restored. The NIBCO Express now carries our children for short excursions around the museum property. Our newest exhibit features the 1926 "Cardinal Train", the history of the Mohawk
3001,

and the Pullman Train story. The National New York Central Rail Road Museum's

biggest challenge is protecting the one of the last two known New York Central Mohawk locomotives from deterioration due to the elements.

14

Our Economic Development Department worked on a number of projects in
2012. These projects include: Colbert Packaging Corporation which created $2.5 million

in capital investment and 34 jobs; Conn-Selmer, $2.2 million in capital investment and
23 jobs; Kiel N.A., $3,8 million in capital investment and 62 jobs; KIK Custom Products, $7.5 million in capital investment and 68 jobs; Kinro, $750,000 in capital investment

and 50 jobs; Lippert, $400,000 in capital investment and 150 jobs; and Scientific Developments, Inc., $1.1 million in capital investment and 9 jobs. The total was $18.9 million in capital investment and 444 jobs. The Economic Development Department is working with the Redevelopment Commission to redevelop North Pointe Blvd. into an attractive front door to our community. Both phases of this project are funded through the Cassopolis Street TIF District. The Economic Development Department, in coordination with the

Redevelopment Commission, assisted Thompson-Thrift with the development of the southwest corner of County Road 6 and Cassopolis Street. This development is designed to provide Class "A" retail space that will help attract nationally known retailers to our community. Staff also worked with the Redevelopment Commission to make significant improvements to sewer in the City's 5th District, specifically in the Pierre Moran neighborhood. These projects were completed using money from the Pierre Moran TIF. The Economic Development Department assisted in hosting The Mayor's Economic Development Summit. Nearly 150 leaders from around the area heard from noted speakers on topics that included the economy, education, workforce development, and small business/entrepreneurship. Plans are underway for the 2013 Summit.

15

The department assisted Feed the Children (FfC) with their commitment to raze their former facility on the former Miles/Bayer campus. They will be working with the City on future plans to redevelop the
26

acres under their control. The South Main

Street Gateway TIF will allow the City to have a funding source to help pay for beautification efforts along the southern gateway of Elkhart. The City acquired the Elkhart Armory building for redevelopment or demolition based on rehab costs. A final decision will be made soon about the future of the building and the site. The Brownfields Office worked with county officials to acquire title to the dilapidated buildings at 700 West Beardsley and 1032 East Beardsley and at the South West corner of Richmond and Division. With help from the EPA in the form of a
$500,000

demolition grant, the building at 700 W Beardsley has been razed. The City

hopes to market it soon. In the meantime, the site will be seeded and turned into an attractive green space. Habitat for Humanity is working with the Brownfields Office to build homes on the 1032 East Beardsley site and surrounding properties. Water service was installed into Sterling Park, over
60

trees were planted and 3

tables and 7 benches using Miles-Bayer Granite and Limestone were constructed. Flower beds and canopy covers for tables and benches were built and picnic tables were installed. When the trees leaf out in spring there will be a whole new look on Sterling Avenue. Our thanks go to Cummins-Onan Corporation and Welch Packaging for their contributions to make Sterling Park a place for all of our citizens. Over the past year, our Street Department applied resurface to over
15

miles of

City streets. Our concrete crews replaced 26,450 feet of sidewalks. The Traffic Division applied over 1,800 gallons of street paint while also applying over 130 white crosswalks and stop bars at intersections. All City parking lots were resealed.
16

18

miles of alleys

were graded, using soil stabilizer for dust and durability. Our street sweeping collected over 13,000 cubic yards of soil and debris and we picked up more the 49,000 cubic yards of leaves which were composted and used for top soil. Once again our pretreating tank truck was used for help in preventing snow and ice buildup. We never stop looking for new ways and improved techniques to do our job. Our Planning and Zoning staff continue to work on updating the 1996 Comprehensive Plan. It is anticipated that the final draft will be delivered to the Plan Commission and Common Council for approval in the spring of this year. Staff prepared
14 recommendations for the Plan Commission and 42 recommendations for the Board

of Zoning Appeals.

11

cases were brought before the Historic Cultural Preservation

Commission. The Technical Review Committee reviewed 26 projects ranging from new retail uses, upgrades to parking lot, and additions to industrial buildings. 17 of those have commenced construction with a total declared value of $4,768,000. The Community and Redevelopment Department's primary function is to administer the City of Elkhart's annual Community Development Block Grant (CDBG) Program. The CDBG program is funded 100% by the City's CDBG entitlement funds. The 2012 CDBG entitlement award was $704,199. In 2012, the City utilized $309,000 in CDBG funds to provide financial assistance for residential rehabilitation activities. By taking the initiative to find additional funding sources another $296,000 became available to assist Elkhart homeowners. Included in the work of the Community Development Department was partnering with the Human Relations Department to provide fair housing assistance. In 2012, the City utilized approximately $150,000 in CnBG funds to improve public infrastructure including sidewalks, community gardens and parks.
17

The City provided $62,840.51 in CDBG funds to pay for one full time Code Enforcement Officer to enforce local property maintenance codes in the City's near­ downtown neighborhoods. The City of Elkhart entered into sub recipient agreements totaling $109,500 with eight local not-for-profit agencies. This investment of CDBG funds leveraged nearly $1.7 million dollars in additional funds to provide program and services for our community. In March 2009, the City of Elkhart received $2,251,346 in Neighborhood Stabilization Program Funds from the U.S. Department of Housing and Urban Development. The City of Elkhart planned to acquire and renovate 10 housing units through this activity. At the end of 2012, the Redevelopment Commission had acquired all 10 units. From the ten, eight have been completely renovated, one was under renovation and one additional unit was in the scope development phase. Seven units are sold or are under lease-purchase contracts while the remaining three units will be sold in 2013. This was a very positive use for these funds. Through the end of 2012, the City has acquired 53 vacant properties to populate the land bank. Some of the properties will be marketed for redevelopment by private parties while redevelopment plans for public uses will be developed for others. By the end of 2012, the City of Elkhart demolished 59 dilapidated buildings through the NSP program. The resulting lots will be used to build new homes, are in the land bank for resale, will be used for public space projects or will be transferred to an income eligible adjacent homeowner. The City of Elkhart acquired four vacant properties to provide buildable residential lots for families in our community in coordination with Habitat for Humanity of Elkhart County.

18

In March 2011, the City of Elkhart received $1,022,717.00 in Neighborhood Stabilization Program 3 Funds from the U.S. Department of Housing and Urban Development. By the end of 2012, the City had acquired 26 properties for the Elkhart Neighborhood Stabilization Residential Land Bank and two additional lots for Habitat for Humanity for new construction NSP-3 funds demolished 10 dilapidated buildings improving the aesthetic and safety of our community. Four additional demolitions are planned for the first quarter of 2013. Once every two years the Aviation Association of Indiana publishes a report of the total economic impact of Indiana's airports. For the first time the study included business both on and off airport property, their current number of employees, and what percentage of sales or output was directly attributable to their use of the airport. The result has been the first truly comprehensive measurement illustrating Indiana's airport's true economic impact. Indiana's official State Aviation System Plan includes Elkhart and 68 other airports that serve the transportation needs of more than 6.5 million Hoosiers and by doing so, directly support more than 69,000 Hoosier jobs. More than 1,519 jobs and $69,641,230 in payroll can be directly attributed to our Elkhart Airport. The study shows our Airport has an annual economic impact of $194,501,190! The City received another grant last year for taxiway rehabilitation. The second phase of the North Ramp Rehabilitation is expected to be completed this spring. Another indication of an improving economy, our Airport had 24,540 operations in 2012, more than 1,000 more than in 2011. The number of based aircraft was also at an all-time high at just under 140 aircraft.

19

Elkhart offers one of the finest municipal airports in the State. Three runways, air traffic control tower, instrument landing system, ARFF, are among the many amenities our airport offers the flying public. The annual October Warbird Fly-in continues to offer the community an affordable alternative to the former Elkhart Air Show. Plans are currently underway to host a radio controlled aircraft air show at the airport titled "Air Supremacy over Elkhart". That event will take place this September
12, 13, and 14.

Fifty-one years ago, John F. Kennedy declared that "the Constitution makes us not rivals for power but partners for progress." "It is my task," he said, "to report the State of the Union -- to improve it is the task of us all." The same can be said for a City. During some very tough economic times we have come together to clear away much of the rubble and blight that has existed for so long. It is absolutely necessary if we are to see the redevelopment in our City and enhance our economic development as well. Overall 2012 was a great year. During my message last year, I promised to revisit the idea of angled parking in downtown Elkhart. Now that the Lerner, when fully activated at times can accommodate in excess of
2,180

people and with so many

enjoying downtown living and in consideration for our downtown merchants, it increased the need to have adequate parking. It has been done. It completely changed the complexion of our downtown neighborhood and added
151

parking spaces. At the

same time, the City completed its design for the Franklin Street parking lot and with much of the work done by City crews, we have a better parking area that serves the Lerner Theatre, IUSB, the
135

Building and our downtown merchants and shoppers.

We put the finishing touches on our Main Street streetscape by adding new lighting
20

above the street and on many of the trees in our downtown area. We have a new Sterling Park taking the place of a much blighted area. We established a new TIF district that is expected to do a great deal to the improvements of our South Main Street Gateway. We began to divest ourselves of City-owned properties that exist outside of our City limits. The first phases of improvements to Lusher Avenue were completed. We recognize the sacrifices made by those who serve us in our Military programs and along with other community advocates conducted our Bike Night raising over
$21,000

for the Wounded Warriors program. The City with a Heart came through again.

And even though we continue to lose property tax revenue, we were able to provide all the services expected of us, keep all of our departments open and all of our employees working. I give the credit to our department heads and to our employees who have accepted what reality is. We continue to do more with less. Things are also looking better job wise and reports indicate jobs that have left us and moved overseas are returning to America. A case in point is when Dometic left Sweden and came to Elkhart. The report is that Caterpillar, Ford and Apple will bring jobs once lost back to this country. Still we must continue our effort in job diversification. We must continue to use our Economic Development Summit program to understand what we must do to be an attraction to some of these major corporations. That includes what curriculum is available to our students at our local institutions of higher learning that will allow us to say to those looking at us; yes we are building your workforce right now. We must equip our citizens with the skills and training to fill those jobs. The two must go together. The jobs must also be here to accept the trainees.

21

When talking about education it brings up the issue of learning and we are told learning begins long before one gets to an institution of higher learning. Study after study shows that if education is available, a child begins learning at a very young age and because of that start will continue to learn well throughout its lifetime. We have great hope that the Horizon Project will enhance that availability to our kids no matter their beginning, race or creed. We must do everything we can to make our learning environment comfortable. Our kids must be clothed and equipped and feel equal to all others. To that end while we wait on many Congressional actions some type of immigration reform is absolutely necessary. Our children born to immigrant parents must know that when they leave for school and return the entire family will still be there. We know our local economy is stronger. Our RV Industry appears to be doing well and we have been assisting in adding jobs almost on a monthly basis. The City's assistance is normally in the form of a tax phase in program. And when one out of every five of us was unemployed any job looked like a good job. But I now question the criteria we have been using when providing a tax incentive program. I am concerned about helping to bring in jobs whose pay scales may mean that their employees still require assistance from our local welfare programs. We have statistics that tell us what is required in take-home dollars to sustain a family of four, to rent a two-bedroom apartment and even that does not offer a lot for vfhat many of us enjoy as quality-of-life extras. To that end, we are working with Elkhart County government and the other cities in our county to hopefully come up with the answers and follow the same guidelines. We have talked about the past and the present. And it is time to speak of the future. And this is perhaps the most difficult area to address because of the uncertainties
22

that we face. I have often said that the only thing that is for certain is that nothing is for certain. We cannot look at our accomplishments and use that as a pattern to continue on into the future when there is so much uncertainty relative to our revenues and resources to do things as we have done in the past. Last year I said as we look ahead to the future we cannot afford to rest on our laurels. The word "afford" might well be the primary word in that sentence. While we must continue to endeavor to make Elkhart a better place to live, raise a family, get an education and build a business, if we are going to survive we must do that in a state of reality. For if we don't deal in a state of reality, will we ever live in a state of reality. If we let our dreams override our dollars we will find ourselves in a free fall. We must continue to understand the difference in needing and wanting. We must compete but at the same time know when matching the competition is too costly to be beneficial over all. Know when it is time to fold when it is in the best interest of the people of Elkhart. Allow me to address another issue of reality. We agree the recession has been over for some time now. However, local governmental jurisdictions across the width and breadth of the State Indiana are facing another form of recession. And it should be a major concern for all of us Hoosiers. We hear a lot about what the State of Indiana has done to become more business friendly and to be an attraction to those seeking to relocate. And a certain amount of that has been done. We've seen it, it is tangible. But what is not so evident is what is going to happen next. If something doesn't turn around for cities and towns and other local jurisdictions what is going to happen is going to take the State of Indiana in a different and negative direction. This State government fails to recognize that it is local jurisdictions that are the attraction to those interested in perhaps coming here. Yet we continue to see bills introduced that infringe upon the
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rights of city and town residents across the State. We have always had too little home rule and after seemingly every State legislative session home rule continues to diminish. The State legislature apparently sees no harm in strict control over cities and towns. Yet without thriving cities and towns across the State, there is not much reason for anyone to come. If one is considering bringing a business here, relocating employees, raising a family, getting an education, enjoying arts and entertainment, chances are a municipality is nearby. Without cities and towns, there would be little growth. As stated, State government often tells us what they have done to bring in new business to the State. But the part of that story that is seldom heard is that the cities and towns are the main attraction. If State government continues to make it more difficult for municipalities to exist, they are putting future economic development at risk. Think about it for a moment. When people look at a City for relocation, what are they interested in the educational system, health care, what City services are available, jobs, and entertainment and relaxation after work. There is a health care system here because of the municipality. There is an educational system here because of the municipality. There are municipal services such as snow and ice control, police and fire protection at a moment's notice. There is brush and leaf curbside pickup; street sweeping twice per month; fresh water, sewage treatment and much more. The Lerner Theatre and Ballroom is here because the City population is a big part of the county population and sustains the operation. The Cities of Elkhart, Goshen and Nappanee comprise nearly half the population of the county. It is the municipality that owns and can extend municipal services outside the City and in doing so, add to the growth and tax base of the township and the county. Take away the City's ability to do the things that people

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expect of us and make us an attraction to others and watch what happens to economic development. A legislator is elected to represent all the people in the district, not just in the rural areas but the State seems to be more focused on the rural needs than those of the cities and towns. Perhaps it is not the opinion of the Governor. Just a few weeks ago the Governor said "that it is the cities and towns that make Indiana the best State in the country." "That the Cities are the face of government that all citizens see and deal with on a regular basis, and Cities are the reason for economic development." Continue to take away from City and County government and the educational system and watch these local jurisdictions fall into a state of regression. And if these local jurisdictions fall into a state of regression so goes the State of Indiana. They can make all the decisions they want in Indianapolis but if they don't begin to consider the plight of communities across the State it won't make any difference. There is time but not a lot. Community managers across the State have done a great job of managing their communities with a lot less dollars. They have found ways to become more effective and efficient but I am concerned that time and dollars are running out. Job diversification remains a part of our long term economic development plan. But this is a global competition. We needed to get our citizens back to work now. And to that end our unemployment rate has been reduced by 50% thanks to the fantastic recovery of our RV industry. The industry that remains a part of the fabric of our community. I predict that the RV industry will exceed the so called expert's predictions on growth. Yes we have recovered to some extent but recognizing that the funds we control do not belong to the government we must be diligent in our thinking as well as our
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actions. We must question where we are in the recovery. President Obama has stated that the economy has not responded as quickly as he had hoped. He noted in order to reduce the deficit the action taken would be painful to many. Like the President, we too face some difficult decisions. We must stay prepared. Because of an additional unexpected announcement of a drop in revenue we began to plan for the worst scenario. We would shut down our City offices five additional days per year and furlough our nonpublic safety employees for those five days and furlough our public safety employees for 24 hours. We would not fill seven job openings which included one police officer and one firefighter. We squeezed every penny in our treasury. Our department heads knew how critical this situation was. They knew that while they had money appropriated they had to find a way not to spend all of it. At the end of 2012, we had left unspent $2.5 million. We were able to cancel the department closings and the furloughs and hire the additional firefighter and police officer. I sincerely hope we will not have to prepare like that again but I am not filing that book where it cannot be found. We have done a good job in conserving the City's financial resources. Our A+ credit rating attests to that fact. Our City government continues to come to grips with the rising costs of health insurance, fuel, and the cost of trash and recycling. We have already made cost saving changes in our health insurance program. We have reduced the cost of trash and recycling service back to the pre 2009 household rate. We have taken measures to reduce the use of fuel including that used in our vehicle operation and we will continue participating in the fuel hedging program. In
2011,

we added 9 more hybrid cars to our fleet. Working with MACOG we saved nearly dollars per vehicle. This addition brings our totals in hybrids to 13. Each one of

$30,000

these replaced a gas guzzling vehicle as well. We also operate 2 total electrics built in
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Elkhart. This brings us to today. In 2013, we will not except any bids for any cars that are not hybrids and they must get an estimated 45 miles per gallon in the City. All of this helps to reduce fuel costs and eliminate exhaust emissions into the atmosphere. Finding an alternative source for funding our trash and recycling program has been and is currently our biggest challenge. With a current reduction of $10.5 million dollars in property tax revenue the challenge becomes more difficult. The trash and recycling challenge has been with us for years. It is now literally at our door step and we must deal with it. But again the States lawmakers are considering legislation that may put more hurdles in our way. We await the results. We have reduced our annual cost of operation by $5.5 million dollars. The goal has not changed. We will keep all of our departments open, continue to provide the services you expect and deserve, and keep all of our employees working, until it becomes financially impossible to do so. If we want to maintain the quality of life we deserve we must continue to reduce our reliance on tax supported funds. The challenge is ours. In the past, we could turn to our Congressman and our Senators for assistance. We could request a congressional appropriation. This is simply asking for our own tax dollars to be returned to us. This is called earmarking. But the current Congress has said there will be no more earmarks. They call it pork or fluff. I disagree. What we need from the Federal and the State government is to return our money to us for we have projects that are needed and will be done over time with local taxpayer dollars if we do not get that return. We have some mandates that we cannot avoid and really don't want to avoid. Cleaning up our rivers and making it better for those disabled to enjoy the same quality of life is the right thing to do. While the Congress won't tell us much that we can understand, the Congress will tell you that they are
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appropriating money for projects such as ours, but the funds, what few there are, are going to the various Federal agencies. One must then apply for assistance through those agencies. The reality of that process is exactly what the Grants Manager said it is. It is a competition. It's Elkhart against every other governmental jurisdiction in the country, the winners mostly being the heavily populated areas across this Nation. We will of course continue with our very expensive Long Term Control Plan to reduce the combined water/sewer overflows into our rivers. This
$10'S
20

year plan will cost

of millions of dollars to construct. We will continue to fund it five years at a time

with the hope that during one of the five year periods we will get some State or Federal assistance that will reduce the increases in our monthly sewer rate below what we might expect them to be. If we do not get Federal or State assistance we can expect our monthly bills to increase every five years. This will go on for the lifetime of the program. Elkhart has and continues to renovate its downtown and as a part of its "livability" approach, I still want to further enhance transit oriented development. As a hub connecting two urbanized areas and its major Cities, the City of Elkhart should serve as a regional focal point for transit rider connections and I am still proposing the development and construction of a "green" energy efficient transfer station. The City is currently looking at other locations near the downtown. This center will make transit integration a major feature of the region's walkable-livable community focus. The proposed transfer center must be located within walking distance of major community traffic generators, including downtown shops and businesses, the Lerner Theatre, Indiana University South Bend at Elkhart, the Amtrak Rail Service, and will provide planned pedestrian access through transit oriented design.
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Further, the Transit Transfer Center, as proposed, will provide safe, off street boarding and may house suggested passenger amenities such as indoor shelter, and internet cafe bookstore. The proposed Transit Transfer Center will include bike racks and accommodations for riders allowing more transportation choices to reduce the cost to the user, aid in improving the air quality, and in a small way help to reduce our nation's overall dependence upon oil. The facility may also include high speed internet access and state of the art audio and visual equipment. The Transfer Center focus supports the City of Elkhart, as we target federal and local funding toward the center of Elkhart, through transit-oriented, mixed-use development. We have the opportunity to do all of this without using any local taxpayer dollars. Over 302,118 passengers depend upon the trolley system for their mobility. It is the only public transportation system we have and those looking to join us will also look at our available transportation. This is a plan in progress. The financing is available we need the location. While studying the possible resolutions to our many challenges, one cannot ignore the uncertainties previously mentioned. However, one of the keys to our survival and our growth is recognizing just that. Uncertainties still exist and we must be prepared to face them at any time. We will not forget that government owns nothing of its own. No property, no money. We are simply entrusted with the managing of the taxpayers business, money and the property they own, and we are obligated to do it in their best interest. To that end, over the past four years we have reduced our operating budget and will continue to look for more efficiency to further reduce our daily costs. Our constant endeavor is to continue to do what we can to produce additional jobs in our City.

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We will continue to utilize TIF funds to provide the infrastructure needed to attract and keep new business in Elkhart. We are a cleaner, safer, quieter City. We understand the term vision and we understand the term planning but we also recognize long term planning is a challenge when you are facing the stark reality of a $13 million dollar loss in revenue in such a short time. That blurs your vision just a little. Waking up one morning and discovering that lout of 5 people in your City were unemployed didn't help much either. Your long term plans can go out the window pretty quickly when this happens. Make no mistake about it. Everything we do is designed to be sure we stay afloat. At the same time we are not stagnant and we are not in a passive situation. For the foreseeable future, we must continue to be very careful of how we utilize our funding. We must choose our projects very carefully. Stay out of debt as much as possible. Recognize our greatest financial challenges and manage them wisely. We will keep this City operational and we will have a City that others covet, a City that is an attraction. A place desired by others and a place we can be proud of. We will do our best to find out how Elkhart would like to see itself in the future. But we will do it in a state of reality. Looking at the plate we were handed, always considering the cost of our vision. Being sure our dreams don't overrun our dollars. Current projects include the Labour Park project, Shoppes at 6, the North Gateway Project and the Central Park and parking lot renovation. There will be additional brightening of downtown and on the Plaza utilizing some LED lighting. We still hope to install the old fashioned street lights removed from Main Street on Division Street. We will continue our current line of thinking that Main Street for the purpose of arts and entertainment begins at the Wellfield Botanical Garden and traverses through our City all the way to Prairie Street. I appointed the citizen group SoMa to look at the south end of our downtown and they too
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recognize there are improvement needs from Jackson Blvd. north and from the tracks to Prairie Street. I look forward to receiving SoMa's recommendations for those areas of our City. Many of these improvements will utilize TIF funds. We will continue to look at our blighted areas. We have been quite successful in securing brownfield funding for demolition and decontamination. During our time in office we have seen the demolition of the Elkhart Foundry, the Labour Pump Factory, approximately
120

residential

properties and the Misco Building. Many others have been rehabbed and we continue to work with Habitat for Humanity. All of this has resulted in better neighborhood living. We can display these words with a great deal of pride, "We do not allow excessive noise in our City. We do not allow smoking in places where the public gathers or works and we mandate the clearing of sidewalks in winter so that our children do not have to walk in the streets on the way to and from school." From the outside looking in we appear to be doing pretty good. We are leading the nation in job growth and we have earned some positive national recognition. Sometime ago Forbes listed the Elkhart-Goshen area as
#10

in their Best Places to live

cheaply article based upon the housing affordability index, cost of living, crime rate, unemployment rate, and school quality data. What I am asking you to do again is to join with me to be sure we're always on the good list! As I said at the beginning it is not up to me - it is up to us. Winston Churchill one time said, "It takes courage to stand up and speak and it also takes courage to sit down and listen." I will continue to listen as promised and when the community tells us they are not lined up with our ideas we will take note. Our only job is to serve the people of Elkhart. Thank you.
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