Two sides to every budget: West Jordan’s revenue projections
Jul 28, 2017 11:18AM ● Published by Becca Ketelsleger
Councilmembers Chris McConnehey and David Newton put together a spreadsheet to show why they thought revenue projections were too aggressive. (Chris McConnehey/West Jordan City Council)
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From its onset, the June 14,city council meeting was slated to turn into a late night.
On the agenda was receiving public input and approving the final budgets for the “General Fund, the Special Revenue Funds, the Capital Projects Funds, the Enterprise Funds, and the Internal Service Funds for the Fiscal Year 2017–2018.”
The discussion started with Councilman Chris McConnehey, who has a background in finance and currently works as a financial reporting consultant.
“Before we even talk about expenditures, I want to talk about revenues,” said McConnehey. “If we start with the revenues, then we have a good target as to how much is available to spend.”
He pulled up a spreadsheet that he had been working on along with Councilman David Newton, which showed the percentages of revenue growth in past years and reductions that they proposed for this year’s budget.
In the proposed budget posted on the city website, the city manager recommended revenue for fiscal year 2017–2018 was $61,909,871.
“As we looked at the revenues and tried to take a best guess based on what had happened in prior years, we are thinking right around $59,000,000,” said McConnehey, going on to recommend a decrease in the projections by $2.9 million.
Overall, the numbers presented by McConnehey and Newton estimated that the growth projections for revenue, based on previous years, were a bit aggressive, according to Mayor Kim Rolfe.
“I’d like to comment thanks for doing this. I think it’s wonderful,” said Rolfe. “(But) I think that the numbers have been conservative to a fault, in my opinion, in the past.”
Rolfe elaborated that last year the budget was passed at a $7 million deficit, with plans made to sell property in that amount if needed. However, the growth that was seen in the 2016–2017 fiscal year was enough to bring the budget back into line without the real estate sales.
Newton did not agree with this sentiment, stating that he and McConnehey worked their numbers separately but came to similar conclusions, and that they have merit.
“It’s looking at the differences where the projections seem to be out of line and not quite appropriate,” said Newton. “I would rather be low on revenue projections than over, because I don’t want to have that negative like we are looking at this year. We have $2 million that we are going to have to pull out of the Fund Balance to balance this year.”
Several specific revenue concerns that came up involved the sales taxes, ambulance fees and utilities franchise taxes.
Councilman Zach Jacob voiced concerns with the sales tax projected revenue, stating that we are seeing more and more stores go dark (“the Amazon effect”), which would, in theory, result in less sales tax collected. However, this could be offset if Amazon does begin collecting sales tax and making payment directly to the state of Utah.
Fire Chief Marc McElreath spoke regarding projected ambulance fees. While last year saw a decrease in ambulance fees collected, McElreath stated that residents are on track for an increase this year. This is partially due to a lag of several months in collecting those fees, as well as an increase of ambulance fees by 5 percent recently set by the state.
Another question that came up was the significant decrease in utility fees collected last year, versus the aggressive forecast on this year’s utilities revenue. Even with something that sounds simple, such as revenue from utilities, there are numerous factors to be considered. Eric Okerlund, West Jordan budget officer, said there are three primary elements that need to be forecast: what new growth occurs, changes in rates, and weather patterns. Of course, at least one of these factors is out of the city’s control.
“This revenue projection and expenditure projection, to a degree, is a subjective practice,” said Okerlund. “Given that background, there are different philosophies on how aggressive versus how conservative someone wants to be.”
In the end, city leaders agreed to a compromise between those who were more optimistic and those who were more “realistic”. The revenue projections were reduced by $1,596,612.
“I understand doing budgeting myself at my employment that a budget is an educated guess,” said Councilman Alan Anderson. “I think what we are trying to do as a council is be responsive and put real numbers to it.”
By this time, the council meeting had already been extended, and the time was bordering on 10 p.m. It was decided that a special meeting would be held on June 21, one day before the budget had to be finalized, to go over expenditures.
At the special meeting that was held, all departments were represented, and several residents were present. This meeting was roughly three hours long, dedicated fully to the budget.
In the end, expenditures were also reduced by $1,070,202.
In Utah, it is required that a tentative budget be adopted in May of every year. Then, a final budget has to be reviewed and finalized in June. If the final budget cannot be agreed upon, then the tentative budget is adopted by default.
“Utah state law requires that we adopt a budget annually, so we really don’t have a choice other than to approve, even if there are items we disagree with inside that budget,” said McConnehey at a later time when asked his thoughts regarding how the budget discussion went. “Unfortunately we received the city manager’s budget in one meeting, and then the following meeting we were required to adopt it by law.”