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1 Ogden City Council Meeting: June 6, 2017 PROPOSED OGDEN CITY FY2017-2018 BUDGET – ENTERPRISE FUND TRANSFERS Action: Adopt/not adopt Resolution 2017-12 to set a public hearing for June 20, 2017 Executive Summary As required by Utah state code §10-6-135.5, a city that is proposing to transfer funds from an enterprise fund to another fund for a purpose not directly related to the goods or services provided by the enterprise fund must provide notice of the transfers to the users of the enterprise fund. The city must also hold a public hearing on the transfers prior to adoption or the amendment of the City’s budget. In Ogden, a budgetary transfer from the City’s Water, Sanitary Sewer, Storm Sewer, and Refuse utility enterprise funds to the general fund has been done for many years; however, the requirement to provide notice of the transfers and to hold a separate public hearing is a recent change to state law. These utility funds are accounted for as enterprise funds in Ogden and are operated like a separate business. As with other businesses and non- city utilities, the City collects franchise taxes and property taxes. The transfer from each of the City’s utility funds to the general fund acts as the City’s collection of these charges. In addition, the proposed FY2018 budget includes transfers from the Water, Sanitary Sewer, and Storm Sewer funds to the capital improvement fund for the purpose of funding public art. In order to be in compliance with state law requirements, a public hearing on the proposed transfers is scheduled for June 20, 2017. Background In Ogden City’s budget there are three basic types of funds. The first type and the largest is the general fund, from which a significant portion of the City’s operations are funded. The general fund’s revenues come from sources such as sales tax, property tax, franchise tax, and fees. The general fund is used to fund the majority of the City’s non-utility operations. Another type of fund is an internal service fund. These funds are intended to allow for separate accounting but do not have their own source of revenue. These include funds like Fleet and Facilities, IT, and Risk Management. The third type is an enterprise fund. In municipal finance, an enterprise fund is a fund that is accounted for separately and is treated and operated like a business. What this means is that an enterprise fund typically has its own source of revenue and those revenues are intended to cover the fund’s operational ---PAGE BREAK--- 2 Ogden City Council Meeting: June 6, 2017 expenditures. The City currently has the following enterprise funds: Water Utility, Sanitary Sewer Utility, Storm Sewer Utility, Refuse Utility, Airport, Golf, Recreation, BDO Infrastructure, and Medical Services. Utility Transfers Because an enterprise fund is treated like a separate business, cities are allowed to collect revenues from these funds the same way revenues would be collected from businesses and non-city utilities. In the case of the City’s utility funds, the City transfers money from the utility enterprise funds to the general fund for charges in lieu of franchise taxes and property taxes. These transfers have taken place for many years in Ogden and are specific to the Water Utility, Sanitary Sewer Utility, Storm Sewer Utility, and the Refuse Utility funds. Public Arts Transfers In addition to the transfers from the utility funds in lieu of franchise tax and property tax, Ogden City has also transferred a portion of the funds used for capital projects from the applicable utility fund to the capital improvement fund to fund public art. From 1997 to 2015, the City funded public art by allocating 1% of the cost of each capital project. The money was collected and then transferred to the capital improvement fund to be invested in public art. In 2016, the City changed the method with which public art is funded. The current funding method is to transfer a set amount from three of the utility funds to the capital improvement fund. The amount proposed each year in the City’s budget is meant to be the equivalent of the average amount previously transferred from each of the utility funds under the former funding method. The transfers come from the Water, Sanitary Sewer, and Storm Sewer funds; as there have historically been very few capital projects in the Refuse fund, no transfer is proposed for that fund. Noticing While the transfers from the enterprise funds to the general fund and the capital improvement funds have been done for a long period of time and the transfers have always been shown in the budget, the recent state law changes included in section 10-6-135.5 require the City to provide a specific notice to all enterprise fund users of the transfers and the public hearing. In Ogden City’s case, because the enterprise funds from which the transfers are coming are utility funds, all utility customers must receive notice of the transfers and the public hearing. There are approximately 26,000 utility customer accounts in Ogden City. ---PAGE BREAK--- 3 Ogden City Council Meeting: June 6, 2017 In order to provide the most efficient and relevant noticing to all of the City’s utility customers, the City has used the utility billing system to provide the notice. A separate notice has been drafted and included with the utility bills as a method to provide proper notice. The City’s utility billing system works on a four-week rotation with one quarter of the users receiving their bill each week of a given month. Noticing began in mid-May and will conclude in mid-June. This ensured that all utility users received notice at least one week prior to the hearing scheduled for June 20, 2017. Public Hearing As per state law, the Council is required to hold a separate public hearing on the proposed transfers. The hearing is required to be a separate and independent hearing from a budget hearing and any other public hearing. At the hearing, the City is required to explain the proposed transfers, provide enterprise fund accounting data (as defined in state code), and allow members of the public in attendance at the hearing to comment on the proposed transfers and the accounting data. There is no specific action required by the Council at the public hearing; rather, the intent is to provide clear notice of what is proposed with the transfers and to allow enterprise fund users to comment on the proposal. The transfers are included in the Tentative Fiscal Year 2018 budget scheduled for adoption on June 20th. A separate public hearing on the Tentative FY2018 is also scheduled for June 20th. Proposed Transfers The proposed transfers are as follows: Water Sanitary Sewer Storm Sewer Refuse Total Transfer Total Enterprise Fund Expenditures $21,764,500 $12,402,450 $6,321,875 $5,608,200 Franchise/Property Tax Transfer to General Fund $2,227,075 $1,336,775 $573,675 $672,500 $4,810,025 Percentage of total Enterprise Fund 10.23% 10.77% 9.07% 11.99% Public Arts Transfer to Capital Improvement Fund $40,000 $15,000 $10,000 $0 $65,000 Percentage of total Enterprise Fund 0.18% 0.12% 0.16% 0% ---PAGE BREAK--- 4 Ogden City Council Meeting: June 6, 2017 Attachments 1. Resolution 2017-12 2. Notice mailed to Utility users Council Staff Contact: Glenn Symes, AICP (801) 629-8164 ---PAGE BREAK--- 2017-12 ---PAGE BREAK--- ---PAGE BREAK--- NOTICE OF PUBLIC HEARINGS TRANSFERS FROM ENTERPRISE FUNDS NOTICE OF PUBLIC HEARINGS Tuesday, June 20, 2017 at 6:00 pm – Public Hearing to be held on proposed Enterprise Fund transfers. The hearing will be held in the Ogden City Council Chambers, on the third floor of the Municipal Building located at 2549 Washington Boulevard. PURPOSE In accordance with Utah Code §10-6-135.5, notice is hereby given that the Ogden City Council will hold a public hearing to receive public comment on proposed transfers from the City’s Enterprise Funds, including the Water, Sanitary Sewer, Storm Sewer, and Refuse Funds, to the City’s General Fund and Capital Improvement Fund included in the proposed fiscal year 2018 budget. The amounts shown in this notice are the maximum amounts proposed. The actual amounts approved in the budget may be less. BACKGROUND Utility Transfers In the proposed fiscal year 2018 budget, the City is proposing to transfer funds from the Water, Sanitary Sewer, Storm Sewer, and Refuse Utility funds to the General Fund. In Ogden City, these Utility Funds are accounted for as Enterprise Funds and are operated like a separate business. As with other businesses and non-city utilities, the City collects franchise taxes and property taxes. The transfer from each of the City’s Utility Funds to the General Fund acts as the City’s collection of these charges. This transfer has been done by the City for many years; however, to be in compliance with recent state law changes, the City is now providing notice of the transfers to all City utility users. Public Arts Transfers In addition to the transfers for the franchise taxes and property taxes, the fiscal year 2018 budget proposes to transfer funds from three of the Utility Funds to the Capital Improvement Fund to fund public art. From 1997 through 2015, the City had funded the public art program by allocating 1% of each capital improvement project. In 2016 the City adopted a change to this funding method. The new funding method replaces the 1% allocation with a fixed annual amount that is designed to be equivalent to the average annual amount that would have been directed to public art. TRANSFER AMOUNTS FROM THE UTILITY FUNDS TO THE GENERAL FUND AND CAPITAL IMPROVEMENT FUND Water Sanitary Sewer Storm Sewer Refuse Franchise/Property Tax To General Fund $2,227,075 $1,336,775 $573,675 $672,500 Percentage of total Enterprise Fund 10.23% 10.77% 9.07% 11.99% Public Arts to Capital Improvement Fund $40,000 $15,000 $10,000 $0 Percentage of total Enterprise Fund 0.18% 0.12% 0.16% 0% Copies of the tentative and line item budgets will be available for review after May 5th at www.budget.ogdencity.com. If you have any further questions or concerns, please contact Lisa Stout, Ogden City Comptroller, at (801) 629-8713 or [EMAIL REDACTED].