Council to hear budget recommendations

May 23, 2022

Staff to present proposed FY 2022-23 budget, CIP projects

The Bartlesville City Council will hear proposed budget and Capital Improvement Projects recommendations for the upcoming fiscal year during a workshop meeting that will begin today at 7 p.m. at City Hall, 401 S. Johnstone Ave.

No official action will be taken during the meeting today, but the council is expected to consider formal adoption of the Operating and CIP budgets on June 6.

The City’s current fiscal year ends June 30, and Fiscal Year 2022-23 begins July 1.

In a report to the council in preparation of tonight’s meeting, City Manager Mike Bailey said the City’s sales tax performance during FY 2021-22 was “historic,” and that the City expects to finish the year about $1.8 million ahead of the previous year. However, several factors surrounding the year’s performance must be considered going into the new year, including:

  • How much of the growth was caused by inflation
  • Was the growth sustained by stimulus funds that have now been exhausted
  • Whether increasing labor costs and a shrinking labor pool provided more money for citizens to spend, resulting in higher sales tax
  • What effect the Federal Reserve increasing interest rates will have on the economy
  • Whether these factors combined will lead to a recession, and, if so, what effect would a recession have on sales tax revenue in the next fiscal year

“Given these unprecedented circumstances, we have taken an unusual approach to estimating sales tax revenues,” Bailey said. “Essentially, we have discarded the results from the last few fiscal years that we believe were so grossly skewed by COVID and economic stimulus. Instead, we have looked back to fiscal year 2019-20 and projected what normal growth of 3 percent would have looked like from that fiscal year. These projections were used to calculate our sales tax expectations for the fiscal year 2022-23 budget. The results were a decrease of over $1.1 million from fiscal year 2021-22 to fiscal year 2022-23.”

Utilities

The budget includes projections based on utility fee increases approved by the council in April that 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.

Water Rates

  • Water base rates will not increase
  • Water incremental rates will decrease by about 3.3 percent
  • Water capital investment fees will increase by about 42 percent

Wastewater Rates

  • Wastewater base rates will increase by about 8 percent
  • Wastewater incremental rates will increase by about 5.7 percent
  • Wastewater capital investment fees will increase by about 27.6 percent

Sanitation Rates

  • Sanitation cart rates will increase by about 5.8 percent
  • Sanitation commercial rates will increase by about 10 percent

Local economy

The same factors that influenced City sales tax estimates are impacting the rest of the local economy as well, Bailey said in the report.

“There is increased competition for labor, which is resulting in a higher cost of labor,” he said. “This is providing more income for our residents, but it has the potential to hamper business growth.”

However, he said, there are signs of growth in both the retail and primary jobs sectors.

“Our restaurant offerings have increased over the last year with the addition of a Schlotzsky’s, Tropical Smoothie Café, and Scooter’s Coffee,” he said. “Existing restaurants have also undergone substantial upgrades and expansions, including Luigi’s, Wendy’s, and plans for McAlister’s. Currently under construction is Bricktown Brewery, and there are plans to construct an H Tea O. This growth has fueled a facelift for some of our most prominent properties.”

Bailey said primary jobs have not grown quite as quickly, but there are several opportunities that are being evaluated by the Bartlesville Development Authority.

“The BDA president has stated recently that he has not seen this level of activity in many years,” Bailey said, noting that in addition to the economic growth, there is “tremendous expansion” of housing in Bartlesville, Bailey said. “DR Horton is constructing more than 70 new homes in the Park Place addition, with the possibility of more in the near future,” he said. “Brent Taylor is also installing the infrastructure for 116 lots in the Stone Branch addition.

“Overall, our economy appears to be performing well, but the same concerns related to sales tax could weigh on our local economy as well.”

American Rescue Plan Act

The City expected to receive federal stimulus funding totaling approximately $5.8 million over two years through the American Rescue Plan Act, with the second tranche expected by the end of the current fiscal year. The actual amount the City is expected to receive is about $6.3 million. The funds must be spent or committed by Dec. 31, 2024.

“During last year’s budget discussion, it was decided to dedicate about $1 million per year over the 3.5 year duration to support increased wages for our essential workers as defined by the act,” Bailey said. “After utilizing about $3.5 million for this purpose, we are left with approximately $2.9 million to allocate to various purposes.”

Bailey said the federal government has modified the rules on how ARPA funds can be spent, allowing cities to claim up to $10 million as revenue loss as a one-time election.

“This simplified the process and allowed almost all cities in Oklahoma to claim all of their funds under the revenue loss category. Bartlesville is one of these cities, and so we are allowed to spend these funds for nearly any legitimate purpose of a local government.”

Possible allocations to City priorities include additional funding for the Stabilization Reserve Fund, priority capital projects, funds for a strategic priority identified in the City’s strategic plan, funds for operation and maintenance of the First Christian Church building, and a mental health co-response pilot project between the City of Bartlesville and Grand Gateway.

City staff is expected to recommend a portion of the funds be used for operation and maintenance of the FCC facility pending a lease agreement between the City and the church foundation. The City is conducting a feasibility study to determine whether a conference center is needed in Bartlesville and whether the FCC building would be suitable for that purpose. Results from the study are expected mid-June.

“Depending on council priorities for the allocation of these funds, some of the priorities may require appropriation as part of our budget adoption on June 6,” Bailey said in the report to the council. “Other priorities, such as projects identified in the strategic plan, can be appropriated at a later date. This initial discussion will provide staff with guidance on what appropriations to include in the budget.”

Staffing additions, pay increases

Included in the proposed budget are recommendations for staffing additions and pay increases for existing City employees. The additional positions proposed are Assistant City Manager, Assistant Public Works Director, three half-time temporary positions in the Parks Department, and two additional police officers who will participate in a mental health co-response pilot project with Grand Lake Mental Health.

“One of the most important focuses for City management and the City Council is ensuring continuity of services for our citizens,” Bailey said. “This focus may take many forms, from ensuring contingency plans exist for cyber security and storm related disasters to ensuring the smoothest transitions possible for critical positions. The highest risks to our continuity of service are related to the city manager’s and public works director’s positions.”

The proposed budget also includes a 5 percent cost of living adjustment for all City employees and 2.5 percent merit increases for employees who have not yet reached their top level of pay.

“As we entered this budget, our highest priority was to ensure that the wages for our employees stayed competitive in this market of increasing labor competition,” Bailey said. “This was further complicated by the fact that inflation has spiked to levels above 8 percent over the last few months. These increases are expected to cost about $1.26 million in the General Fund and $304,000 across the rest of the organization.”

Also, decreased costs in the City’s previous retirement plan, effective for employees who were enrolled prior to FY 2009-10 have resulted in a $245,974 cost savings for the City. The plan is now 81 percent funded, but recommended contributions included in the budget will increase the funding to 89 percent.

Reserve Fund

The City’s stabilization reserve policy calls for a contribution equal to 2 percent of the Operating Budget of the General Fund, Wastewater, Water and Sanitation funds until the maximum level is reached. The maximum level is defined as 35 percent of the operating budget of the fund, while the minimum level, set by municipal ordinance, is 16 percent of the operating budget of the fund. The upcoming fiscal year budget for the fund is a total of $955,857 across all four funds, bringing the total Reserve Fund to $11.6 million, or 19.6 percent of the budget.

“With this year’s allocation, all funds have now reached the minimum level but are years from the maximum level,” Bailey said.

CIP projects

Director of Engineering Micah Siemers will present the proposed Capital Projects Budget, which includes expenditures funded through the City’s Half-cent Capital Improvement Projects (CIP) Sales Tax and General Obligation Bonds, both of which are approved by voters.

The upcoming budget includes approximately $9.5 million in G.O. Bond funding and about $3.1 million in Half-cent CIP Sales Tax funds for capital projects

Capital projects budgeted to receive funding in FY 2022-23 include:

  • Police cameras, vehicles and other equipment
  • Preventative street maintenance
  • Pathfinder maintenance and repairs
  • Shade structure replacement at Sooner and Frontier pools
  • Jo Allyn Lowe turf
  • Oak Park basketball court
  • Mowers and other equipment
  • Sewer line point repairs
  • Transfer pumps and motors, water line and other equipment at the Water Treatment Plant
  • City Hall upgrades and repairs
  • Numerous street resurfacing/repairs
  • Sooner Park restroom remodel