2022-2023 Budget Message

Presented to the Budget Committee By

City Recorder Alex McHaddad, Budget Officer

Approved by the Budget Committee On

May 25th, 2022

Budget Adopted by the City Council on June 16, 2022

Budget Committee Members

1. Mayor Roger Perry

2. Council President Adina Olivares

3. Councilor Jeff Hensley

4. Councilor Ray Jackman

5. Councilor Brian Lewis

6. Peggy Bishop (2020-2022)

7. Tammy Lewis (2020-2022)

8. Suzie Hibbert (2021-2023)

9. Anthony Morelos (2021-2023)

10. Joe Parsons (2022-2024)

Introduction

The City of Sodaville currently organizes the Budget into three Funds that are currently entangled into a pair of accounts with fictitious beginning and ending balances not reflective of any easily traced transaction history. In the name of simplification, all three Funds, General, Streets, and Water Enterprise, will be combined into the General Fund but retain their separate operation as segregated Programs within the General Fund. The Water Enterprise Fund will be incorporated into the General Fund as the Water Enterprise Program, retaining the business-like funding sources and expenditures. The Streets Fund will be incorporated into the General Fund as the Streets Program, and the current General Fund will transition to the Administration Program within the General Fund. This simplifies the budget on paper and provides the City and citizens with an accurate and easily understood record of how public resources are utilized. 

The Oregon Local Government Budget Manual makes the following remarks about Enterprise Funds:

“A separate fund makes it possible to set up separate accounting data on the operations of the facility. This information can be used to determine what the service charges should be. It can also provide better controls and information on the management of the resources and expenditures. Examples of enterprise funds are for water, gas and electrical utilities, swimming pools, airports, parking garages and transit systems operated by cities, and some school food service operations. Separate funds may be established for each utility or enterprise.”

Typically, a separate Enterprise Fund would yield the above benefits if resources and requirements were sequestered in a separate bank account and all expenditures were made solely on the business-like utility that the fund governs. However, Water Enterprise Fund resources and requirements have historically been entangled with all other resources and requirements in the City’s operating account and LGIP account, both in fact and on paper. Furthermore, Water Enterprise Fund requirements are frequently combined with the General and Street Funds to jointly pay the same bills, including payroll, payroll taxes, benefits, public relations, and debt service. Integrating the Water Enterprise Fund into the General Fund as the Water Enterprise Program dispenses with fictitious balances and keeps funds in order in fact as well as on paper.

General Fund Resources

Available Cash on Hand

The City will have four primary resources on hand at the beginning of the 2022-2023 Fiscal Year: $114,900 in the Local Government Investment Pool, and $88,300 in the Operating Account, including $49,000 of regular city resources, $38,300 of unused ARPA funds, and a $1,000 grant from the Department of Land Conservation and Development for land use planning. Total available cash on hand is projected to be $203,200. The projection will likely be lower than the actual amount, but in the name of caution, the low projection will be retained.

Fees, Licenses, Permits, Fines, Assessments & Other Service Charges

The City collects franchise fees from Comcast for cable TV and Internet, CenturyTel for landline phone service, Consumers Power for electricity, Republic Services for solid waste disposal, and Northwest Natural Gas for natural gas. Franchise fees for 2022-2023 based on average collections during FY 2021-2022 are projected at $19,100. These resources are appropriated for the Administration Program in the General Fund.

Metered Water Sales are projected at  $130,000 for FY 2022-2023. User fees will increase due to the improved measurement accuracy of meters installed during FY 2021-2022. This revenue is appropriated for the Water Enterprise Program in the General Fund.

Administrative fees are charged for Construction Applications, Site Reviews, and other permits ($500); Zoning Applications and Permits ($350); Administrative Service Charges and Lien Searches ($400); and the Sale of Maps, Publications, and Photocopies ($100). Total projected fees total $1,350. These resources are appropriated for the Administration Program in the General Fund.

Federal, State & All Other Grants, Gifts, Allocations & Donations

The City will receive the second tranche of ARPA funds in late summer 2022. This amount is projected at approximately $38,300. ARPA funds already received and expected to be received will be appropriated in the Street Program and Water Enterprise Program in the General Fund. 

State Highway Fund taxes sent to the Local Government Investment Pool are projected to total $25,000 based on average collections during FY 2021-2022. Highway funds are appropriated for the Street Program in the General Fund.

Revenue from taxes on controlled substances is shared with the City. Cigarette and Marijuana Tax revenue of $450 and Liquor Tax revenue of $6,200 is projected for 2022-2023 based on average collections during FY 2021-2022. These resources are appropriated for the Administration Program in the General Fund.

The State of Oregon shares revenue with cities who vote to receive shared revenue. The City of Sodaville has received shared State revenue annually for several decades. The projected resources for 2022-2023 are $3,000 and are appropriated for the Administration Program in the General Fund.

The City occasionally receives donations. Donation revenue of $1,000 is projected for FY 2022-2023 and appropriated for the Administration Program in the General Fund.

All Other Resources Except Current Year Property Taxes

The City’s investment account with the State of Oregon’s Local Government Investment Pool yields monthly dividends. Interest revenue is projected at $500 and appropriated for the Administration Program in the General Fund.

The City occasionally receives refunds for goods and resources. The previous year’s projection of $500 is retained and appropriated for the Administration Program in the General Fund.

Current Year Property Taxes Estimated to be Received

The City’s property tax revenue is generally small, this year making up less than 2% of resources. The City’s property tax rate of 0.4452 is retained and expected to yield approximately $8,000 like the previous fiscal year. Property tax revenue is appropriated for the Administration Program in the General Fund.

General Fund Requirements

Administration Program

Introduction

The Administration Program in the General Fund takes the place of the resources and requirements that comprised the General Fund in previous years.

Personnel Services

These requirements comprise the bulk of the Administration Program. The Mayor receives a deduction of $30 for their monthly water bills. This normally totals approximately $360, but is rounded to the nearest hundred. The Public Works Director’s wage requirement remains the same from the previous fiscal year, while the City Recorder’s wages are increased. The later increase is conjoined to decreases in the City Recorder salary requirement in the Streets and Water Enterprise requirements to reflect a longstanding administrative procedure funding this position’s wages at 60% from General (now Administration) and 20% each from Streets and Water Enterprise. Health Benefits and Payroll Taxes remain the same. $1,000 of the City Recorder’s salary is funded by a grant from the Department of Land Conservation and Development to fund work on land use planning.

Health Benefits is replaced by Health Benefits and Paid Family Medical Leave Insurance. The PFMLI expenditure will be mandatory beginning in January 2023, partially funded by City contributions and employee payroll deductions. The PFMLI allocation is equivalent to 1% of an employee’s gross payroll, which the City may partially cover at a maximum rate of 40%. An additional $300 in this requirement from the previous year covers 40% of the 1% of gross pay that would be deducted from the salaries of the City Recorder and Public Works Director. If the Council elects to pay this portion, the City will be eligible for grants to cover the cost of a temporary employee to replace an employee who is on leave under this program. If the Budget Committee or Council elect not to pay this portion, deducting $300 from the Budget Officer’s proposal and sending these funds into the Unappropriated Ending Fund Balance, then the City automatically waives its rights to receive grants to cover the cost of hiring a temporary employee to replace an employee who is on leave under this program. Oregon law permits employers to participate in alternatives to the State’s PFMLI program, but City County Insurance Services does not provide an alternative.

Paid Family Medical Leave Insurance covers the following employee leave situations:

• Bonding with a child during the first year after birth, adoption, or foster care placement.

• Caring for a family member who has a serious health condition.

• Taking medical leave for an employee’s own serious health condition.

• Taking safe leave for an employee experiencing issues related to domestic violence, harassment, sexual assault, or stalking.

The Oregon Employment Department, which facilitates the PFMLI program, provides the following information regarding the relationship between PFMLI and an employer’s additional vacation and sick time benefits:

“Family and medical leave runs concurrently with Oregon Family Leave Act (OFLA) and Family Medical Leave Act (FMLA) leave.

• PFMLI is separate from vacation, most paid sick leave, and other paid leave.

• Employers may allow concurrent use of other paid leave for benefits to equal 100 percent of an employee’s normal wages.

• Employees may not receive PFMLI benefits while receiving workers compensation or Unemployment Insurance benefits.”

Materials & Services

These requirements comprise the second largest portion of the Administration Program. No changes have been made from the 2021-2022 Budget.

Capital Outlay

These requirements comprise the smallest portion of the Administration Program. The requirement entitled “New City Hall/Community Center” has been removed as the funds for this project were spent in previous years and the funds were not retained in a separate account. This could have been avoided if the funds were held in a separate account, but this did not occur. No changes have otherwise been made from the 2021-2022 Budget.

Streets Program

Introduction

The Streets Fund will be closed at midnight on June 30, 2022 and integrated into the General Fund as the Streets Program. In previous years, resources for this program were ostensibly funded by fictitious beginning balances housed in the Operating and LGIP Accounts, state highway taxes, and state/federal grants. In the 2021-2022 Budget, the Budget Officer proposed receiving a $100,000 grant that would be entirely spent on Vine Street improvements despite the planned project being canceled prior to the drafting of the Budget. Resources in 2022-2023 will come from projected beginning balances housed in the Operating and LGIP Accounts, as well as American Rescue Plan Act funds.

Personnel Services

These requirements pay for portions of the City Recorder and Public Works Director wages, healthcare benefits, and payroll taxes. The City Recorder’s wages are decreased in concert with a similar decrease in the Water Enterprise Program and a corresponding increase in the Administration Program.

Materials & Services

Most requirements have not changed since the 2021-2022 Budget. Improvements to Vine Street are no longer budgeted. $46,600 from the American Rescue Plan are appropriated to the Operating Expenses - Rock, Grading requirement.

Water Enterprise Program

Introduction

The Water Enterprise Fund will be closed at midnight on June 30, 2022 and integrated into the General Fund as the Water Enterprise Program. As in previous years, Water Enterprise operations are the largest portion of the Budget. The 2021-2022 Fiscal Year saw a $917,000 budget shortfall, $817,000 of which occurred in the Water Enterprise Fund. The Budget Officer proposed $851,000 in grants from the US Department of Agriculture and Business Oregon that would be spent on specific projects. The City received only $34,000 from USDA. The City does not anticipate receiving these USDA and Business Oregon funds during the 2022-2023 fiscal year. American Rescue Plan Act funds will be used for a capital purchase. The largest single financial resource, Meter Water Sales, is entirely appropriated for the Water Enterprise Program. Revenue is expected to increase as a result of the installation of more accurate water meters.

Personnel Services

These requirements pay for portions of the City Recorder and Public Works Director wages, healthcare benefits, and payroll taxes. The City Recorder’s wages are decreased in concert with a similar decrease in the Water Enterprise Program and a corresponding increase in the Administration Program.

Materials & Services

These requirements compose the largest portion of the Water Enterprise Program. Most of the requirements are similar to the previous year. Water Acquisition is increased to $60,000. The previous Budget appropriated only $20,000 but the City spent $85,000 without adopting a Supplemental Budget. $60,000 is appropriated this coming year due to an expected decrease in water transportation costs.

Capital Outlay

$30,000 from the American Rescue Plan Act will be appropriated to purchase a new Programmable Logic Controller. This device runs the City wells and fire pumps, also controlling the levels of the reservoir.

Resources and Requirements Not Allocated

Debt Service

$10,050 is appropriated to make payments on a tractor and accessories, along with an Infrastructure Finance Authority Loan.

Operating Contingency

$6,350 is appropriated for the Operating Contingency.

Reserved for Future Expenditure

The 3% GASB Reserve for the 2022-2023 fiscal year is equivalent to $13,900.

Unappropriated Ending Fund Balance

The projected Unappropriated Ending Fund Balance is $74,950. This is $88,950 below the opening balance, which includes $39,600 in designated funds. The bulk of these remaining funds will be in the LGIP Account. On a hopeful note, the projected opening fund balance for the Operating Account will likely be higher than the original projection, but a low projected amount of $49,000 in non-designated funds will remain. Given the City’s mix of mercurial revenue sources, it is better this year to project resources with extreme caution. Unanticipated funds may be appropriated with the passage of supplemental budgets.

Declining revenues are the norm for municipalities in Oregon, and the City will need to devote considerable time to developing new sustaining sources of funding or risk larger cuts to administration that will make operations more difficult in future fiscal years. Staff will need to put an increased emphasis on writing grants. The City may be able to emphasize minimal economic development with the refurbishment of the old general store into a community center that drives immediate and related revenue opportunities. The saving grace of this budget is that the City will be operating with easily accounted funds, regular use of resources that were not properly accessed and spent during the 2021-2022 fiscal year, and a year’s worth of time to operate with a stable budget as a plan is put in place to find additional revenue and pursue economic development opportunities that will keep the City operating in accordance with the will of Sodaville’s residents.

Historical Data - Special Payments

The historical data for 2019-2020 and 2020-2021 includes “Special Payments” line items both entitled “Unitemized Balance Correction.” The amounts in these line items are reflective of what appears to be an inefficient use of the City’s QuickBooks software to accurately record revenue and expenditures in previous years. Between starting and ending balances, along with revenue and expenditures, QuickBooks entries show an extra $13,000 unaccounted for in 19-20 and $29,000 in 20-21. The Budget Officer placed these special payment line items in the Budget Proposal with the intent of waiting for an examination by the City’s contract accountant, who was unable to account for the extra funds. These line items remain in the proposed budget as a note that the City is aware that these additional funds cannot be properly accounted for at present.