Sales tax down, so is the 2021 budget
Jun 01, 2020 12:15PM
By Bill Hardesty
By Bill Hardesty | [email protected]
At the May 13 South Salt Lake City Council meeting, Mayor Cherie Wood and Kyle Kershaw, director of finance, presented the draft fiscal year 2021 budget. With little comment, the City Council acknowledged receiving the budget. So far, no fireworks like last year.
The council plans to discuss the budget at their next meeting on May 27. Public comment is scheduled for the June 3 meeting. A city budget must be passed by June 30 according to state law.
“Of the 11 budgets, we have worked, this is the one that we have lost sleep over,” Wood said.
“We have never seen anything like this,” Kershaw said.
SSL saw a 32% decrease in sales tax revenue during the 2008 recession. This occurred over 12-15 months. This year, the same decrease is possible after just a couple of months.
This is significant because most of the revenue used in the General Fund comes from sales tax. In addition, less state revenues have resulted in less homeless mitigation dollars. In other words, in FY2020, the city was given the funds to hire 12 police officers and 12 EMTs. For FY2021, some of their costs must be paid for by the city.
For planning purposes, the city used a 25% decrease in sales tax revenue, but it could be higher or lower. The city projects a $5.2 million dollar decrease in revenue, including $2.1 million in sales tax, $300,000 in energy sales/use tax, $375,000 in building permits, which has been a cash cow for the city in the past few years, and $400,000 in state homeless mitigation funds.
SSL has six funds and each fund must be balanced within themselves. The General Fund is the largest budget and handles day to day city functions. The Capital Improvement Fund is used to manage larger expenses covering multiple budget years. There are three utility funds: Water, Sewer, and Solid Waste Collection. Utility funds revenue come only from fees. The final fund is the Insurance Reserve. This fund is used to pay property and liability insurance and each department pays into the fund.
The proposed General Fund budget is approximately $630,000 less than the current FY2020 budget. Across all the funds, the tentative FY2021 budget total is $53,374,505 compared to the adopted FY2020 budget of $53,594,480. Almost a $222,000 reduction.
“We have taken strides to tighten our belt,” Kershaw said.
These actions include suspending hiring for eight open positions. Three other open positions are considered essential and are included in the FY2021 budget. All training and conference budgets across all departments were significantly reduced.
In addition, there are no employee raises or additional benefits in the budget. No layoffs are expected.
“It is very commendable for you to create a budget without any layoffs,” said Councilmember Ray deWolfe.
Balancing the budget
Even with belt tightening, the tentative budget is short. The administration is suggesting moving $4.3 million from fund balance into the General Fund. Fund balance is the city’s savings account.
The $4.3 million represents about two-thirds of the balance. With the withdrawal, about $1.5 to $2 million remains.
“Using fund balance, buys us some time,” Kershaw said.
The city will use the time to gather more solid numbers, allowing for better forecasting.
The Capital Improvement Fund will be balanced by delaying certain projects and working to extend the useful lives of existing equipment and vehicles.
The Water Utility Fund revenue is expected to see a $167,000 decrease due to businesses closing and hardship on homeowners. With some minor adjustments and corrections in some budget lines and the Jordan Valley Conservancy District reducing water rates by 5%, the fund should balance. The city does have the ability to access funds residing in the city’s revenue bond replacement/reserve account for unforeseen projects or repairs.
An increase in sewer rates passed earlier this year will provide the increase funding required in the Sewer Utility Fund. This increase is due to pay increasing operating costs and fund capital projects at the Central Valley Water Reclamation Facility.
With additional homes and with some adjustments, the Solid Waste Collection Fund remains unchanged for FY2021.
Numbers for the Insurance Reserve Fund are still undetermined.
The entire proposed budget document is available on the SSL website (SSLC.com) under the news section on the home page.