The Bartlesville City Council heard City staff proposals for the 2023-24 Fiscal Year operating and capital budgets as well as proposed projects for the upcoming General Obligation Bond Election during a workshop meeting held May 15.
No votes were taken on the items, as workshop meetings are scheduled to allow council members to discuss in-depth and/or more complicated issues facing the City. Workshop meetings are held every year prior to a public hearing and final adoption of the budgets in June. The budgets go into effect on July 1, when the new fiscal year begins.
The proposed FY 2023-24 budget is based on a projected 2 percent decline in sales tax, which is the City’s primary funding source. City Manager Mike Bailey told the council in a letter issued last week that staff is projecting a decline in revenue due to uncertainties in the economy, including inflation and a possible recession.
Sales tax
“Over the last 10 years, the City’s most important revenue source, sales tax, has undergone many ups and downs, which has resulted in service contractions and expansions to the citizens of Bartlesville,” Bailey said. “All City services were affected, and most departments suffered staffing decreases, including streets, parks, fire, police, and many other departments.
“As we enter Fiscal Year 2023-24, our main revenue concern, as it is in most other years, is sales tax. The performance of sales tax in FY 2022-23 was historic, and we expect to finish the year about $620,000 ahead of the previous fiscal year, which also produced record sales tax collections.”
However, Bailey said, despite the growth in sales tax over the last few years, there are several issues that could impact the near future, including inflation, increasing labor costs, interest rates, and a potential recession.
“As with previous years, we have taken a conservative approach to estimating sales tax results, and due to these uncertainties, we are budgeting for a 2 percent overall decline in sales tax from FY 2022-23 to FY 2023-24,” he said. “This provides a $460,000 decrease in sales tax across the entire organization.”
Sales tax is expected to generate approximately $22.6 million during the next fiscal year. Sales tax revenue funds most City services and departments except utilities.
Use tax
The City’s use tax, approved by the City Council last year, went into effect Jan. 1 and has yielded $1.15 million since that time. But it’s difficult to project how much revenue the tax will generate over the upcoming year with just three returns in so far, Bailey said.
“Use tax is a companion tax to sales tax that was intended to close any loopholes in the sales tax law,” he said. “In its simplest terms, use tax applies to anything that would have normally been subject to sales tax that didn’t get charged sales tax. These transactions range from business assets purchased out of state to the more common online purchases.
“We have received a few months of use tax at this point and are attempting to estimate the FY 2023-24 use tax amounts based on this brief history. It has been impossible to accurately estimate the impact of use tax prior to its implementation. As such, we only budgeted $400,000 in our current year, and we nearly exceeded this estimate in our first month. Based on these results, we are estimating $2.5 million in FY 2023-24.”
Utilities
The budget includes projections based on utility fee increases approved by the council in 2022, the third phase of which will go into effect on July 1.
A comprehensive water and wastewater rate study was conducted in fiscal year 2020-21, which included recommendations for new rates sufficient to support the operations of the system and capital fees to support mandatory improvements to the system.
The new rates were effective for customers within and outside the city limits and were phased in over a five-year period. The City Council adopted the first year of the five-year rate structure effective on July 1, 2022, and later adopted a slightly modified version of the rate structure for years two through five of the plan. The rates total a 5.5 percent increase for City utility customers.
Water Rates
- Water base rates will not increase
- Water incremental rates will not increase
- Water capital investment fees will increase by about 18.5 percent
Wastewater Rates
- Wastewater base rates will increase by about 11.6 percent
- Wastewater incremental rates will increase by about 5.4 percent
- Wastewater capital investment fees will increase by about 6.2 percent
Sanitation Rates
- Sanitation cart rates will increase by about 5.5 percent
- Sanitation commercial rates will increase by about 10 percent
Local economy
Bailey said that despite higher labor costs potentially hampering business growth in the community, there are several signs of growth both in the retail and primary jobs sectors.
“Our restaurant offerings have increased over the last few years with the addition of a Schlotzsky’s, Tropical Smoothie Café, Scooter’s Coffee, HTeaO, and Bricktown Brewery,” he said. “Existing restaurants have also undergone substantial upgrades and expansions, including Luigi’s, Wendy’s, and McAlister’s. Currently in development are a Whataburger and Jimmy’s Egg. This growth has fueled a facelift for some of our most prominent properties, and discussions about additional retail offerings in the next year are again positive.”
Primary jobs have not grown quite as quickly, he said, but “there are several opportunities that are being evaluated” by the Bartlesville Development Authority.
“Additionally, the City of Bartlesville is working with the BDA and Bartlesville Redevelopment Authority to incentivize a state-of-the-art sound stage at the historic First Christian Church building. Bartlesville has played host to numerous Hollywood productions over the years, and the addition of this new sound stage would attempt to capitalize on our reputation and generous tax credits available through the State of Oklahoma and the Cherokee Nation.
“In addition to this economic growth, there has been our highest level of expansion of housing in Bartlesville in decades. DR Horton has constructed more than 70 new homes in the Park Place addition and has moved on to the Bison Trails subdivision. Brent Taylor has completed the infrastructure for 116 lots in the Stone Branch addition and construction of new homes has begun. Most recently, the City Council approved a PUD (Planned Unit Development) for the Oakwood Addition of Oak Park. This development should provide nearly 100 new homes.
“Overall, our economy appears to be performing well, but the same concerns addressed related to sales tax could weigh on our local economy as well.”
Stabilization Reserve Fund
During the recent economic downturn, it became evident that a more effective and consistent method of accumulating reserve funds was needed. With the guidance of the City Council, staff established several mechanisms that will aid in the City’s future financial stability. These were the creation of the Stabilization Reserve Fund, Capital Reserve Fund, Auto Collision Insurance Fund, and the formalization of inner-fund reserve policies.
The City’s stabilization reserve policy calls for a contribution equal to 2 percent of the operating budget of these four funds until the maximum level is reached. The maximum level is defined as 35 percent of the operating budget of the fund. The minimum level set by the ordinance is 16 percent of the operating budget of the fund. As you can see from the results above, all funds have now reached the minimum level but are years from the maximum level.
Other items proposed
- $1.2 million for the Stabilization Reserve Fund, which currently stands at $13.2 million.
- The addition of two police officer positions to patrol City parks. The positions are needed due to a growing homeless population in Bartlesville, which has resulted in increased vandalization of public facilities and a fear of crime along Pathfinder Parkway.
- The addition of a communication and marketing specialist, who will assist with content creation, management of the City’s social media platforms, media requests and interviews, and goals of Bartlesville NEXT, the City’s strategic plan.
- Employee compensation increases of a 6 percent cost of living adjustment and 2.5 merit increases for all eligible employees. Similar increases are expected for union employees, police officers and firefighters, for whom negotiations are still ongoing.
- Incentive funding for high-performing employees, who will be eligible for incentives ranging from $250 to $1,000.
Total resources and revenue in the General Fund are expected to exceed $36.5 million, with expenditures totaling $34.4 million.
Capital Projects, GO Bond
City staff also presented proposed funding for projects previously approved as part of the 5-year Capital Plan as well as projects proposed for an upcoming General Obligation Bond Election, tentatively planned for Oct. 10.
Staff is proposing asking voters to approve $12.5 million for streets, $388,050 for equipment, $2.3 million for buildings and facilities, and $2 million for parks and recreation. Projects proposed for council consideration in June include:
- New fire station at Hensley Boulevard and Virginia Avenue
- Improvements to Pathfinder Parkway
- Security lighting in City-owned parks
- Wayfinding signs
- Douglass Park playground shade structure
The total cost proposed for the bond issue is $17.6 million for a period of four years. The council is expected to consider a final list of projects and officially call for the election during an upcoming meeting. Voters will decide the outcome in the Oct. 10 election.