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Funding Community Priorities – Strategies and Tools

Understanding property taxes and the certified tax rate, the truth-in-taxation process, old and new “fees” within the general fund (with recent case studies), and the bigger picture of priority-based budgeting.
by

Fred Philpot

on 14 September 2018

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Transcript of Funding Community Priorities – Strategies and Tools

1987
1978
What Did it Cost?

Average Cost of New House: $92,000

Average Income per Year: $24,350

Average Price for New Car: $10,305

1 Gallon of Gas: 89 cents

1 LB of Bacon: $1.80

US Postage Stamp: 24 cents

Dozen Eggs: 65 cents
The Year of Harry and The Hendersons, RoboCop and Lethal Weapon.
The World Enjoys ALF, Remington Steele and Airwolf for the Last Time.
Michael Jackson Releases the Album "Bad".
The PC6 Goes on Sale, with a Whopping 40MB of Memory. Everyone owns a Walkman.
1916 Woodrow Wilson & The Zimmermann Telegram

Wilson had been re-elected President in 1916 under the slogan, “He Kept Us Out Of War.”

Tough Choice
: Go back on his word, or allow hostile foreign governments to negotiate while using American territory as a bargaining chip.
The art of taxation consists in so plucking the goose as to obtain the largest possible amount of feathers, with the smallest possible amount of hissing. — Jean-Baptiste Colbert
1914: Henry Ford Decides to Double his Workers' Wages

Henry Ford had a problem. Too Successful, Too Efficient, Too Much Turnover

Lesson Learned: With their pay doubled, Ford's autoworkers could now afford the very products they were producing. This triggered a consumer revolution that helped create the wealthiest nation on earth.

Between 1910 and 1919, Henry Ford reduced the Model T's price from around $800 to $350, solidified his position as the world's greatest automaker, and made himself a billionaire.

And by raising wages he expanded the overall market for the Model T. As Ford said to reporters that January: "We believe in making 20,000 men prosperous and contented rather than follow the plan of making a few slave drivers in our establishment millionaires."
How to Deal with the Challenges of Providing Necessary Services
$
Prioritizing – How to use what cash you have.
Can’t perpetually cut costs or defer Maintenance.
Some Revenues are more volatile.
Bell-bottoms are in High Demand
The Bee Gees Song "Stayin' Alive" Tops the Charts
The Year of Space Invaders, Superman & Grease
New York Yankees Win the World Series
What Did it Cost?
Average Cost of new house: $54,800
Average Income per year: $17,000
Average Price for new car: $4,645
1 gallon of gas: 63 cents
1 LB of Bacon: $1.20
US Postage Stamp: 15 cents
Dozen Eggs: 48 cents
"No New Taxes" - Why isn’t this sustainable?
Not realistic to live off of same tax revenue as you received 10, 20, or 30 years ago
The World Sees Star Wars for the First Time!
What Does it Cost?
Average Cost of new house: $371,200
Average Wages per year: $44,564
Average Price for new Car: $35,300
1 gallon of gas: $2.94
Dozen Eggs: $1.20 cents
What Solutions do we have...
Raise Revenue:
Cut Costs or Defer Maintenance:
What does this mean?
Property Tax – Most stable source, rate controlled by City Council.
Based on Assessed Value of Real, Personal and Centrally Assessed Property in the City.
Certified Tax Rate = Revenue Neutrality plus New Growth.
Rate can be controlled by Council but in most cases it is largely ignored and therefore controlled by Certified Tax Rate calculation.

Why Isn't this Sustainable?
What the Certified Rate Doesn't Do.
Adjust for Inflation.
2018
We finally got Incredibles 2!, Mary Poppins is Back and Superheroes Continue to Dominate the Silver Screen.
Cavs and Warriors face off again for NBA Championship.
The IMAC boasts 1 TB of storage and 512 GB of flash storage. The world is connected through Social Media.
2018 Winter Olympics in PyeongChang
AOL Instant Messenger signs off forever.
=
PROPERTY
TAX 101
What Can We Do:
Analyze: We Need to Know the
Why
.
Educate: They Need to Know the
Why
.
Public Hearing Required for Tax Increases Above Certified Tax Rate
Analyze:
Educate:
Simple and Easy to Understand
Direct
Informed
"In the end, the real question really boils down to: Should the city cut services to bridge the proposed funding gap or raise revenues?"
"certain programs...are essential to the overall health of the community."
A Combination of All of the Above
"Tax payers need a well-thought out plan regarding what, exactly, the city's leaders intend to do..."
A Focus on Revenues
Adjustments to Certified Tax Rate Formula
Adjust for New Growth in Centrally Assessed and Personal Property
Why Isn't this Sustainable?
What the Certified Rate Doesn't Do.
Adjust for Inflation.
Allow you to maintain or increase your Level of Service (LOS).
New Bricks and Mortar
Plus
Centrally Assessed, Personal, Less CRA
Neutral Revenues
+ New Growth
Property Tax – Most stable source.

Sales Tax – Fluctuates with economy, State Legislature controls the distribution formula.

Franchise Fees – More stable than sales tax but not as stable as property tax. Limited to maximum of 6% on gas and electric, 3.5% on telecommunications.

Building and Development Fees – Unpredictable and decrease near buildout, usually cover reimbursement of actual staff time and processing expense.

Prioritization of Services
Evaluate Areas to Reduce
Determine Needed Increases
Horse Manure Problem of 1894
In 1894, the Times of London estimated that by 1950 every street in the city would be buried nine feet deep in horse manure. One New York prognosticator of the 1890s concluded that by 1930 the horse droppings would rise to Manhattan’s third-story windows.
40 ft
Colonel George Waring , a sanitary engineer, became the Street Commissioner of NYC in 1894. He organized many reforms in his department. With his workers, the "White Wings", Waring managed to clean the streets of New York as well as Memphis, TN and parts of New Jersey. His work led to modern day systems of recycling, garbage disposal, and street cleaning.
1950s
Most people expected to own a car and a house, and believed that life for their children would be even better.

Americans during the 1950s were on the move. The population was shifting from the country to the city, then to the suburbs. In 1945, Americans owned 25 million cars; by 1965 the number had tripled to 75 million.

A new freeway system:
41,000 miles of four-lane roads
More than 16,000 entrance ramps
55,000 bridges
Not fully completed until 1990s
Designed for high-speed driving
A total of some $129 billion
Sections of highway were constructed into and around cities.
1940s
Nearly 60 Percent of the population lives in Cities.
Cities become the major location of industry and government, with the institutions that organize transportation, commerce, communication and financial work.
For the record, the Utah Taxpayers Association does not oppose every proposed increase over the certified tax rate. In many cases, local governments are recouping inflationary losses. Howard Stevenson
We must continue to think creatively about how to address tough budget decisions by evaluating why we provide services, how to ensure the best results, and what resources are needed to ensure success.
Lb of Bacon: $4.48
Are you ready to make the tough decisions to prepare your community for the future?
"Political courage is often a hard commodity to come by."
Intersection of Revenues and Expenditures
Capital Needs
Level of Service Issues
Program Growth
Inflation
Impacts of Redevelopment
A Well Thought out Plan
How to Deal with the Challenges of Providing Necessary Government Services
Prioritize
Cutting Costs
GFOA:
Evaluate Individual Programs
Do the Important Things Well
Question Past Patterns of Spending
Know the True Cost of Doing Business
Provide Transparency
Demand Accountability
Step 1: Identify Available Revenues




Step 2: Identify your Priorities
The Case of the "Needed" Basketball Facility
GFOA:
Evaluate Individual Programs
Do the Important Things Well
Question Past Patterns of Spending
Know the True Cost of Doing Business
Provide Transparency
Demand Accountability
For Questions Regarding our Presentation, or to Schedule a Follow-Up Presentation, Please Contact:

Fred Philpot, Vice President
fred@lewisyoung.com
(C) 801.243.0293
(O) 801.456.3909
Full transcript