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03/08/1990 - Minutes Minutes of the Meeting of the Committee of the Whole March 8, 1990 5: 00 p.m. to 6 : 11 p.m. City Council Conference Room 325 City and County Building 451 South State Street Salt Lake City, Utah 84111 In Attendance: Ronald Whitehead, District One; Wayne Horrocks, District Two; Nancy Pace, District Three; Roselyn Kirk, District Six; Don Hale, District Seven; Cindy Gust-Jenson, Executive Director; Linda Hamilton, Finance Director; Scott Bond, Director of Policy and Budget; Susan Roberts, Revenue Specialist; Mark Hafey, nominee for Board of Adjustment; and other City and Council Staff members, and members of the press. Councilmember Alan Hardman, District Four, was excused and Councilmember Tom Godfrey, District Five was excused. The meeting was called to order by Nancy Pace, Vice-Chair, who reviewed the agenda for the meeting. Executive Director, Cindy Gust-Jenson, briefed the Council on the schedule of events and indicated that the Council meeting for Tuesday night would be lengthy, due to the members having been out of town at the N.L.C. conference, other circumstances, and a multitude of public hearings had to be scheduled for that date. BOARD OF ADJUSTMENT CANDIDATE The Council interviewed Mark Hafey, the Mayor's recommended candidate to the Board of Adjustment. Mr. Hafey indicated that he had worked for 30 years in the Salt Lake City Planning Department and had been involved in solving zoning problems. Mr. Hafey stated that if he was appointed, this background would be beneficial to the Board of Adjustment to help solve current zoning problems. Mr. Hafey stated that he would try his best to do a good job. Mr. Hafey stated that he has volunteered his experience in the past and enjoys being of assistance. Councilmember Horrocks stated that it has been approximately twenty years that he was aware of since Mr. Hafey served on his first committee. Councilmember Hale stated that Mr. Hafey's volunteer experience is very commendable. Councilmember Kirk indicated that Mr. Hafey has very good experience. Councilmember Pace indicated that Mr. Hafey is a good mentor with a positive attitude and that he would be an asset to the Board of Adjustment. Councilmember Hale asked how the voting on the Board of Adjustment was established. Mr. Hafey indicated that only five board members have voting privileges. Councilmember Pace encouraged the Councilmembers to recommend people that they feel are qualified for the boards and commissions. Councilmember Pace indicated that Mr. Hafey's appointment to the Board of Adjustment would be placed on the agenda for Tuesday's council meeting. FINANCE DEPARTMENT POLICY BRIEFING Vice Chair Pace then asked Linda Hamilton, Finance Director, to brief the Council on policy issues. Ms. Hamilton indicated that Scott Bond, Susan Roberts, and she would be briefing the Council. Councilmember Kirk congratulated Ms. Hamilton on the summary she had provided and stated that it was easy to read and understand. Councilmember Pace also expressed her appreciation. Ms. Hamilton stated that she was assuming that the Council had read the summary briefly and would summarize on this assumption. Ms. Hamilton stated that in the past four to five years the City has lost 4 . 4 million dollars in revenue, but that parking revenues have been increased. Ms. Hamilton stated that the balancing of the budget during these years has been obtained by one-time money and that we cannot continue to balance the budget this way because it is never known if one-time money will be available. Councilmember Pace asked where the one-time money comes from. Ms. Hamilton stated that in the past it has come from interest income, sale of real property and various other sources. Ms. Hamilton stated that 1.7 million dollars was used last year to balance the budget. This one-time money had come from Salt Lake County making payments for the rental of the City and County Building and from revenues in the Building Restoration Debt Service Fund. Ms. Hamilton stated that the decline in real property value in Salt Lake City over the last five years has created a significant decline in property tax revenues and that it is likely to continue for at least the next five years. Ms. Hamilton also stated that the distribution change in the sales tax revenues has limited the growth of revenue in this area. Ms. Hamilton stated that the continued decline in real property assessed value, the efforts to decrease sales tax, population decreases and the decline in Class C Road Fund revenues have all contributed to budget shortfalls, and if policy changes are not made, services or personnel cuts are likely. Ms. Hamilton stated that $700, 000 may also be allocated to support the Salt Palace restoration. Ms. Hamilton stated that the policies that people are using to evaluate the budget have never been put in writing. Ms. Hamilton stated that property tax initiatives and tax initiatives which would reduce revenues further are being supported by the Police Department. Ms Hamilton stated that the fee schedule for Salt Lake City has not been updated accordingly to keep up with inflation, so that when increases are made, they are big one- time, instead of gradual, increases. Ms. Hamilton stated that the consolidation of the Police and Fire Department 911 service has saved money. Ms. Hamilton also stated that the street lighting consolidation has resulted in a savings to the City. Ms. Hamilton stated that by establishing user fees the City could increase its revenue and that the user fee policy should be worded to allow discounted fees for eligible citizens. Ms. Hamilton stated that it would benefit the City if expense revenue policies were written because it would be clearer to the citizens and would provide a guideline to staff. Ms. Hamilton stated that the policies would need to be written to give context to analyze individual issues. Ms. Hamilton stated that written policies would provide a framework for long-term decisions. Ms. Hamilton stated that the State Surplus is making the citizens feel better about the economy of the State, but that Salt Lake City does not receive any of this surplus money and that the sales tax distribution formula established by the State impacts our revenues and property tax base. Ms. Hamilton stated that the City needs to address long-term revenue development and suggested a few options that are being considered. Ms. Hamilton said that option 1 is to increase economic development in a viable way to increase the tax base without increasing tax rates. Ms. Hamilton stated that option 2 involves the strengthening of legislative lobbying to create an increase in revenues for the City. Ms. Hamilton stated that option 3 would involve implementation of new user fees by establishing fees to represent the cost of user services. These fees would be distributed equally between all users and the fees would be offset for those users who qualify for low income waivers. Ms. Hamilton stated that currently the fees being charged are below the cost for operation and so services are being cut yearly to offset the shortage of funds. Ms. Hamilton stated that the Finance Department is trying to set guidelines that would be set as City Policy to help prevent the guidelines from being established on an unofficial, informal basis by circumstance. Ms. Hamilton stated that currently the Finance Department is working on five items to try and increase revenue. Ms. Hamilton stated that the budget forecast is being developed internally and includes very conservative estimates. Ms. Hamilton stated that the second item is the attempt to minimize the use of one-time money. Ms. Hamilton stated that the third item is to aggressively collect revenues that are due to the City, i.e. parking tickets, business license fees, etc. Ms. Hamilton stated that the fourth item is to increase user fees so that programs can pay for themselves and will not require funding from the City. Ms. Hamilton stated that the fifth item is to reduce costs, which would involve determining if it is safe to cut services, or increase revenue by establishing new user fees, or increasing current user fees. Ms. Hamilton stated that establishing new fees is preferred to increasing the user fees, but that the current fees would be addressed on a yearly basis to determine if the fees being charged are in line with other comparable providers. Ms. Hamilton stated that the public would more readily accept frequent small increases rather than a large increase once every ten years. Councilmember Kirk stated that the fees in the Lighting District in her District are increasing three times the current amount due to cost increases, and that there have not been any increases for quite some time and many citizens are opposing the increase. Ms. Hamilton stated that the long-term goals of the finance department are to establish a policy and alternative ways to allocate costs, and to develop an alternative to revenue distribution formulas. Ms. Hamilton then stated that this was their proposal and asked the Council if they had any questions. Councilmember Hale asked why Ms. Hamilton said that the economy looked better. Ms. Hamilton stated that she said this because the revisions to the sales tax distribution policy had been changed to distribute sales tax revenue to the City's on a quarterly basis instead of yearly, and the State economy was looking better to the public due the surplus funds. Ms. Roberts stated that Salt Lake City has not been doing very well, that the sales tax revenue is down and not much growth is expected. Councilmember Kirk asked if we had a model of a long-term procedure to follow. Ms. Hamilton stated that if the Council thought the long-term goal proposal presented by the Finance Department was reasonable, and was agreed upon by a majority of the Council, the Finance Department would allocate funds to develop a long-term procedure. Councilmember Kirk asked who would be doing the research. Ms. Hamilton stated that was not known; first, a decision had to be made to determine if this was a reasonable approach. Councilmember Whitehead stated that we need to address the daytime population issue as being a source of revenue to the City by charging toll tax, commuter tax, etc. Councilmember Horrocks stated that policies on Capital Improvement are in need of attention as well and asked if there were any ways to build up this fund. Ms. Hamilton stated that a general direction needed to be decided to provide individual solutions. Councilmember Horrocks stated that it seems like the budget has never provided funds for maintaining capital improvements. Ms. Hamilton stated that it appeared this way because it has been more difficult to balance the budget due to decreases in revenues and services have had to be cut. Ms. Hamilton stated that we need to find a better way to increase revenues. Councilmember Horrocks stated that the infrastructure was falling, and asked if an increase in fees would help. Ms. Gust- Jenson stated that the capital planning staff for last year suggested hiring a consultant to suggest ideas and that this option may be something the Council would like to consider. Councilmember Horrocks stated that to accomplish these items, the department would need to spend a little money. Councilmember Whitehead stated that the Police Department used one-time money last year. Councilmember Horrocks stated that the Police Department had used these funds but that if they hadn't then they would have had to cut services. Councilmember Whitehead stated that they should have thought of ways to increase revenue sources years ago. Councilmember Whitehead stated that if the City does not choose to change procedures that the City will be a very rich town or a very poor town if the growth doesn't go in the right direction Councilmember Horrocks stated that the current residents of Salt Lake City consist mainly of Senior Citizens and lower income individuals and that this trend needs to be reversed. Councilmember Pace told Ms. Hamilton that she had started a very good discussion. Ms. Hamilton stated that the direction must be determined to find the solution to these problems. Councilmember Pace asked if taxes are charged on City services. Ms. Hamilton stated that the City does charge franchise tax on its services. Councilmember Pace asked if these funds are limited and how they are assessed. Ms. Hamilton stated that the tax schedule is mandated and that the franchise tax is charged to the utility companies within the City however, the Public Service Commission voted to allow companies to pass this franchise tax on to the customers and therefore, the citizens are paying the services tax. Councilmember Hale brought up the fact that one way to increase revenue was to legalize gambling in the State, because Utah is losing many dollars to Wendover. Councilmember Horrocks asked if Councilmember Hale was advocating gambling. Councilmember Hale stated no, but that it is disheartening to lose these revenues to another state. Councilmember Pace stated that the current policy needs to be reevaluated. Councilmember Whitehead asked Ms. Hamilton if the fair market value is being equally distributed. Ms. Hamilton stated that the County assesses the fair market value on a home. Councilmember Whitehead asked if we could push the County to assure that the fair market values being assessed are correct. Ms. Hamilton stated that the City cannot interfere and has no control over the assessments and that the home owners would notify the County Assessor if their property value was incorrect. Councilmember Whitehead indicated he had seen several assessments which could not have been correct. Ms. Roberts stated that most home owners would not be willing to contact the County Assessor if their property value was low because it would increase their property taxes. Councilmember Kirk stated that many years ago the County Commission was told to reevaluate assessed property values every five years. Councilmember Pace indicated that the Council needed to stray away from this issue because a decision needs to be made on the issue at hand. Councilmember Kirk asked if the private/partner relationship was important and if this would increase money. Ms. Hamilton stated that it is a good idea. Councilmember Pace stated that she thought this was an excellent idea. Ms. Hamilton stated that the politicians need to handle this effort and that the City does not have enough staff to cover the lobbying. Councilmember Pace indicated that a straw poll should be taken and asked Ms. Gust-Jenson how to conduct a straw poll. Ms. Gust- Jenson stated that Councilmember Pace would need to ask each Councilmember if they agreed with the proposed plan. Councilmembers Pace, Horrocks, Whitehead, Hale, and Kirk indicated support. It was agreed that Councilmember Godfrey and Councilmember Hardman would be asked for their opinions informally. Ms. Hamilton stated that the departments will be specific in their budget requests and that the Finance Department will present the total funds available for these requests. Councilmember Horrocks asked if the Full Time Equivalents (FTE) budgets are rising. Ms. Hamilton stated that yes, they were rising considerably. Ms. Hamilton asked Mr. Bond if he had done a survey on the FTE funding. Mr. Bond stated that he had completed a survey and that the Airport and Enterprise funds had increased substantially, and that there had been some decreases that had occurred mostly in the General Fund. Councilmember Whitehead stated that he was interested in knowing what funds had increased and what funds have decreased. Mr. Bond stated that to see the FTE breakdown for each individual department would require going to each department to see the breakdown reports. The Committee of the Whole meeting was then adjourned at 6: 11 p.m. Alan G. Hardman, Chair date Kathryn Marshall, City Recorder date • OFFICE OF THE CITY _COUNCIL CITY AND COUNTY BUILDING 451 SOUTH STATE STREET, SUITE E 304 SALT•LAKE CITY, UTAH 84111 535-7600 TENTATIVE AGENDA To Be Posted: 5:00 p.m. Wednesday, March 7, 1990 SALT LAKE CITY COUNCIL COMMITTEE OF THE WHOLE MEETING DATE: Thursday, March 8, 1990 TIME: 5:00 p.m. PLACE: City Council Conference Room City & County Building, Room 325 451 South State Street Salt Lake City, Utah 1) The City Council will interview Mark Hafey prior to consideration of his appointment to the Board of Adjustment. 2) The Council will receive a briefing from the Finance Department regarding policy issues. Break *** The Council will convene as the Board of Directors for the Redevelopment Agency for their monthly meeting following the Committee of the Whole meeting. cc: Mayor Palmer DePaulis, Mike Zuhl, Emilie Charles, Roger Cutler, Kathryn Marshall, Department Heads, Press OFFICE OF THE CITY COUNCIL CITY AND COUNTY BUILDING 451 SOUTH STATE STREET, SUITE 304 SALT LAKE CITY, UTAH 84111 535-7600 January 3, 1990 MEMORANDUM TO: COUNCILMEMBERS FROM: ED SNOW RE: REVIEW OF MAYOR DEPAULIS" BOARD APPOINTMENT RECOMMENDATION I have attached the Mayor's recommendation of Mark Hafey to be appointed to the Board of Adjustment. Because of a question regarding this recommendation, there was a slight delay in the processing. BOARD OF ADJUSTMENT ORDINANCE CITATION: 21 .06.010 MEMBERSHIP: 5 with 3 alternate members TERM: 5 years, staggered terms QUALIFICATION: Non-required ADVICE AND CONSENT: yes OATH OF OFFICE: No PURPOSE: The Board has three basic powers: (1) Hears appeals on applications of zoning ordinances. (2) Reviews, grants, or denies all applications for special exceptions to the ordinances (conditional uses). (3) Grants variances from the zoning ordinance in specific cases where there are special conditions attached to the ,property not generally applicable to other properties. The Board cannot grant a use variance. NAME COUNCIL INITIAL TERM DISTRICT APPOINTMENT EXPIRATION DATE 1. Dorothy Pleshe 3 4/84(ALT) 1st Full Term 641 6th Ave. 7/86(12/86) 12/31/91 Salt Lake City, Utah 84103 12/86 Phone: (W)530-7367 (H)539-9704 2. Jerry Fenn 1 12/88 1st Term 905 North 1500 West 12/31/93 Salt Lake City, Utah 84116 Phone: 359-7597 3. Robert Lewis 4 1/81(12/82) 2nd Term 806 Blair Street 12/82( 12/87) 12/31/92 Salt Lake City, Utah 12/88 Phone: (H) 363-8331 41. Nancy Pace - RESIGNED 3 (12/84)1/85 1st Tern 1524 Arlington Drive 12/31/89 Salt Lake City, Utah 84102 Phone: (W)364-4461 (H)322-2348 5. I. J. Wagner 3 10/83(ALT) 1st Term 445 Northmont Way 10/87 12/31/90 Salt Lake City, Utah 84111 Phone: (W)322-4141 (H) 364-6870 sAn ri Q, 0'° ONE OFFICE OF THE CITY COUNCIL CITY AND COUNTY BUILDING 451 SOUTH STATE STREET, SUITE 304 SALT LAKE CITY, UTAH 84111 535-7600 March 5, 1990 MEMORANDUM TO: COUI&ILME ERS FROM: CINDY GUST-JE SON .1,fi\ c) SUBJECT: FINAME POLICY DISCUSSION The Finance Department's policy discussion relates to establishing an informal revenue policy for the City. Generally, the Council does not take straw polls on policy discussion items, but in this case it may be appropriate to do so to determine the level of support of the Council. Because the Finance Department is proposing an informal policy, there is no need for the Council to take official action, but the straw poll would express the Councils opinion. If the Council supports all or parts of the proposed revenue policy, the Administration would print the policy in the budget book, and would consider it as they prepare their budget. In addition, the informal policy could serve as guidance to the Council staff as we evaluate the budget. For the record, the informal policy could be included in the Council's policy manual. If you have concerns about any of the items in the proposed policy, please feel free to let us know before Thursday's meeting and we will ask that the Finance Department come prepared to answer your specific concerns or questions. .`i".'.-. .: r. - 'ems .. .... •-p....-.:;•' , --Y'.::"3':i`•,s;•.� ..i .... ... -. REVENUE POLICY . . T; On III 0(1% ik, ®0DO 0 0 T El(imcil2n ° o 00 I i ii s i 1 : o tAll :.: i= aZ Si 4'' /� -"r' I( I "n--- ® _ III11I •_-• il�a II'!li --, IIIII'• — i Ir.--'--'' —--, - ii----....---, — ---.-....tillilijf (W) r �e. — 40 ,-,,ti _ __ PLn . 'Pelf 0 . _ = = .. inti- OO if1//J/ i1V\\\v' , /1� : 0AO o%3 0® 0 00 DEPARTMENT OF FINANCE POLICY HEARING WITH THE CITY COUNCIL March 8, 1990 LINDA HAMILTON IA42 (U, PN PALMER DEPAULIS DIRECTOR OF FINANCE - MAYOR FINANCE DEPARTMENT Policy and Budget Division 451 SOUTH STATE STREET, ROOM 248 SALT LAKE CITY, UTAH 84111 TELEPHONE (801) 535-7810 February 26, 1990 Alan G. Hardman, Chairperson, and City Council Members Salt Lake City Council City & County Building, Room 304 Salt Lake City, Utah 84111 Dear Mr. Hardman and City Council Members: Attached please find the briefing paper of the Finance Depart- ment ' s policy hearing scheduled for Thursday, March 8. This year we propose advancing only one policy issue before the City Council. We have chosen to discuss revenue policy because of its critical and long-range impact on City operations. We are continuing work to implement centralized contracting and to establish the Office of Internal Audit, but feel that there are no needed changes to our operating policies at this time. We look forward to meeting with you and discussing the issues outlined in this briefing paper. Sincerely, Linda Hamilton Director of Finance LH/SB:lc Attachment THE DEPARTMENT OF FINANCE Policy Hearing with the City Council ISSUE: REVENUE POLICY During the past several years, the City's tax base has not kept up with rising costs which has required the Mayor and City Council to struggle with some major policy issues. In FY 1986-87, we lost $3.6 million of federal revenue sharing. This loss necessitated a property tax increase, an increase in building permit fees, increased parking fines, and the initiation of a franchise fee on water and sewer services. The loss of the remaining $800,000 of federal revenue sharing in FY 1987-88 and a stagnant economy resulted in increased business licence fees, an increase in the parking meter rate, and the initiation of a garbage collection fee. Changes in tax or fee rates were modest in FY 1988-89 and FY 1989-90 with the exception of a new admission fee at the Tracy Aviary. However, one-time revenue of $424,000 was used in FY 1988-89 and $1 ,700,000 in FY 1989-90 to balance the budget. All indications are that in the next five years, the Mayor and City Council will face policy issues of a magnitude similar to those faced during the past five. Our property tax base has declined in terms of real dollars over the past five years and will likely continue the decline during the next five. Furthermore, the scheduled shift to give greater weight to population in the sales tax distribution formula will further dilute our tax base's ability to fund basic services as our population continues in a moderate decline. Declining population will adversely affect other revenue sources including class "C" road funds and the Community Development Block Grant. Although City policy makers have made some important policy decisions about our revenue base, they have not articulated an overall revenue policy to guide budget development. The purpose of this paper is first, to discuss the City's de facto revenue policies; second, to outline the reasons why the City should adopt written revenue policies; third, to discuss reasons why some of the current policies should change and possible options; and fourth, to discuss recommended changes. Current Policies The City has not articulated a formal policy on revenue, although several de facto policies have emerged. 1 . Hold the line on taxes. The past five years have been characterized by a turbulent political climate that resulted in three tax limitation initiatives making the ballot in 1988. Although the initiatives failed, they clearly had an impact in shaping this policy that has been generally accepted by the Mayor and Council alike. Only the property tax increase and franchise tax on water and sewer that occurred in FY 1986-87 were exceptions to the rule. When adjusted for inflation, tax revenue has declined since that time. -2- 2. Hold the line on fees. Unlike taxes, the City has had more control over the rates for the various fees charged for City services. The City has increased its reliance on fee increases to balance the budget, but recent increases are still inadequate to maintain the same level of funding as FY 1986-87 when adjusted for inflation (see chart on page 8). City fees have been reviewed sporadically and the increases for a given fee are relatively large and infrequent. 3. Increase Efficiency. Necessity has dictated that departments implement cost reduction strategies in order to balance the budget. Some of these reductions were accomplished with little or no decrease in the level of service provided to our citizens. Examples of efficiency enhancements include consolidation of Police functions into a central facility, fire station consolidations, and lower cost street lights. These increases in efficiency will continue to be the Administration's first option for dealing with revenue shortfalls. 4. Shift to user fees. Since FY 1986-87, when new revenue was needed, the City sought new fees or increases to existing fees as an alternative to taxes. As a result, the City's revenue base has become increasingly more dependent on fees and less dependent on taxes. In FY 1986-87 taxes comprised 75% of the general fund revenue. Currently, taxes are only 72% of a comparable revenue base. On the other hand, charges for services increased from 1% to 5% during the same period. Most of the increase was caused by the fee for garbage service established in the FY 1987-88 budget. 5. Provide discounts for those less able to pay. A good example of this was the abatement program for low income garbage customers. This philosophy also was apparent in the discussion on water and sewer rate increases. A low income abatement will soon be available to eligible property owners in all Special Improvement Districts. The Argument for Written Policies The City has pursued financial policies that have delivered balanced budgets during years of fiscal distress and have contributed to maintaining our AM bond rating. However, committing policies to writing, formally adopting them, and reviewing them periodically would result in additional benefits. Written policies: 1 . Provide a communications tool that would enhance the City's credibility with the public, other government agencies and bond rating agencies. 2. Provide guidelines for staff that would enhance efficient analysis and presentation of financial issues. -3- 3. Provide a "big picture" approach to individual issues. They provide a long-term perspective and prevent policy decisions that may be inconsistent or in conflict with existing policies. 4. Encourage Continuity with past decisions and future commitments. Although policies can and will change from time to time, sound policies can be a legacy for future Mayors and City Councils. 5. Provide a yardstick for evaluation. They are criteria for future decisions and practices. Some Current Policies Need Reevaluation Taxes generate most of the City's general fund revenue. However, taxes have lost ground to inflation during the past five years. When adjusted for inflation, tax revenue has steadily declined since 1987 (see charts on pages 9-12). Much of the decline is attributable to utility rate decreases that have decreased franchise tax revenue as well as declining property values that have held property tax revenue below the rate of inflation. Sales tax has been the tax source that has best kept pace with inflation. Recent publicity about the State's budget surplus has confused the public's perception of the City's fiscal condition. The fundamental difference between the State and the City is that the State's revenue base includes income tax revenue not enjoyed by the City. In fact most of the current surplus is attributable to increases in income tax revenue. As we look to the next five years, there are several factors that indicate that the City's tax base will continue to lag behind inflation: 1 . Legislation - The State continues to exercise significant control over local government. As a result, the City faces restructuring of sales tax distribution and the potential loss of the Innkeeper's Tax. 2. Demographics - The City's population is declining despite an increase in the number of households. As a result, the City will lose a portion of sales and gasoline tax revenue that are partially distributed on a population basis. However, the decline in population is not indicative of a decline in demand for services. 3. Property Values - The growth in City property values has slowed during the past five years and actually decreased between 1988 and 1989. Part of the decline is attributable to the poor housing market. A 45% increase in the number of appeals to the Board of Adjustment also contributed. 4. Tax exempt properties - A large portion of the property in Salt Lake City is exempt from taxes but still require services. An estimated 40% of Salt Lake City is owned by tax-exempt entities such as the -4- federal government, the State, the City, churches, and nonprofit organizations. The point is that the City will likely see a continued need to rely on many options (including taxes) to balance the budget. Furthermore, some of the alternatives that were viable during the past five years may not be as viable during the next five. For example, the City had to become more efficient over the past five years out of necessity. While ways to become even more efficient are becoming less evident, we will continue to pursue efficiencies in the future. Reductions in services would jeopardize our quality of life and the ability to attract residents and businesses. Policy Options Several policy options are available to manage our changing revenue base. Considering the current unwritten policies is a good place to start. Certainly they have been effective in the recent past. However, the outlook for the next five years gives reason to believe that new or revised strategies will be needed. Economic Development Economic development is a viable way to increase the tax base without increasing tax rates. However, economic growth generally requires an initial investment and results in greater demands on services. Economic development has been pursued by the City in the past and will continue to play a role in City policy in the future. The City coordinates its economic development efforts with other jurisdictions through the Utah Economic Development Corporation. Although economic development is a productive way to bolster the City's tax base, it should not be considered a panacea. Our economic development efforts should be guided by specific goals and criteria which define in advance the expected growth in revenue and the associated costs. Economic Development efforts should be accompanied by other strategies when addressing revenue concerns. Legislative Action As mentioned earlier, a significant part of our revenue problems are caused by legislation at the state or federal level. Federal legislation resulted in the loss of federal revenue sharing and state legislation will result in decreased sales tax growth and potentially in diverting the Innkeeper's Tax for other purposes. Furthermore, state statutes limit the City's ability to increase revenue through rate increases or alternate forms of taxation. The City has had an ongoing lobbying effort to quell legislation that adversely impacts City revenue and to promote legislation that would help our cause. If City policy makers choose this option, they must recognize our limitations in effecting changes. However, that should not deter us from directing our efforts to that end. -5- The City's efforts to initiate legislative action should start with a long-range political strategy. This should be coupled with efforts to focus the public's attention on the important issues. One potential policy issue is to find an equitable way for commuters to help fund City services. The City's large day time population places considerable demands on City services beyond those required by City residents. Other cities address this issue through a City income tax. Another potential issue would be a proposal to change distribution formulas that use residential population as a determining factor. Residential population is a poor indicator of the demand on City services, especially in Salt Lake City where the average household size is on the decline. User Fees Perhaps the most viable option is one that we have effectively pursued in the past; increased reliance on user fees. User fees are one of the few revenue sources over which we have much control. As discussed earlier, policy decisions in the past five years have resulted in fees and fines producing a greater portion of our general fund revenue. Admittedly, user fees have some drawbacks. Most notable is the fact that a user fee is more regressive than other forms of revenue. Although it does effectively match the cost of a service with those who use it, it also has a tendency to put more of a burden on those least able to pay. Fees are regressive because they constitute a higher percentage of disposable income to lower income residents. Another issue that must be addressed is the seeming inconsistency between moving towards a greater reliance on user fees and the desire to, "hold the line on fees." Our past practice has been to avoid frequent increases of any particular fee. The result has been disproportionately large increases when they are raised with a fair amount of public resistance, often to the point that usage decreases. This practice is inconsistent with policies in other cities that recognize that inflation creates yearly cost increases. Many cities have adopted policies that call for annual evaluation of fees on the basis of service costs, which result in more frequent but smaller increases. A side benefit of this process is that cost increases may be more closely scrutinized if they result in immediate fee increases. The policies recommended in the next section reflect the opinion that as a practical matter, the City will need to continue to rely more heavily on user fees to fund City services. The recommendations also reflect the opinion that we must manage this revenue source more carefully to assure that its growth is consistent with funding needs. We make these recommendations recognizing that user fees are a small enough revenue source that they will not be able to solve all funding problems. Rather, they are a practical way to mitigate problems over which the City has some control and ability to manage. Recommended Policies In conclusion, we recommend the following revenue policies for recommendation to the City Council. We point out that these policies will be used as general guidelines in preparing the budget. They will also be printed in the budget book in order to communicate the City's intent to the citizens. They should not be -6- construed as rigid rules that bind either the Mayor or the Council in the decision making process. It is also worth pointing out that some of the proposed policies differ from current practices and will require some time to implement. General Principles 1. The City will project its annual revenue through an analytical process and the City will adopt its annual budget using conservative estimates. 2. The City will minimize the use of one-time revenue to fund programs that will incur ongoing costs. 3. Once assessed, the City will aggressively collect all revenue due. 4. The City will pursue abatement programs and other ways to reduce the effect of taxes and fees on those least able to pay. 5. To the extent that the City's tax base is insufficient to fund current services, the City will first, continue to look for ways to reduce the cost of government services; second, consider reducing the level of government services; third, consider new user fees or increases in existing fees. Should these three alternatives fail to offer a suitable solution, the City would increase the property tax rate as a last resort. User Fees 6. The City will review the annual budget for those programs that can be reasonably funded by user fees. This review will result in a policy that defines cost and specifies a percentage of that cost that will be offset by a fee and establishes a rationale for the percentage. When establishing these percentages the City will consider: a) Rates charged by other public and private providers. b) Costs required to change the rate. c) The ability of the users to pay. d) Other policy considerations. (For example, sometimes it is necessary to set a fine at a higher price than is needed to cover full costs in order for the fine to serve as a deterrent.) 7. The City will adjust user fee rates annually based on an analysis of the criteria established in policy six above. The City will pursue frequent small increases as opposed to infrequent large ones. Long-Term Strategies 8. The City will consider initiatives consistent with the following three objectives: -7- a) Finding alternatives which address service demands created by the City's large daytime population; and b) Finding alternatives which allocate an equitable portion of service costs to tax—exempt institutions; and c) Finding alternatives to formulas that use residential population to distribute key revenues such as sales tax and gasoline tax. GENERAL FUND CHARGES & FEES Actual & Inflation Adjusted 1982 Dollars Millions $10 -1 Prm—ww Fr— //cmwrt /, .0Ik $4 - , / - /111 - V /Hi $0 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 %/A Actual Mu Inflation Adjusted GENERAL FUND TAX REVENUE Actual & Adjusted For Inflation % Change From FY 1986 14% — 10% - 8% - B% - 4% - 2% 0% 1986 1987 1988 1989 1990 Fiscal Year Actual —i— AdJ For Inflation PROPERTY TAX REVENUE Actual & Inflation Adjusted 1982 Dollars Millions $30 --`--- - -- $25 d 7 V 7 $20 1 /�? ,--` //�'- ��- i % l - •- / F--- // /.�. , $15 -� �LC o , r / —/7-- P:.___ /—/-_-_- _ _ r — !!I F-_ , --./"--_-_- _ ,/= //,-- ,v-- i - .--/,;=-.- II $5 - „ ----- ------ \--- 77- . .. --. 1-- At ‘-.-- - - . ----- ,r--- --- `-- , - / /i= -.--- - , -‘=-- t- --'=-J iiii $0 /____, , z, . ,... , 4.-:---_, /,___ z._,_, , / , 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 v// Actual UM Inflation Adjusted SALES TAX REVENUE Actual & Inflation Adjusted 1982 Dollars Millions $25 $20 - 7 7 7 7 7 7 $15 -1 /e--7 /- / x7--• g - $5 4f7 _ I 7-7 -- $o 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 /Z Actual MP Inflation Adjusted FRANCHISE TAX REVENUE Actual & Inflation Adjusted 1982 Dollars Millions $20 $16 - 7 7 7 7 7 /=/- 7/.= - , A- V= $o 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 IM Actual MU Inflation Adjusted e..o w — 3-8-i 0 i �) %sem,: hlP-- 1,v K-- Rw— Rk —DH cC N P v , — V — v) rc- ` Ni— r 1 a.- 5'1D - 51, ,cr—' 11\}A9-- -`)- _L — ow,-- AMiu Ito -C4... ko •.t vw t L a J $-w - CUL ot.a.t. 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