City eyes finance goal completion by 2020
During its second meeting of July, the city board adopted a list of goals for the city they hope to make progress toward or achieve between now and the end of 2020.
The list consists of six issues that are commonplace in most communities — economic development and growth, infrastructure, planning and code enforcement, finance, parks and recreation and communication. Each of these priorities is accompanied by a goal statement that is subsequently followed
by one or more objectives that specify gradual steps the city will take in order to foster growth in each of these areas.
To help residents better understand each goal and their objectives, in recent weeks the Herald-Leader has thus far provided a deeper look into the goals of infrastructure, economic growth and development and planning and code enforcement. Today, the focus shifts to that of finance.
Similarly to the aforementioned goals, City Administrator Phillip Patterson plays an essential role in the execution and oversight of the city’s finances. The board specified a single objective for the goal of finance, which is detailed below with further information.
• Create a fiscal plan that stipulates a specific amount that can be transferred from the enterprise fund to the general fund.
Like many cities, Siloam Springs has a general fund and an enterprise fund. The general fund allows the city
to ensure the continuation of governmental operations such as the police and fire departments, and its revenue largely comes from property and sales taxes. In contrast, the enterprise fund consists of revenue generated from consumers of city services, such as utilities or the airport.
Patterson said that the city has historically relied upon transfers from the enterprise fund to help bolster the general fund. Although the decision of how much will be transferred each year is made when the budget is adopted, there has never been a defined amount or percentage for such transfers.
This has resulted in the monies in general fund that come from enterprise transfers to fluctuate on a yearly basis. With some years being as low as 20 or 30 percent and others as high as 40 or 50 percent, this presents an issue for the city’s finances long-term.
“If you were the franchisee of a business, and you had to pay a franchise fee to corporate every year, but you never knew what that franchise fee was going to be, how well do you think you would operate that business?” Patterson said.
“The idea is to get a prescribed amount, whether (it be) a percentage or dollar amount.”
The reason the transfers — or what Patterson referred to as “administrative fees” — are necessary is because they help to cover costs that come along with running the city’s various departments. Meaning, that if the city’s electric department receives revenue from the payment of any electric bill, that money goes into the enterprise funds. But, other administrative expenses, such as having to pay an individual to do the electric department’s accounting, falls under the general fund.
Other reasons that the general fund requires these transfers are that property and sales taxes are not enough to cover all of the city’s day-to-day operations, such as those previously mentioned, in addition to the various administrative expenses. For those interested in how much the city earns from property and sales tax or what it is used for, Patterson said the city’s property tax is set at 5.5 mills — a standard measure used to assess how much one’s property tax will be based on the value of the property. Of that figure,
5 goes to the general fund and .5 goes to retirement funds for the fire department.
As for sales taxes, Patterson said that the city places a 2 percent tax on transactions. Of that 2 percent, .2 goes to the general fund, .2 goes to the police department, .2 goes to the fire department and .4 is dedicated to streets and roadways. Of the remaining 1 percent, 3/8ths goes to capital improvement and quality of life projects. While the intended use of the 5/8th that is leftover has expired, a citywide vote that took place in May determined that it will be reinstated on Oct. 1 for roughly $31 million worth of improvements needed at the water treatment plant.