Final budget to be reviewed at Sept. 21 public hearing
The Aurora City Council voiced mixed opinions last week about which strategy to utilize when computing this year’s budget, with the key differential focused on the need to build back the city’s depleted cash reserves versus giving taxpayers a break.
Option 1, which was recommended by City Administrator Adam Darbro, would include the maximum request allowed without triggering a pink postcard hearing, increasing last year’s tax asking by $317,588 to $2,438,766. Option 2, he explained, would tax property owners based on real growth only, generating a tax asking request of $2,287,046.
“We know we are going to get savings from what we did with EMS Unlimited,” Darbro said, referencing the new contract with a private ambulance provider which went into effect last month projected to produce a savings of $638,000. “I think we should save money over the next three years and build our reserves back, and then if we want to put in place a policy where we only need to tax growth, or we only want to go a certain percentage, that’s fine. But I think right now we need to get our reserve funds back to what they should be.”
Darbro began the Sept. 8 budget discussion by updating the council on the city’s actual expenditures for a fiscal year which ends Sept. 30. In addition to the savings represented in the new EMS contract, he said the city has been reducing its spending whenever possible.
“We underspent (the general fund budget) by roughly $600,000,” he said. ‘So that’s our carry forward number right now. Our expenses are just shy of $4 million, so it would show at the end of the year we’d have $740,990 in reserves in the general fund. The auditor recommends that you have 50 percent of your operating budget ($1.99 million) so we’re short by $1.2 million.”
Darbro then broke down budget projections for each of the city’s departments, noting that, based on the auditor’s recommendations, cash reserves are short by $733,936 in the sewer/water treatment department, $347,289 for the ambulance service, $325,014 in the street department, and $77,607 in the water department. Cash reserves in the sanitation department were reported at $569,665, more than $230,000 over the recommended amount.
Based on requests from council members, Darbro and city clerk Barb Mikkelsen also prepared a summary sheet showing the projections of a budget taxing only real growth, excluding changes based on valuation increases.
“If you go down under the general fund what you’ll notice is our total receipts coming in at $3,859,456 and our overall expense at $3,999,019,” he noted. “If we would spend everything we budgeted in the general fund, and we never spending everything we budget, we would have to pull from reserves to cover our expenses.”
Asked to quantify the difference, Darbro said Option 1 (the maximum request) would add $12,158 to the reserve funds, pushing the total to $740,990, while Option 2 (real growth only) would deplete the reserve funds by $139,562 to $589,270.
Bergen voices concern
Council member Esther Bergen repeated concerns raised at an earlier meeting with the concept of taxing the inflation on real estate.
“Citizens all across the state of Nebraska list rising property taxes as their number one issue of concern,” she said. “This second option (taxing real growth only) would at least show taxpayers that we are listening to them when they state that they are fed up with high property taxes and that we are making an effort to lower the amount of money that we are demanding from them. This would at least be a start.”
Bergen suggested that the budget could be reduced further still, cutting spending from $3.857 million to $3.319 million.
“We are already receiving $1.6 million in franchise fees and other local receipts, so that leaves $1.7 million that we need to take in property taxes to cover the $3.3 million, which is the same amount that we spent last year minus the EMS savings and adding in $100,000 for COLA (cost of living) increases. This will leave our general fund reserves at the end of next fiscal year the same as they are now at the start of next fiscal year, with no increases and no decreases. I’m throwing that out there as a deeper way to look at the budget.”
Discussion on reserves
That prompted a lengthy discussion about concerns with the level of reserves, which were depleted after five consecutive years of deficit spending by the fire-based EMS service.
“Growth isn’t always going to be there," Darbro said. "You can always cut. It just depends on what you want for services. That’s the thing.”
Darbro also noted that state law currently limits the amount a municipality can raise taxes in a single year to 2 percent, plus real growth.
“I think being fiscally responsible would include the idea that we know we need to replenish reserves,” said Councilman Paul Lackore. “For me right at the moment, our biggest concern is if we have some unanticipated expense come our way and if we’ve cut down what we have, then that unanticipated expense becomes a stress factor and a burden. All of a sudden we’re struggling to find where we are going to come up with the capital.”
“I’m all for fiscal responsibility, but at the same time being fiscally responsible doesn’t mean not spending any money,” added Councilman Mark Dunn. “It means adding value with the money that we are taking and I think this (budget summary) sheet shows where that is going and that we are doing a good job of that.”
Darbro confirmed that there is room in the budget to reduce spending, though reiterating that his recommendation is to build up reserves for a few years before lowering the level of tax asking.
“If we do continue on this route and we do build our city reserves up, I think that story needs to be told to the taxpayers,” said Councilman Todd Jensen. “This is what we’re doing. This is why you’re not getting a tax break. This is why the levy’s not changing.”
Darbro said he agreed.
“I appreciate people being willing to discuss this,” Bergen added. “I also think that the taxpayers don’t feel any difference until the tax levy goes down. They feel no difference, even if we are being frugal with their money and still take as much as we ever took. I ran for this office because of taxes being too high and trying to help get it down and I would like to see some movement on that.
“Our tax asking from 2016 until now has gone up by over one million dollars,” Bergen continued. “That’s a 100 percent increase in that amount of time and people’s paychecks aren’t going up 10 percent a year like what that amount would be.”
Lackore then cited a recent report which compared Aurora’s tax structure, levy, tax asking and valuation, with 30 communities of similar size across Nebraska.
“When we look through that, we’re the one community in that list that doesn’t have a sales tax,” he noted. “When you look at the total tax burden on the citizens of Aurora compared to the average tax burden of our comparative communities, Aurora is at 77 percent of the taxes collected. So we’re not necessarily overtaxed. It’s more of a perception and there are people who are going to feel like that’s the case. I’m not in contrast to their viewpoint and I’m not saying that they’re wrong. I just want them to be clear that compared to the average of the 30 communities we were compared to, Aurora is running our city on 77 percent of what the average community in that comparison runs their budget on.”
Hoping to put some perspective on the impact the proposed budget would have on Aurora taxpayers, Darbro called attention to the budget worksheets which listed the monthly tax impact for each department. For a single-family home valued at $267,004, which is the average home value in Hamilton County, the total monthly property tax bill using the maximum tax request philosophy would be $98.72, or $1,184.64 per year. By comparison, the total monthly tax bill using the real growth only approach would be $93.48, or $1,121.76.
Community feedback
Tuesday’s budget discussion drew feedback from some in the audience as well.
“I think we should leave it as is and rebuild our reserves,” said Jannelle Seim, an unopposed candidate for a Ward 1 seat in the November election. “We are one building falling down away from total devastation and eating all of the good that the city has done … I think you hold steady for now, you build up your savings account and then you incrementally start doing the decreases and be smart and methodical about it.”
Derek Rose, president of the Aurora Chamber of Commerce, shared his perspective as well.
“While the hard decisions were made in regard to EMS Unlimited … I think ultimately that was a great call,” he said. “But then to signal to the taxpayers that yes, we cut so much out of our budget and now we’re going to ask for a lot more, that messaging seems angry. Like Todd said, if we’re going to ask for this much, it needs to be known that the reason we’re doing it is to build reserves back.”
As the meeting drew to a close, Darbro asked the council for direction in terms of which taxing philosophy should be used in preparing the final budget. Jensen made a motion to base the budget on taxing real growth only, which was seconded by Bergen. The motion failed on a 3-2 vote.
The hour-long budget discussion that engaged city leaders, both elected and appointed, as well as several guests in attendance, raised several points to be considered in a budget to be finalized by Monday, Sept. 14. The legal notice posting the final proposal must, by law, be published in the Sept. 16 edition of the News-Register, so that it can be reviewed in a public hearing Sept. 21. The city council is then scheduled to vote on the final budget the following night, Sept. 22.