By Myrna Trauntvein
Times-News Correspondent
Only two people turned out at a public hearing Tuesday to review the tentative budget for the coming year and to review the tentative final budget for last year held prior to Nephi City council meeting.
On the following day, the council met in a special meeting held to adopt the budget and to adopt the final budget for 2015/2016.
"The budget for Nephi's fiscal year 2016-17 includes the city's general fund, as well as the enterprise or utility funds," said Randy McKnight, city administrator.
"The budgets for all funds exceed $18 million dollars," said McKnight. "That is more than $3,200 per resident and reflects the efforts required to provide comprehensive municipal services in a still-rural setting."
The budget for the general fund provides general government services such as public safety, streets, parks and cemeteries, library, and recreation. Revenue sources for the general fund include sales tax, property tax, fines and forfeitures, gasoline tax distributions, telecommunication taxes and fees and charges to and contributions from enterprise funds.
"Nephi City's general fund revenue sources have been improving since the national and state economic recoveries have been recovering," said McKnight. "There is room for optimism when the economy is strong. On the other hand, it can be a mistake to rely on elastic revenue sources to fund basic city services, since it is difficult to cut back on those basic services when the economy falters and revenues decline."
Nephi City maintains a relatively low property tax levy, he said. Of all the property taxes paid on a property in Nephi, less than 12 percent comes to Nephi City. With the property tax rate being kept low by the city's elected officials, growth in this revenue typically comes only from new buildings, equipment, and improvements that are added in the community.
Revenue from property tax in fiscal year (FY) 2017 is expected to be a little over $300,000.
"Complete reports of property tax values in the city have not yet been received from the Utah State Tax Commission for the current property tax year." McKnight said.
Property taxes fund less than 10 percent of the cost of general fund services. That means the general fund budget relies heavily on other sources that are less predictable and stable.
Sales tax represents the largest source of tax revenue for the city. Including a sales-tax levy earmarked for street improvements. FY 2017 sales tax revenues are projected to be $1,085,000. Sales tax revenues have now recovered to pre-recession levels and are improving slowly.
"It is difficult to rely on sales tax to fund basic city services because sales tax revenues are so volatile," said McKnight. "For example, sales tax revenues declined by $147,641 from fiscal year 2007 to fiscal year 2010. That is a large loss to deal with, if sales taxes are funding basic city services."
Registration fees are charged for some of the organized recreation programs operated by the city but registration fees only cover part of the cost. In addition, Juab County contributes to help cover the organized recreation costs not covered by registration fees. The balance of the cost of providing the programs comes from the city's general fund.
Some of the gasoline taxes collected by the State of Utah are distributed to local governments under a formula determined by the state legislature. The local share is meant to be used for transportation infrastructure maintenance and improvements. This distribution, called Class C road revenues, is estimated at $260,000 for FY 2017.
"Expenditures for streets maintenance and improvements are budgeted at over $723,000 for the coming year," said McKnight. "The balance of those costs must be paid for by local revenues. Even with annual expenditures of this magnitude, the city is falling behind on streets maintenance needs."
Utility funds are charged a reasonable allocation of the costs of services provided by the general fund and shared by all funds (utility billing and collection, financial accounting, human resource management, and insurance services, for example), he said.
The following amounts are projected to be allocations to the utilities, of costs shared among operating entities: Electric Fund, $437,233; Natural Gas Fund, $314,626; Water and Sewer Fund, $86,884; Solid Waste Fund, $44,033.
Additional contributions from these funds to the general fund represent a return on investment or dividend for investments made by the community in these utilities, as well as the value of community assets utilized by the utilities.
For FY 2017, the following are dividend transfers projected from utility funds to the general fund. The transfers help cover the costs of important city services, including police, streets, library, recreation services, parks, cemeteries, golf and other city functions.
These are not based on allocations of cost, but on a percentage of utility revenues, and will not be repaid: Electric Fund, $180,675; Natural Gas Fund, $133,245; Water and Sewer Fund, $36,810; Solid Waste Fund, $18,612.
"In addition, the natural gas fund will contribute $90,000 toward the city's economic development and load-growth efforts," said McKnight.
"The expenditure categories in the general fund represent the operating departments and the services provided by those departments," he said.
The police department carries out most public safety functions in the city, including basic police services, animal control services and emergency management. For FY 2017, that budget is $1,177,420 and represents almost 30 percent of all general fund.
The street department is responsible for maintenance and rehabilitation of city streets, including snow removal and airport maintenance. Basic operations of the street department are reflected in the $353,919 budget. Significant additional funding for major streets projects is provided by the capital projects fund.
Operating under a single department head, the parks and cemeteries departments carry out maintenance and improvements at these facilities. The parks department budget for FY 2017 is $211,068 and the cemeteries department budget is $148,220.
The organized recreation department provides indoor and outdoor programs for youth and adults and has a FY 2017 budget of $255,975 with revenues projected to be $100,000. The golf course department provides golf facilities and programs for youth and adults. The budget for FY 2017 is $210,610. Golf course revenues are projected to be $122,500.
Donald Ball, resident, asked if the swimming pool paid its way.
"It is a net loss to have the swimming pool and splash pad," said McKnight.
Enterprise funds in Nephi City include utilities that the city operates. Revenue to fund the operations and expenditures in these enterprise funds comes principally from user charges, which are the rates charged for those utilities.
"Tax revenues are typically not available to the enterprise funds," said McKnight. "Therefore, all costs of providing these utility services must be recovered by the rates charged for those services."
The capital projects fund allows for appropriations to projects that are not completed within a specific budget year and appropriations in this fund do not lapse at the end of each fiscal year.
"General fund transfers are the primary source of revenue for projects in this fund, although revenue sources also include bonds, grants, and contributions from other units of state, federal, and local government," he said.
Due to revenue constraints, not all suggested or requested projects are funded each year in the capital projects fund. However, many worthy projects have been accomplished. Nephi City is most effective in meeting community needs when partnering with other local governments.
FY 2014 saw the end of debt service for the construction of a water transmission line in Salt Creek Canyon that was installed in the 1980's to replace a line washed out by flooding. That marked the end of debt service obligations on traditional utility infrastructure. There is currently no debt supported by general fund appropriations.
"The only remaining debt now is the $20,000 per year payment on the Community Impact Board loan for the pool and splash pad project," he said. "That no-interest loan payment is made each year by the water and sewer fund, although sales tax revenues were pledged as the guarantee for those payments."
