Springville residents could see an increase in city services like sewer, water and power as the city’s budget proposal includes an across the board 2.5 percent rate increase for utilities.
The proposal, found in Springville’s tentative 2020 budget that will be voted on by the city council June 18, calls for a 2.5 percent rate increase to help cover the cost of inflation. That comes out to about $3.75 per month for the average homeowner, according to City Administrator Troy Fitzgerald, who presented to the city council at a meeting last week. That comes to about $45 per year for an annual average bill of $1,800.
In the early 2000s, Fitzgerald told the council the city had very little money in reserves, and the council directed staff to start building up reserves.
“We prefer to pay for capital projects with money in the bank rather than going into debt to fund it,” Fitzgerald said.
The need to have plenty of money in reserves comes down to a couple different reasons, Fitzgerald said. The first is for emergencies. A blown transformer can cost the city $1 million or more. The second reason is making sure the city is planning for the future. If the city has healthy reserves, it can pay for projects as it goes rather than bonding or going into debt to fund them.
Fitzgerald told the council that in 2009, before the city started focusing on making sure it had proper reserves in place, the city had about $6 million in reserves in the utility funds. By 2018, there were more than $20 million in unrestricted utility fund reserves — almost 100 percent of the annual utility revenues. Compared with surrounding cities, Fitzgerald said that’s not a significant amount of reserves.
While the city council could choose to use those funds to keep from raising utility rates, Fitzgerald said that failing to address inflation now would set the city up for a larger percentage utility increase down the road. For instance, the Utah Department of Transportation is estimating a 5.5 percent inflation on construction for the Fiscal Year 2020.
That much inflation on the $8.5 million the city has budgeted for capital projects would cost the city hundreds of thousands of dollars alone, even without factoring in any other contributing factors, Fitzgerald said.
“This inflation is real and painful,” Fitzgerald said. The city council will vote on the budget June 18.