West Jordan dipping into rainy day fund to get through COVID-19
Jun 01, 2020 12:52PM
By Erin Dixon
West Jordan is facing difficult times, and West Jordan officials are grappling with how to combat financial struggles. (Photo courtesy West Jordan City)
By Erin Dixon | [email protected]
At the end of the fiscal year 2019 (July 1, 2018, to June 30, 2019), $12.5 million was left in the general fund (also known as reserves or “rainy-day” fund).
At the end of the current fiscal year 2020, $9.3 million will be in this fund. Some reserve funds have been used to make up for the loss in sales the city sustained when businesses were closed in mid-March for the COVID-19 stay-at-home order.
The proposed budget that ends fiscal year 2021 (July 1, 2020, to June 30, 2021), city leaders proposed to use another $3 million to make up for the additional loss they anticipate in the coming year. That means that by the end of fiscal year 2021, there will be $6.1 million left in the general fund.
Mayor Dirk Burton, first strong mayor in West Jordan, is responsible for presenting the budget he put together with help from city staff.
“COVID-19 has completely changed the way we live and work,” he said. “Social distancing has kept West Jordan safe, but it has crippled our economy. Our municipal budget—which was already stretched thin due to past budgeting practices, a decrease in fees and increasing benefits and retirement obligations to public safety staff—has been decimated.”
Utah cities are required to have at least 5% of their expenditures in their general fund for emergency use, which means West Jordan needs just over $3 million at all times.
Councilmember Kelvin Green is nervous about this practice of using general fund money to make up for holes in the budget.
“I’m trying to play chess here a year ahead of this budget even though we’re $3 million in the hole,” he said. “If we don’t fix this now, we’re going to be in the hole next year. It’s obvious we’re spending more than we’re bringing in. How do we get to the point where we’re not spending more than we’re bringing in?”
Danyce Steck, finance director for West Jordan city, suggested that previous planning was inefficient. The city did not receive its projected income.
“[Last year] the budget for franchise tax was far over-budgeted,” Steck said. She began working for the city in spring 2019. The budget at that time was projected to have at least $9 million in revenue.
“I was not familiar with the city last year; I had been with the city for about 60 days at that point,” Steck said. “It was budgeted at $9.1 million, but [the year before], it was budgeted at $8.6 million. Why would you budget $9.1 million when it was coming in at $8.6 million?”
When Utah began efforts to slow the spread of the coronavirus and shut down most businesses, West Jordan lost millions in expected sales tax revenue.
“[W]e had a reduction in revenues from year to year of $2.4 million, and our response was to reduce our expenses by $2.4 million,” Steck said. “That dip in fund balance is really related directly to sales tax.”
Green hesitates using general fund money if the economy continues to drop.
“We’ve got to figure out a way to cut $3 million out of this budget because I’m not sure the residents really want to see a property tax increase,” Green said.
If the city staff and officials are in favor of a property tax increase, a truth in taxation meeting is required, which would happen as a public hearing on Aug 14.
Where did the reserve money come from in the first place? High city employee turnover before 2018 is the main source.
“West Jordan had a history of not being able to keep employees for a long period of time,” Steck said. “When there’s vacancies, there tends to be considerable savings.”
Councilmember Kayleen Whitelock suggested another source of savings for the city.
“Oftentimes, there is money left over in government, maybe there is less snow than you thought there was going to be, so you have a little bit of money left from your salt,” Whitelock said.
Whitelock also said past council and staff created the imbalance.
“The problem has been in the past we had council members that didn’t totally understand the budget and felt that [reserve] funds should be used,” she said. “We also had finance people that maybe didn’t totally understand how to give us great data.”
“Then we had council members that feel like there is money in the budget and that we can cut things, and I'm still waiting for them to share that with me,” Whitelock continued. “One of them is now our mayor, and the only cut I'm seeing is in personnel, so I’m very concerned that we now have a budget that we know for sure we’re running a deficit on.”
Because reserves were built from empty jobs at the city and front first responders, as well as some other surprise savings, the city does not have a way to immediately build the reserve fund as it is used.
Councilmember Zach Jacob said the city could benefit in change of practice.
“When all you have is a bedroom community, this is all you’ve got,” he said. “You’ve got to raise your property tax rate by a whole lot because you don’t have the sales tax coming in to make up for that and the property tax coming in from commercial businesses. We can’t afford to be a bedroom community or we’re going to be a bedroom community with no services.”
One question that may be on your mind is, why doesn’t the city just cut all of the events?
Tauni Barker, communications officer, said most of the events are actually self-funding. If the money isn’t earned, it also isn’t spent. The annual Western Stampede has been canceled, and the Demolition Derby in September may also be canceled.
“We only have one full-time event staff, and without the self-funding events our budget for events in a year is about $35,000,” Barker said.
Budget discussions will continue through June before any final decisions are made.
For more information on what the city is doing during the COVID-19 crisis, check out westjordanjournal.com.