We are pleased that this budget includes our recommendation of 5% merit and a one-time bonus of 2% replacing the traditional COLA.

We are recommending an increase in General Fund Revenues of 6.96%. Revenues continue to grow at a slower pace than expenses. Our expenses increased 8.75% before reductions were made to balance the General Fund. The overall concern is the unknown variables in the future that will inhibit revenue growth as we have experienced in the last few years. If the revenue picture does not improve then cuts to expenses including services to the citizens might become a reality. We hope for a concerted effort with administration, council, employee groups and citizens to find ways to improve our future revenue without resorting to increasing taxes. There are many who advocate the use of one-time monies for ongoing expenses. Although this is tempting it is fraught with future challenges that may be insurmountable. It has long been the policy of the Council and Administration that only ongoing revenue is used to fund ongoing expenses. The use of one-time money from FY2005 has been recommended to you for use in a one-time bonus (referenced to earlier) and the purchase of a portion of fleet vehicle leases. Both are tools to help balance the budget before submittal to the council.

REVENUE:

General Philosophy

Our revenue numbers are increasing but not at the rate of many of our sister cities. Delays in construction of the River Project and Mall Site along with the legislative changes eliminating the opportunity to build the purposed Wal-Mart are contributing factors in these challenges. Revenue projections for FY2007 would be increased if Wal-Mart were underway. The new Wal-Mart would have contributed immediately to our sales tax and property tax projections in FY2007. Although the economic recovery has been slowed because of high fuel and heating costs, the increases in sales tax remain healthy for many retail rich cities. In a March 24, 2006 article in the Deseret News it was projected that 2007 sales tax distributions indicate 24 Utah cities will have an increased local sales tax, according to the annual sales tax distribution report released by the State Tax Commission. The article predicted that Ogden would rank 23 out of the 24 with an estimated 4% growth expected. Since the majority of our revenue increases are derived from sales tax it would reason that expenses cannot outgrow those projections without increasing the pie beyond State Tax Commission’s forecasts. If creative alternatives are not implemented soon then in future years services currently being performed may be reduced or eliminated. In this budget revenue is projected to increase 6.96% in the General Fund and 2.60% overall in all city budgets. We continue to advocate the viewpoint of requiring, where possible, users of city services to pay for them. To that end, the revenue enhancements proposed in the FY2007 budget are focused on maintaining general tax rates and requiring users to pay the cost of new services or disproportionate use of city services.

Taxes

The Administration is estimating a 3.6% increase in property tax receipts over FY2006’s estimates because of new growth in property value and after the reduction for dispatch services. Sales tax revenue is projected at 5.33% above last year’s adopted budget. Sales tax revenue continues strong during the first half of FY2006 (through seven months we are 6.71% above budget), and we anticipate and hope the growth will continue.

Utility Rates

The FY2007 budget proposes the inflationary indexing established in FY2006. The indexing program for utilities recommends a 3.4% increase in all utility rates, which is reflective of the Wasatch Front cost of living as established by Department of Labor Western Region. This indexing effort allows the city to adjust rates by a small amount annually and maintain a situation where revenue keeps pace with escalating costs of providing the service.

User Fees

A number of user fee proposals are included in the recommended budget. These include the following:

Recreation: The budget proposes increasing the fees at Lorin Farr Pool and the Marshall White Center.

Airport: The budget proposes increasing land lease prices and landing fees.

Water and Sewer: Water and sewer fees are recommended to increase 13.4%, which is above the current CPI of 3.4% in order to start paying for the long needed infrastructure replacement.

EXPENDITURES:

General Philosophy

In developing the FY2007 budget, the FY2006 budget was used as a starting point with only a few adjustments approved above the previous year. These adjustments included increased costs beyond the city’s control such as auto fuel, heating fuel, legislative mandated retirement increases, etc. In order to balance revenue and expense numbers most departments provided reductions on this year’s budget projections.

Employees

We recognize that our employees are outstanding and dedicated. Our commitment is to maintain and develop our competent and motivated work force. One component of meeting these objectives is recognizing the importance of being competitive in our compensation and in our employee benefit package. This budget does include funding for a 5% merit adjustment and recommends use of one-time monies from FY2005 to give a 2% bonus in July instead of a traditional cost-of-living adjustment for employees. This bonus will differ in that it will not increase their base pay but will be given to them in a one-time check instead of the normal COLA distribution of 26 pay periods. It appears that our medical insurance usage has improved slightly but continues to be above average. The Administration recommends increasing co-payments required for doctor and emergency room visits along with a minor payroll deduction to cover remaining cost increases. With the increases to the costs, including the payroll deduction, the city will still pay 98.37% of all medical premium costs per employee. Currently we have had seven government agencies respond to our benefits survey. The average of these seven agencies is for a 2.35% COLA and only one agency has (as yet) determined to provide a merit increase.

Reduction in Force

Two positions from various departments are recommended for reduction and transfer (one reduction at MWC and one reduction at Mt. Ogden Golf Course). If approved, these position changes will be effective June 30, 2006. Both positions will be vacant on June 30, 2006.

Modification Requests

In this budget there is one new full-time position. The council office has recommended a new full-time council communication specialist.

Tax Increment District Revenue and Expenditures

Tax increment districts, which have borrowed money from the General Fund and are now in a position to repay portions of that debt, include the Historic 25th Street District and the Washington Boulevard District. Combined revenue from these districts is estimated at $270,000 in the recommended budget. City Ordinance 97-57 provides funds generated by these districts to the General Fund be used for the contractual obligation for operating deficits at the Ogden Eccles Conference Center, or placed in the Capital Improvement Fund to be used for specific capital projects. The Administration proposes using the full amount of the funds in the operating subsidy for the Ogden Eccles Conference Center, totaling $270,000.