News

CITY COUNCIL WANTS TO BREAK POLICE SERVICES BORROWING CYCLE

 

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.

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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.

     I think it is a great idea and demonstrates fiscal responsibility regarding our tax dollars.  Thank you.
     I like that you’re working to improve this. How much in interest are we paying annually for this? Great idea to get rid of the loan. Interest rates are likely going up.
     Sounds like a good idea and really, the cycle of borrowing is unsustainable. Citizens should not expect a quick fix with the new plan, however. Costs rise all the time so even if it looks like taxes collection in year one will build in a reserve of a month for year two, it might not work out quite that way. Doesn’t mean it isn’t a good—even a great—idea, just that it may take longer to break free of the cycle than we hope. Go for it anyway!
     Breaking the cycle of debt is a worthy endeavor provided taxes are not raised to do it. If there are not funds available to accomplish this goal, other areas of expenditure should be curtailed until we are caught up on our bills.
All departments within Millcreek would be wise to adopt this fiscally responsible position.
Thanks for soliciting input.
     We say go for it. Increase property taxes enough to cover the 13th month and get us out of this cycle. Otherwise, we’re paying more in the long run.
     I fully support any efforts to reduce the borrowing cycle.
     My father used to say “those that understand interest receive it and those that don’t pay it.” As someone who is coming up on 10 years living in Millcreek I believe we must take the long view on making the city better. Paying money to finance services is never a good idea (unless there is a natural disaster). I believe you are offering a balanced approach to remove this burden from our budget. Let’s get this idea into practice.

     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.

     Thank you for all the open communication in this newsletter.
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 interest expense and transaction costs for a tax anticipation note borrowing are really quite low and are partially offset by interest earnings on higher balances in the borrowing agency’s bank account.
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.
     Thank you for your great service to Millcreek City. I love the things you are doing!!!
     I read this twice and am still unclear as to what you are asking? How do the taxes become” more than enough” to pay for 13 months instead of 12? At you taking about increasing property taxes in Millcreek? Please clarify. Thank you so much.
     How much will this cost property owners?   Nice to not be paying interest.

     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.

     It’s a good idea only if you can do this without raising my property tax.  It’s already one the highest in the valley
     I did think the original way this was set was the best route to take but I also didn’t feel that I had a voice in the process either.  I’ve never thought changing the police fee to a tax was the right thing to do but I understand that we weren’t within statutory laws.
     Thanks for asking! I’m sure there is a good solution if we all work together .
      I agree with this approach as long the extra funds are being monitored careful and remained in place for the intended use.
     You theory sounds good.   We would encourage the idea if it will save us money as long as all factors are considered.

     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.

     Our town needs more police attention whether on roads or in an accident. The independence is important to me and I do not feel we have to pay for all the large expensive resources that Salt Lake City may use more.
     As starting our own force may not be an option, I do approve of the budget to get out of borrowing asap.
      It is fiscally irresponsible that SLVLESA started this practice and we appreciate your efforts in trying to correct it.  Thank you for your diligence in helping to make Millcreek City current on its spending.

     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.

 

19 thoughts on “CITY COUNCIL WANTS TO BREAK POLICE SERVICES BORROWING CYCLE”

  1. In response to one comment above, while Millcreek residents could have known about this borrowing situation prior to incorporation (it certainly was not hidden), Millcreek did not have its own representation on the SLVLESA Board prior to incorporation. Our county representatives on that board did not make the situation widely known. We learned more about it when Millcreek received its own seat on the SLVLESA Board after incorporation. (We also learned that Millcreek was paying more than $1 million more for UPD “pooled services” than Taylorsville, a city almost identical to Millcreek in population and call volume. We have since rectified this by insisting that Millcreek receive six additional officers in our city).

  2. To explain how this borrowing cycle started, many of us remember when the Salt Lake Valley Law Enforcement Service Area (SLVLESA) was created as the vehicle to pay for our policing from Unified Police. Initially, a “Police Fee” was collected, instead of a property tax. This option was chosen because of the timing of when the UPD was created and the process and timing required to levy a property tax. The Police Fee was extremely unpopular, so SLVLESA moved to levy a property tax. Due to the statutory process and timing required to do that, SLVLESA was required to borrow money to pay UPD for police services through tax revenue anticipation notes to pay for services until collection of the property tax revenue could occur. This started the cycle of borrowing against anticipated revenues, which SLVLESA still uses and which Millcreek inherited when we decided to leave the SLVLESA taxing district and to levy our own Millcreek property tax to pay for the UPD’s services. The Millcreek property tax levy that replaces SLVLESA’s will begin in 2018.

  3. I’m not opposed to “retiring” the debt, but would like to better understand the current & proposed mechanics of the process. That said, given the newness of our city I think that we’d benefit from having a full year of revenue & expenses to use in realistic budgeting. To date, by necessity the budgeting has been done through estimates only and the city administrators haven’t been shy about hiring staff they feel necessary. Waiting another year will cost additional interest, but better that than being substantially wrong in our projections/budgets and requiring cuts in spending or tax increases.

  4. I am in favor of adding the 13th month payment. We need to break the cycle of paying interest every year. Spending a little more now will save all of us much more during future years.

  5. While not implying this is true for our current city officials, the police fee was about $85 when converted to a tax. My current “contribution” last year was $445 or 500% higher and the same for fire. My house is the same as when the fee was imposed but I don’t really feel 500% safer. I would like to see an independent audit of the police and fire budgets, spending and benefits. Are we getting a good deal? I also remember when the water fees were increased during a drought year with the promise they would return when the supplies were back to normal – it never happened. Gasoline taxes were raised during the energy crisis – when over they didn’t go down. Are there any more surprises (waste disposal, franchise taxes, fees?) Having said this I would vote for a flat rate per home rather than a percentage of property values as a means to get ahead of the game. Thanks for all the work the mayor and council give and their interest in getting a good solution..

  6. Public safety is more important than traffic calming and even street lights, the cost of which is going down(also there are concerns about too white and not auto pwr down. The cost would go down if SLCO would adequately fund public safety. The Mayor should ask the Council for a public discussion now on how to put criminals in prison who have long rap sheets and how to fix the revolving door jail. Car thieves are kept in jail, sometimes, for just a couple of days. Then decide on fix after County decides on what to do.

  7. I think that the proposed idea of 13 months instead of 12 sounds like a feasible way of resolving the dilemma overtime without introducing a major shock to the system. However, please don’t raise our taxes any further. We already pay out the nose in taxes and don’t need another incremental increase.

  8. Recently, it was proposed that Millcreek use funding differences between the UPD costs and the former taxing district to add 6 additional officers in Millcreek.

    I would suggest that those funds be split and half used for three new officers instead of six, and the remaining funds be used to start decreasing the net amount borrowed each year. Over several years, we will get back ahead of the borrowing. We will add officers and avoid any tax increase.

    Another alternative that would speed up the elimination of borrowing would be to keep the original contingent of officers and use the funding difference to reduce the debt required. Let’s not talk tax increases this soon onto our new city’s existence

  9. How about we borrow one more time and begin our own police department so we the citizens can hold the department and then money spent for it accountable? We Pat all of that money for SLCO when the resources are mostly used in Kearns and those citizens don’t pay for it.

  10. The problem with raising taxes for a short period is that “government” has a bad record of turning off the taxes. For example, we still pay both a flood and drought sales tax increase that has never been stopped. It is better to reduce spending over the next 10 years to fix the problem. Remember that one of the reasons that we decided to create a new city was to have better control over our taxes and get a bigger bang for our bu

  11. So I am a little confused!!! You knew this was the case when we became a city you knew you would prob need to raise taxes for this however it seems a little dishonest to bring this up as a surprise type situation when all along you could of said we do not intend on raising taxes however.. and gave us this info is front!!!! The other issue I have is I have personally been told by an officer that mist days there is only 1-3 officers on duty for the entire city in fact he said “I have told my wife that if anything happens to me on duty to sue because I have no back up”. So what exactly have we been paying for!!!!!!!! There has also been a major increase in concern for safety in the area!

  12. Just as I have to adjust my “want to/need to” decisions, Millcreek needs to take another look at some of the decorating and other beautification expenditures before hitting us with this. We have done without fancy streetlights and planted medians for this long, we need to pay the loan off first, just as any smart budgeter would do. Older people on Social Security cannot keep up with expenses of “citifying” plus paying off this loan, my vote is for paying off the loan within budget. A lot of us saw this coming – don’t prove us right!

    1. I agree. Cut costs. How about an 11-month plan? Take the budget for the last 12-month cycle, divide it by 12 then multiply by 11 and that is the budget for the coming fiscal year. The amount of the 12th month is paid to lower the debt.

  13. As a senior on a fixed income, it is hard to be in favor of a tax increase. However, if we keep on this cycle, taxes will inevitably increase anyway. I am in favor of breaking this cycle and paying a bit more for now, especially as it will result in improved services over the long run and free up funds for other priorities instead of paying interest.

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