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The Holbrook City Council met for a budget session on June 11 with City Manager Ted Soltis outlining what expenditures and revenues could be expected for the coming fiscal year.
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For the coming year the general fund is projected to have $4.2 million in revenues, down approximately $217,000 over the previous year. Included in those figures is a projected decrease in city sales tax from $1.9 million to $1.8 million. “We took some hits here. The Magnuson burned down and that has a compounding effect. The auto place (Tate’s Auto Group) is having issues right now so I didn’t feel comfortable making an increase in those numbers.
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Soltis stated that the city will budget the full amount in the water and wastewater departments because the equipment is so old. “That doesn’t mean we’ll spend it, but the goal is going to be that we will accumulate revenues in there for when we have big expenses. All of our infrastructure is in very bad shape,” he explained.
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He also noted that Holbrook’s population has been trending upward since 2015, a trend attributed to higher costs in housing Flagstaff and those moving from the west coast. In 2010 the population was estimated at 5,053, then declined to 4,983 in 2015. It has begun a steady increase since then and as of 2017 has risen to 5,049. With that increase comes a need for more housing. “We are having conversations developers about building houses. As soon as the wastewater plant is paid off next year, we are debt free. That all looks very good to developers.”
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He noted that the HURF (Highway User Revenue Fund) is in really good shape, with the city closing out the year with a balance of $176,000.
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Soltis informed the council that golf course revenues have gone from $25,000 up to $40,000 this year. “The golf course was really crippled. They (city administration) really cut them off at the knees and that was really not a good idea.”
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He explained that right now the course is costing a lot of money but if the city hadn’t done closed the club house and removed carts, it would have been bringing in a lot more money. “It’s an asset. It’s a very nice golf course and I think we really need to think about our assets and do a better job of protecting those assets.”
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The lodgers tax will continue to provide assistance to the various organizations despite a current negative balance of $6,976. Those organizations include the Holbrook Chamber of Commerce with a projected amount of $40,000, the Navajo County Historical Society for $12,198 and the Navajo County Fairgrounds with $40,000.
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“It’s really tough and if 2021 didn’t look well (for the lodger’s tax) I’d be talking to you right now about cutting that. It’s very hard to continue to fund these organizations when we’re going in the hole and we’re taking money out of the bank. But I know that if we take those monies away it would be crippling to these organizations.”
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There is also $20,000 from the general fund that will be included in the budget for repairs to the historic courthouse roof.
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The utility funds will continue to see increases in revenues through fiscal year 2020 as the rate increases take full effect. The new rates are projected to eliminate the downward trend in revenues that each fund has been experiencing.
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Although a $5 water adjudication fee has been added to the utility bill, Soltis said this is not enough to cover the ever-increasing debt of the litigation involved in the water rights case. As a result, he recommended that fee be increased to $8.
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The big hit to the city is the percentage increase of contributions to the Public Safety Personnel Retirement System. “Tier 1 and 2 went from 99 percent to 156 percent. They came up with a new Tier 3 with the idea to create a lower rate, which they did at 9.4 percent but it’s now at 154 percent,” explained Soltis.
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“The way it has to be looked at is as a debt and our debt went from $5.5 million to $6.5 million in less than a year.” This is due in large part not to the current employees of the police department but those that have already retired.
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He explained that for the police department alone, with 11 employees, the city’s cost for retirement is at $870,752 while the total amount for the rest of the city’s 41 people is $200,448.
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The state legislature has tried to improve the system, which is the mandatory system for municipalities for law enforcement officers, but law suits followed any potential fixes and left the system unchanged.
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With payroll as the city’s most significant cost, the total wages will be nearly $2.5 million, a figure that Soltis said will go down through attrition with the work load dispersed through existing personnel. The current number of people currently employed by the city is 61 FTE (full time equivalent).
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On the utility fees, Soltis said that he is going to have to look at restructuring how the rates are implemented. “I was very conservative and I did not see the increases I’d like to see,” said Soltis. “The majority of our costs are fixed, so the majority of our fee must be fixed. If you have your rate increases over here on usage what happens? You think rates are going up so let’s use less water. But our costs keep going up. You have to have a rate structure where the bulk of the fee is a fixed cost,” concluded Solitis.
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The tentative budget will be presented for approval by the council on June 25, with the final approval to be made on July 23.
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