Mayor Challenges Fee Increases
Aug 04, 2016 03:46PM
By Tori LaRue
This graph shows the amount of money in each Enterprise fund
By Tori La Rue | [email protected]
West Jordan, Utah - West Jordan utility rates have not changed since 2013, but that could change.
West Jordan City Manager Mark Palesh recommends an increase in resident utility fees to cover the cost of the rising operating expenses and a new public works building but has yet to win over the mayor who won’t support an increase while the fund balances total approximately $33 million as of June 30, 2015.
The numbers come from the city’s FY 2014–15 Comprehensive Annual Financial Report, which includes the most recent audited numbers as well as a $6.5 million storm water bond that is committed to storm water projects. The city operates on a fiscal year that runs from July 1 to June 30. The 2015–16 fiscal year just ended, and final figures are not yet available.
“I don’t think an increase of fees is warranted in any one of the funds,” Mayor Kim Rolfe said. “Everyone feels more comfortable if they have large savings accounts. The difference is, this is not personal saving. This is not a business. This is all hard earned money that our residents are paying.”
Enterprise funds are self-sustaining funds with their own revenue source—fees. The funds must equal or exceed the cost it takes to operate and maintain them, and the reserve money is already slated to cover projects, according to Mark Palesh.
West Jordan’s enterprise funds include water, sewer, solid waste, storm water, secondary water and street lights, all of which will have personnel housed in the new $20 million public works facility approved by the city council in February.
“A portion of the fee increases are necessary to cover cost-of-living and career ladder increases, but the majority of the fee increases are needed to cover normal inflation of operating costs and capital projects not covered by new development impact fees,” Palesh said.
Each enterprise fund operates separately, similar to a small business, and has its own revenues, expenses and fund balance. The Solid Waste fund, for example, is approaching a negative cash balance within 12 months or less according to the cash balance in the CAFR and projected expenditures. The Storm Water fund has some cash balance, but state officials are requiring the city to hire additional employees and purchase additional equipment to inspect, clean and maintain the pipe system to a higher standard—or face steep fines.
Rolfe said he’d be fine with the increase of fees if he thought the money from the enterprise funds would be used on projects within a timely manner but said he doesn’t believe that will happen. According to the approved 2015–16 budget, $5.7 million in projects from the storm water fund were slated for completion during the fiscal year, yet $1.9 million was spent during the fiscal year that ended June 30, 2015. Construction projects often span more than one budget year, however, and approximately $4 million was spent during the fiscal year that ended June 30, 2016.
Palesh said he feels the mayor and council don’t recognize how many projects are underway.
“If the council doesn’t go with these fees, they’re going to have to look at making some cuts or not do the public works building,” he said. The proposed building would replace the current public works building that was built in 1986 when the city had 35,744 people.
The monthly bill change for residents would be approximately $11.85 per month if the city increased fees to match the expense trend, according to the city’s rate analysis, but Palesh recommends an intermediary option which would increase residents’ monthly bills by about $6.93. Rolfe said the intermediary option is still too high.
“There are residents here who barely scrape to get by, and they have to be represented as well as those who are affluent and can afford $3 a month more or $6 a month more,” Rolfe said. “I am not proposing that we lower the rate, but we need to use [the reserve] down to what I would classify as a normal rate.”
In several funds, the surplus balance at the end of the last recorded year was 50 percent or more of what the annual operating budget was, Rolfe said. This means West Jordan could stop collecting fees from residents and have money to run the utilities for half of the 2016–17 year if they had a similar budget year to the 2015–16 year.
Rolfe said he believes West Jordan’s fund surpluses should be between 5 and 25 percent of the annual operating budget. That’s the surplus percentage range required by the state for the General Fund. State law sets minimum and maximum General Fund balance levels, as a percentage of annual budget. But those laws do not apply to enterprise funds (utilities). Industry standard guidelines from American Public Works Association and American Water Works Association recommend a fund balance for each separate enterprise fund between 90 days and one full year’s expenses—25 to 100 percent of the annual budget amount.
According to the approved city budget, the expected annual expenditure for the storm water fund balance for the 2016–17 year is about $12.6 million, which includes capital construction project expenditures of approximately $10.3 million. The storm water fund balance at June 30, 2015, was approximately $6.6 million.
Palesh proposes a 42 percent increase in the storm fund, an approximate $1.69 monthly bill increase because the state found the storm fund inadequate. The city must increase the balance of the fund or the state will impose fines, probably for hundreds of thousands of dollars, he said.
“Each of these funds has a five- and a 10-year plan, so you are moving forward with saving money because you know that in two years you’re going to have to start the engineering, and after that you’ll have enough money to actually do the project,” Palesh said. “If you stop increasing the fees, eventually you’re not going to have any money to do any projects.”
Rolfe said he’d like to keep fees where they are and monitor them in the future. Rolfe would vote to increase fees once the surplus value reached 25 percent of the annual operating budget, he said.
“We can change fees any time a year, and doing it now, I really don’t feel like that would be the best use of our authority at the city level, and I’ve been passionate about it,” Rolfe said.
Palesh said he hopes the council will compromise.
If rate increases are postponed, future rate increases will need to be even larger because operating expenses continue to rise with inflation every year. The city can postpone rate changes and rely on existing cash balances temporarily, but revenues eventually need to match expenses.
This item will come before the council at a future meeting. Notice of the date and time will be posted on wjordan.com.