Tag: water rates

Water Rates, Debt, and That Cash Reserve

11/02/2015 / David Rodeback

Debt

One of the numbers AFCitizens gets right in its campaign to take down city council incumbents is American Fork’s debt. The number is inherently a moving target, but according to the 2016 American Fork City budget (page 68), the City’s total debt as of July 1, 2015 (the beginning of the fiscal year), was about $52.3 million. That number is projected to be less than $49 million by the end of the fiscal year, June 30, 2016.

On one hand, these are big numbers. Whether that’s too much debt for us is a judgment call. AFCitizens says it is, and we should blame the incumbents. I readily agree that much of it was avoidable, but blaming the incumbents is a bit too convenient and quite historically absurd.

On the other hand, the City is legally allowed to carry almost $200 million more debt than it has. That limit is not a single, universal number, and not all of the City’s debt is counted toward the limit (most is), but officially we’re at about 16 percent of our statutory debt limit. I am not saying we should borrow as much as we’re allowed, though I did favor borrowing a small fraction of that remaining margin for roads two years ago. (Most voters felt otherwise, though some now say they would vote differently.)

More than $41 million — over 75 percent — of our current debt relates to water, which brings us to our water bills. AFCitizens says they’re too high. That is also a judgment call, but I agree that they could have been lower, and I wish they were.

Kicking the Can Down the Road, 1990s Style

Several years ago, city leaders studied our increasingly poor water situation at great length and decided that the wisest and least expensive course of action was to borrow to install a pressurized irrigation system. They proposed a bond issue, which the voters overwhelming passed. Here’s the essential bit of history: had City leaders in the 1990s been willing to face the problem, the cost of the system would have been less than $10 million, instead of almost $50 million dollars. Instead, they did the “fiscally conservative” thing, kept taxes and rates low . . . and effectively borrowed $40 million from us in what was then the future. (They did much the same with roads, but that’s a separate discussion.)

The same timid City leaders allowed water rates to remain well below the cost of actually delivering water, so that our water bills were in effect subsidized by tax revenues. Meanwhile, nothing was being tucked away to help replace infrastructure (which is known to have a finite lifespan). Again, several years ago, later City leaders prudently raised water rates to a level that covers current costs and a good portion of known replacement costs.

As if this didn’t make our water rates high enough, most or all of the water bond payments could have come from impact fees from new construction, but then the economy tanked, and those fees dried up. So the debt the voters voted to incur has had to be paid through higher water rates.

Had City leaders and voters acted prudently in the 1990s, our water bills would be a lot lower. Fiscal conservatism is fine, and I don’t like high taxes and fees either. But sometimes saving a penny today costs us a dime down the road.

For what it’s worth, City leaders recently were able to find enough economies elsewhere to avoid passing on to the residents a sewer rate increase imposed by the sewer district.

The Rainy Day Fund

AFCitizens wants to blame the incumbents, so they keep saying — and candidate Allen Simpson has said — that the City has lots of money lying around that could be used to lower our rates. The none-too-subtle implications are these: current City leaders want the rates to be higher than they need to be, and water rates themselves, rather than being sensibly tied to real costs, can be whatever the city council wants them to be.

Which brings us to the City’s cash reserves. According to official sources, the statutory limit is 25 percent of the City’s annual budgeted revenue. Right now the City chooses to keep that between about 14 and 18 percent. (It fluctuates during the fiscal year.) It was 9 percent when the Great Recession hit, and more would have been a very good thing then.

AFCitizens says the City is at its statutory limit, when it doesn’t need to be. Their number is off by one-third or so, based on the FY2016 budget.

How large our cash reserves should be is a judgment call. Economic downturns, fighting a refinery fire which destroys much of the City’s firefighting equipment, or a natural disaster could suck up even the maximum allowable reserve very quickly — and two of those things have happened in recent years. To my mind, the prudent thing to do is to keep a generous reserve against the unpredictable, so we don’t have to go begging, borrowing, or taxing when a major, unbudgeted need arises.

Councilman Rob Shelton, the council’s resident financial guru, wrote this to me:

“I believe a true conservative plans a budget with revenue conservatively (thinking less income will come in) and expenses conservatively (thinking there would be an increase). At the end of the year, we use the excess to fund capital improvement projects like roads, waterlines, sewer, etc.

“This approach allows us to use the ‘plan for the worst and hope for the best’ type of budgeting. This last year we came close to the 25% reserve amount, due mainly to an increase in sales tax revenues. Good budgeting allows us to be pleasantly surprised at the end of the year with excess, rather than a shortfall. You take the excess and then apply it to one-time projects in the capital improvement plans.

“So this last year we took the excess and put it to work in the budget, and that dropped [the rainy day fund] down to just under 18%.”

That’s conservative enough for me, thank you.

With Fiscal Conservatives Like These, Who Needs Liberals?

We are in the bizarre position of hearing self-proclaimed fiscal conservatives argue that we’re preparing too well for a rainy day, and that the price of a thing (here, water) should be below the cost of actually delivering that thing in the short term and (when we consider infrastructure) in the long term as well. Are they making sense to you?

Even if they are, they’re getting some of the numbers badly wrong, as usual, and misplacing the blame for the numbers they’re getting right.

Learn before you vote — and please share the facts with your neighbors and friends.

Note: this blog post and the infographic were edited after publication to correct an error.

meet the candidates — (L to R) Moderator John Dougall with 2015 candidates: Councilman Brad Frost, Councilman Robert Shelton, Kevin Barnes, Allen Simpson

Meet the American Fork City Council Candidates (Parts 9-12)

10/28/2015 / David Rodeback

On Saturday morning State Auditor John Dougall moderated a meet-the-candidates event at American Fork Hospital. It was part of their Pancakes and Politics series, which is sponsored by the American Fork Chamber of Commerce.

Kevin Barnes

No one in the area has more credibility in the moderator’s role than John Dougall. And the free breakfast was good too. About 40 people attended, not counting the candidates and the moderator. The audience was noticeably older than Wednesday evening’s.

The format was a bit different from Wednesday evening, and some of the questions seemed a bit redundant, but there was more discussion of some key issues, as well as some treatment of issues which didn’t arise on Wednesday evening.

All four candidates were there: incumbents Brad Frost and Rob Shelton, and challengers Allen Simpson and Kevin Barnes.

My audio recording of this event is not of professional quality (that’s no surprise), and there’s a fair amount of background noise. But it’s easy to follow. I’ve broken it up into four segments of about 20 minutes each. For each segment, I’ll list the topics and the order in which the candidates responded.

First Segment

Audio link: 2015_Saturday_1

Councilman Brad Frost

Opening Statements (3 minutes each; Frost – Shelton – Simpson – Barnes)

Brad Frost: “Let me see the facts, and I will make a decision.”
Robert Shelton: “We were able to find over the last three years $1.8 million in budget cuts. . . . We were able to do more with less.”
Allen Simpson: “I’ve been successful at leading teams of people who were not used to following.”
Kevin Barnes: “I’m not mad at anybody. I’m not after anybody’s throat. I just want to serve.”

Questions (one-minute responses):

water rates (Shelton – Simpson – Barnes – Frost)
experience (Simpson – Barnes – Frost – Shelton)
more experience (Barnes – Frost – Shelton – Simpson)

Second Segment

Audio link: 2015_Saturday_2

Questions:

property and sales taxes, tax cuts (Frost – Shelton – Simpson – Barnes)
developers vs. residents (Shelton – Simpson – Barnes – Frost)
why running, what do you what to accomplish (Simpson – Barnes – Frost – Shelton)
top two priorities for City’s limited resources (Barnes – Frost – Shelton – Simpson)

Third Segment

Allen Simpson

Audio link: 2015_Saturday_3

Questions:

police questioning of people who haven’t broken the law (Frost – Shelton – Simpson – Barnes)
the study saying American Fork is the 4th or 5th most-taxes city in Utah (Shelton – Simpson – Barnes – Frost)
areas of City government that need changes (Simpson – Barnes – Frost – Shelton)
roads (Barnes – Frost – Shelton – Simpson)

Fourth Segment

Councilman Rob Shelton

Audio link: 2015_Saturday_4

Questions:

building department (Frost – Shelton – Simpson – Barnes)
what to cut in the budget (Shelton – Simpson – Barnes – Frost)
off-street parking and snow removal (Simpson – Barnes – Frost – Shelton)

Closing Statements (two minutes each; Barnes – Frost – Shelton – Simpson)

You may also enjoy notes and audio from the Wednesday evening candidates event.

Meet the American Fork City Council Candidates (Part 5)

10/28/2015 / David Rodeback

Link

Here’s a link to audio of a few questions and candidate responses at last Wednesday evening’s meet-the-candidate event at American Fork Library: These questions were submitted by residents attending the event.

2015_Wednesday_5

Questions in this Segment

How can American Fork protect its interests in American Fork Canyon? (Order: Simpson – Barnes – Shelton – Frost.)
What do you think about Proposition 1? (Order: Barnes – Shelton – Frost – Simpson.)
Why are water rates so high? Is there something the City can do to reduce them? (Order: Shelton – Frost – Simpson – Barnes)

Notes

Each candidate had one minute for each response. Note the response order above with each question, because candidates aren’t named before every response.

Highlights

Councilman Rob Shelton after the October 21, 2015, meet-the-candidates event at American Fork High School.

Allen Simpson said, about the canyon, talk to the county commissioners, then talk to Councilman Frost. He talked about UTA’s large debt load and bad fiscal management. He thinks the whole point of Prop 1 is to get money for UTA. He likes the way UDOT handles the roads, though. He will vote no on Prop 1. He claimed that water rates are outdated, that there’s a million-dollar surplus, and the City chosen to make the rates keep rising “when they don’t need to.” (This got applause from Councilman Carlton Bowen in the audience, which was out of order.)

[Again, this seems like a good time to point out that I’m reporting and summarizing what they said here, not asserting that it is true.]

Kevin Barnes said that when the canyon discussions started, we didn’t have a seat at the table, even though the canyon bears our name. Now we’re involved, and “the whole city needs to thank Brad for that.” Roads are the good part of Prop 1; it bothers him that UTA gets 40% of the revenues from the proposed sales tax increment. The more he learns, the more he leans against Prop 1. He would like the legislature to rewrite the law so UTA gets less. The water system should have been done a long time ago, but wasn’t, so we have to do it now. We still have to manage funds carefully, but “it’s not always as easy as some people make it seem.”

Rob Shelton praised Councilman Frost for shouldering the burden of the canyon. We cooperated with other cities. As to Prop 1, a lot of legislators in Salt Lake County wanted to make sure Utah County was committed to UTA. He would like two separate bills, one for roads and one for UTA. Sometimes we don’t get much back from these statewide sales tax initiatives; he’s like a more local solution. In part, water rates are so high because the impact fees it was hoped would pay for the pressurized irrigation system dries up when the economy declined. He talked about some very old culinary water pipes being replaced recently; “we got our money’s worth from that pipe.”

Brad Frost said we’ve put a lot of time into the canyon development questions. The county has jurisdiction over development. “We used a small hammer . . . Finally we had to use a sledgehammer” to prevent land trades negotiated by Salt Lake County. The city council voted down a resolution the county wanted, supporting Prop 1. He’s not satisfied that UTA will do anything with the money to help American Fork. He’s voting no on Prop 1. As to water rates, he talked about some unexpected (but necessary) investments in infrastructure and the cost of pressurized irrigation.

Here’s a link to the next segment.