Monday, June 27, 2016

City Council 14-Jun-2016: 16-17 Budget, Utility Rate Increases

2016-06-14 Budget Expenses

Seven residents attended the meeting to approve the the 2016-2017 budget and utility rate changes. Perhaps the fact the process has been very transparent with multiple meetings open to residents early in the process contributed to the low turnout. As always feel free to reach out to me via phone or email with questions or comments. I really don’t mind being challenged on decisions or opinions. It always makes me think.

Council Meeting AGENDA / MINUTES

  1. RESOLUTION: Adopting Certified Tax Rate – As determined by Utah County. Each year the county calculates the property tax rates for Highland so that the city will collect the same amount of property tax revenue as the previous year excluding new growth. Thus is if there is growth the city will get additional revenue. What this is also means is that amount of money you pay to the city via property tax should not vary from year to year (it also means this tax does not automatically increase to cover inflation). Note, the last tax rate change requested by the city was a decrease in 2010. Staff, as of yet has not been able to find the last time the city requested a property tax increase. Click here for a more detailed explanation of the certified tax rate.The county assigned tax rates for 2016-2017 are:

    • 0.001298 for Highland City General operations with anticipated collections of $1,574,043
    • 0.000196 for the Highland City Library with anticipated collections of $237,683.
    • 0.001494 is the total certified tax rate with anticipated collections of $1,811,726.

    The resolution to adopt the Certified Tax Rate was approved unanimously. Click here for additional details.

  2. RESOLUTION: Approval and Adoption of Final Budget - Fiscal Year 2016-2017. There was little discussion over the budget details as most questions had been addressed in prior work sessions, council meetings and conversations with the finance director. Items of note were that the city settled a lawsuit for an unpaid bill for $400,000. $200,000 of which hit the 2015-16 budget and $200,000 of which will go into next years budget. Also, beginning in January of 2017 city employees will begin to pay a portion of their health care costs (note medical expenses are going up 8% and dental are decreasing by 8.9%. An up to 3% merit increase for employees was included in the budget. Although, $200,000 was budgeted for outside engineering services in lieu of a full time employee, if we hire the right person we could save $50,000 or more on this item.

    Next year’s budget also includes $35,000 for a  short open fence around the splash pad. This should limit the ability for young children to run directly out onto the streets surrounding the splash pad.  The total proposal general fund budget is $8.7M.  Click here for details. The budget was approved unanimously.

    I’ve put the budget online again. You can get to it by clicking here. This is a multi-sheet Google Sheets workbook. The charts are in the left most sheet followed by various summaries. The sheet named “Data” contains all the raw budget data.

    Here is the General Fund revenue breakdown:

    2016-06-14 Budget Revenues

    The Tax Revenue breakdown:
    2016-06-14 Budget Tax Revenue

    And the General Fund expense breakdown:
    2016-06-14 Budget Expenses

  3. RESOLUTION: Approval of Utility Rate Increase – Storm Drain. Click here for additional details. In reviewing the projected state of the funds for Sewer, Culinary Water, Pressurized Irrigation (PI) and Storm drain only two funds need immediate adjusting. Culinary Water looks to need a $2.00 per household increase in 2023 while Sewer is on solid ground. Note, relative to sewer there is a city portion to the bill and a TSSD (Timp Special Services District) component. While the city portion will most likely not need to be changed for the next 10 years the TSSD portion may.

    The table below describes the changes for both Storm Drain and Pressurized Irrigation.

    Lot Size (Acres) Current
    PI Bill
    PI Bill
    Current Storm Drain Bill New
    Storm Drain Bill
    Total Monthly Increase % Monthly Increase
    0.33 $18.31 $29.67 $5.73 $6.97 $12.60 52.4%
    0.50 $21.35 $34.58 $5.73 $6.97 $14.47 53.4%
    0.75 $25.81 $41.81 $5.73 $6.97 $17.24 54.7%
    1.00 $30.28 $49.04 $5.73 $6.97 $20.00 55.6%

    A point of discussion was whether the new rates were fair to those on a fixed income. Personally, I don’t agree with the premise of the question. Each enterprise fund is supposed to be operate on a break-even basis and retain a reserve sufficient to handle emergencies. Over the last year the city put together long term operating and capital plans for each fund. We then contracted with Zion’s Bank to look at the income and expenses for each fund over the next 15 years to see what our rate structure should be. There was no bias towards an increase or decrease. The instructions were to keep a minimum reserve of 180 days of operating capital in each fund with a goal to reach 275 days. When we the initial rates were determined we relooked at the capital expense plans and eliminated items which could reasonably be deferred (e.g. meters for PI, infrastructure upgrades that would only serve the area between high school and the development center). Afterward we held two public meeting to review the rate increases with residents. These were attended by a handful of residents.

    A significant portion of the PI increase is simply to build up a reserve – we are presently close to zero. Without an increase the PI fund will run a deficit next year and each year thereafter. In fact with our low PI reserve we are technically out of compliance with our bond and the bond holders to actually force a more egregious changes to our rates. Note we anticipate being able to reduce the PI rates in 2023. At that time the bond will have been paid off, our reserves will have been built up and most of the significant PI capital projects will have been completed.

    Now, what about the “fair” question. Let me pose it a different way. Assuming the rates we are asking for are needed, which I believe to be true, then if we give one person a discount whose rate will we raise to cover the resulting deficit? Who decides who gets a discounted rate? How do we arbitrate challenges? Manipulating the rates to help some people and charge others means we are making the rate change a political issue rather than an objective decision.

    It was also suggested that we borrow money from the reserves of another fund to bolster the PI fund and thus delay the rate increase. Do we really want to weaken another fund? This action doesn’t reduce the amount of increase required it only defers it and we end up with two funds in poor shape rather than one good and another bad.

    We can’t change the fact that we undercharged in prior years or that some city administrators or elected officials made accurate statements. But we can and did help put the system on a good footing for the future. Brian Braithwaite, Dennis LeBaron and I voted to approve the increases. Tim Irwin and Ed Dennis opposed the increase. For more information please read the following:
  4. RESOLUTION: Approval of Utility Rate Increase - Pressurized Irrigation. See my notes from item 4. Stan Mead a member of the Highland Village HOA had a good question regarding how is development is billed for PI. We agreed to look into the question and see if it makes sense to bill the HOA rather than individual homeowner for PI. Note, from what I know I believe this makes sense.


  • Council agenda with my rough notes. If you want to review my comments to staff and rough notes in the PDF file you will need to first download it before opening it with Adobe Reader. If you click on the comment button on the top right of the Adobe Reader application or in the Tools Menu, depending on the version of Adobe Reader you are using, you will see a list of all comments in a panel on the right side of your screen. Note, this is a large file and may take a minute to download.

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