MILLCREEK. The City Council believes that your property tax dollars are better spent on police services than on paying interest on a loan. To do that, we must break a borrowing cycle that has been in place long before our city incorporated.
For years, Millcreek citizens paid for police services by paying property taxes to the Salt Lake Valley Law Enforcement Service Area (SLVLESA). In theory, the taxes collected in December of each year would be used to pay the Unified Police Department (UPD) for services throughout the ensuing year.
The reality was different. Instead of using collected taxes to pay for future services, SLVLESA was always a nearly a year behind. SLVLESA had to borrow money each year to pay UPD’s monthly invoices. The taxes collected in December were used to pay off the loan, and then SLVLESA had to borrow again to pay for most of the new year’s police services.
Millcreek inherited this borrowing cycle upon leaving SLVLESA at the end of 2017. Thus, to pay for 2018 police services, Millcreek had to borrow the funds. In December 2018, Millcreek will owe its lender approximately $10 million plus interest. The loan will be paid from the 2018 property taxes, and Millcreek will have to again borrow to pay for 2019 police services.
But what if the property taxes collected were sufficient to not only pay off the current year’s loan, but also to pay for 13 instead of just 12 months of police services?
Each year, we would have to borrow less and less, until eventually, the City would no longer have to borrow to pay for police services.
We are currently in the process of preparing budgets for the fiscal year July 2018 to June 2019. This is one of the many strategies the City Council is considering to save Millcreek citizens money. We are interested in knowing what you think.
The article was originally published on 3/23/18 in our weekly newsletter, with a link to email comments back. Below are comments we’ve received in response. You can leave your own comment in the link at the bottom of the page.
It sounds good, IF after 12 years our property taxes would then be reduced back to the 12 month amount. If not, then this just becomes a plot to increase taxes, which is unacceptable.
agree with idea.
Sounds like a great idea!
Raise taxes or do a one-time assessment, either way get rid of the debt
Seems financially prudent to me. What interest rate is being paid?
Thanks for good idea about borrowing. Think it is great as long as by statute and/or hard to change method there is a corresponding reduction in property tax once the reserve is met. Think there will be lots of concern that once the new threshold of discomfort of property taxes is reached that it won’t go down and could be allocated away to other uses. Thanks for looking our for our long term.
Thanks for informing us property tax payers how taxes are being spent on interest payments. I for one had not heard of that interest expense on the law enforcement bill. It would seem prudent to get the billing switched around so it’s paid on time with no need to borrow and end up paying interest. Thank you for proposing to end the borrowing cycle. I support that effort.
My biggest concern with incorporation was that property taxes would be raised. Sounds like I was right…
Well, taxes will have to be increased to meet your proposal to pay the UFD annually. We suggest you leave it as it is.
I am for it, paying down the loan by paying for 13 months per year makes sense.
I like the concept of this. If it is as straight forward as presented it sounds good to me. At least in concept. I’d like to see the actual numbers involved.
I think the 13 rather than 12 is an excellent idea. I would recommend that plan be instituted this coming year if it is feasible. I agree, interest on a loan is like the old adage, pounding sand down a rat hole., not good.
All departments within Millcreek would be wise to adopt this fiscally responsible position.
Thanks for soliciting input.
I think this is a very good way to get out or the Tax Anticipation Note debt cycle. The County got in the trap when it shifted from the user fee to property tax, and as you aptly noted, never tried to get out. Such everlasting use of TANs is frowned upon by ratings agencies and makes getting high bond ratings hard to achieve. Given that interest rates are bound to go up, the City should move on this, perhaps even faster than 12 years….
In theory the idea is a good one; one I could support. But, I wonder why you’re not expressing the other side of the coin: the cost. I would expect that there is a cost and the cost is increased taxes. Of course, the advantage to the city is that the cost of the funds is likely significant (the difference between borrowing rate and the tax rate), but the total cost to the typical homeowner is a factor that must be considered. Also, once the city is in a positive cash situation what becomes of the extra funds?
I appreciate innovative ideas, but this one needs more analysis and a transparent explanation of the resulting effects.
How did the police fund get into this one year deficit for funding? What did the funds go to when this deficit was created? Have budget planners looked at at reducing police expenses to recover the deficit versus increasing taxes? Or a combination of reducing expenses and increasing taxes?
Obviously Millcreek is still suffering from the stupidity of our previous government. Yes, we need to get rid of the loan cycle. I’m game for everything from bake sales to a donation bowl at the summer movies to a one-time tax. We’ve got to get out from under the elephant.
Get us out of debt.
How much would this increase the taxes? How many years would it take to begin paying for current year? It is always better to pay for services as they are used than to borrow and pay back a loan. That is just good common sense but common sense may come with an additional cost. Just curious.
I agree with the idea to borrow less in the future and eventually no longer having to borrow to pay for police services.
I think this is a good idea. What would the cost be on our property tax?
A couple months ago an article said the city was saving so much money by directly contracting with Unified Police that we could spend the savings on hiring more police officers for the city. With this proposal to increase our payments to Unified Police to eliminate the debt, will the money to accomplish the debt reduction come from the savings we realized by direct contracting instead of more officers? If not, where is the money to reduce the debt coming from? It seems either some budget needs to be reduced or taxes need to increase to cover the additional payments.
Also, I went to one of the recent planning overview meetings. Again I appreciate the openness and interest in public input. One thing I did notice is that some citizens have already developed a strong personal feeling for certain ideas. It seems that viewing all these alternatives without the benefit of some cost estimate is going to lead to unrealistic expectations from residents. In establishing priorities for the community, I hope the city can tell us how much money per year we can afford to spend on making progress toward all these goals. The public acceptance of our financial limitations may help ensure our goals for improvement are realistic.
The larger point, however, is that borrowing a large share of your budget in January and paying it off in December leaves the agency very little in the way of reserves if something arises during the fiscal year (doesn’t it always?) and they must use the bulk of their December tax receipts to pay off the TANs by December 31. If large expenditures come up during the year there just isn’t much to fall back on.
So as a cash management tool, TANs are not a bad way to go but it reflects the fact that there really isn’t much in the way of reserves for the agency when they do this.
The agency should build up its reserves so it is less reliant on TAN borrowing and has resources at hand to deal with unforeseen emergencies.
I just finished reading the city newsletter in my email. I think breaking the borrowing cycle of the police department is smart. Starting with our property taxes is a good way to begin. If we pay off a month of debt each year this will (theortically) take 12 years. Are there multiple strategies we could employ to pay it off quicker? Otherwise this seems a reasonable approach. Thanks for all you do.
I just wish we could enjoy the first year of being Millcreek City without immediately facing more property tax increases. It kind of puts a pall on becoming a new city.
Support breaking police services borrowing.
The business of borrowing money carries with it the constant threat of inflation and incurred interest rates fluctuating, too often, adversely against normal cost of living increases. Millcreek needs stability in its mandated protection of the interests of its constituency. The three principle elements of effective enforcement are administration, coverage and communication.
Having spent fifty years dealing with various levels of law enforcement, local, county, state and federal, I’ve seen costs rise due to either exaggerated administrative oversight in lieu of practicing patrol and investigative personnel. Or to the obverse, the lack of qualified administrators has led to laxity in oversight and insufficiency in case follow up and desired procedural improvements.
To many persons, appropriate and sufficient coverage is more often than not a matter of response to complaints or emergency calls. It calls for placement and distribution of resources. It becomes a case of putting our money where the manpower (no diffidence intended toward the female members) is needed as conditions and situations change.
Communication is a two way street. Between patrol units and citizen communicants. Between the various elements of the department itself as well as an understanding of the individual and coupled roles of the city’s administration and its assigned law enforcement supervision.
I do not feel we can continue to base future budgetary potential on an organization which has shown its inability to provide measured and realistic control of its services throughout the areas for which responsible. In my study of thirteen contiguous communities, it seems apparent that where budgets have been exacerbated beyond fiscal conscience, it was those few who insisted on inflated costs at the upper levels of police supervision. However, I am a strong believer that one gets what they pay for so I am recommending a police operation that meets the community’s needs with a firm hold on ancillary costs that too often overshadow the need for on-the-ground personnel.
Were Millcreek to determine its best interest to create their own law enforcement structure, it might also be an opportunity to provide subsidiary services to smaller contiguous urban areas such as parade services, special event security for those activities facing a shortage of available resources within their own community, etc. Just a suggestion.
Simply put, SLVSLA is an ever increasing money pit. Something our community does not need as we work to gain as stable a fiscal and operating position as possible. If a specific study (please, not very expensive consultants from large urban sites who do not recognize the primary needs of locations such as ours) with a detailed protocol and applied range of research were to decide Millcreek should develop its own policing system, I would support that. If not, then a renegotiated relationship with the actual concept and purpose of SLVSLA.
Having myself been a consultant in my particular industry career, I am reminded of the old axiom; “A consultant is some guy who claims to know all the ways of making love, but doesn’t know any women.”
Is this a plan for double-dipping into our property taxes/pocket books? Need more explanation. I will vote NO if you don’t clarify your intentions… Sounds shady to me.
Stop pleading poverty…you get enough money!
Does that mean the city is going to raise taxes in order to accomplish this?
Was this situation known and discussed at the time of incorporation? Was this remedy mentioned at that time? If not, what other strategies were originally discussed?
Great idea. Thanks
I like this idea and would support it.
I don’t like to borrow money. I would vote to raise taxes to pay for Police or any another debts
I’m happy to see significant change from our folks not managing Millcreek. I think the long term plan sounds like a reasonable way to get rid of the unwanted cycle. So, it sounds like the costs will be spread over 13 years, with the 14th year being the point at which borrowing to pay the last annual payments will stop?
I’m very please seeing how Millcreek elected officials are approaching ideas to improve the use tax payer dollars, which is clearly an improvement over how fiscal issues were previously managed through Salt Lake City. It sounds like the residents who will need convincing of this proposed idea will be those not planning to be here long-term as they will incur a tax increase, but not be here long enough to see the benefits of breaking the cycle. I am happy to support this initiative and send thanks to those who continue to thing outside the bureaucratic box.
I went to the City Council meeting when the idea to stay with UPD was first purposed. My initial thought was to start our own Police Force for Millcreek and manage our own expenses instead of “renting” from UPD. I know you are on the board for UPD so you inherently know the benefits of the establishment.
Thank you for asking for community input. Regarding the notion outlined in the March 23rd Millcreek newsletter of collecting property taxes “sufficient to not only pay off the current year’s loan, but also to pay for 13 instead of just 12 months of police services” with the idea that that would enable the city to eventually catch-up and retire the loan. I am going by the information provided in the current newsletter. It sounds like that’s proposing an increase in taxes to enable the city to make the extra month’s payment. While it seems most people are against tax increases regardless of the logic behind them, I’m not one of those. Taxes are not bad by definition. I view taxes as the means by which we pay for municipal services that community citizens benefit from. If we are wasting money on debt service then by all means I agree it’s important to retire that debt as soon as possible, and then put in place a strategy to avoid getting into a situation requiring securing debt to pay for services. If my understanding of the logic behind such an increase is correct, then yes I support the strategy.