NICK GOSNELL
Hutch Post
HUTCHINSON, Kan. — The Hutchinson City Council on Tuesday approved notification of the Reno County Clerk that the city will exceed the Revenue Neutral Rate in its 2025 budget.
"The city is proposing to keep the current mill levy flat," said Hutchinson City Manager Enrico Villegas. "With that, if we exceed one dollar more from the previous year's budget, we are exceeding the revenue neutral rate that was set from last year. By proposing to keep it flat, we are then, would be assuming any of the increased assessed valuation from this year."
There are many financial reasons that the city believes it needs increased revenues in the coming year.
"A lot of what we purchase, say equipment or materials for street maintenance, our fire suppression equipment like fire trucks, and all of those things are very expensive, and so to pay for all of that, we need additional money coming in. Now there are other ways that we could do that through bonding capacity. We could take on some debt in order to do that, which we do. It is healthy for a government to do that, but we are also wanting to focus on building back our fund balance or another way to think of that is a savings account. It's important for us to have a savings account because as we look at taking on debt in this form of bonds or temporary notes or something, our bond rating or the city's credit score is impacted by how much money we have in our savings account. When that's evaluated, the investors are looking at, do you have the ability to pay back the debt? In this case we have very little money in our fund balance. At one point we were negative $3.8 million. Now through a series of cuts and moving things around and unfortunately having to freeze some full-time positions, we were able to get us back to the good. We still have a lot to build back, but we're looking pretty good and it'll be manageable. It's not ideal, but it's manageable."
How much do those agencies want in the city's ending balance?
"With this particularly, it's good policy to have at least two months of reserves. And so for us that would be about $7 million. So they would expect to see at least $7 million in the savings bank or in our savings account. By financially positioning us the way we have, we could end up with around $750,000, which is a 10th of what it should be. And so that is one key thing that they'll look at because investors want to know, are you able to pay us back?"
That's leaving aside the obvious increases in expenses that have happened across the economy and government generally.
"I think that give two to three years, we'll be in pretty good shape," Villegas said. "We have a really good team that, and really good council, I think we'll be fine. I don't want to spend too much time on just the fund balance piece, because that's just one part of the equation. But really just for any ongoing projects or anything that we want to pursue with inflation, rising costs and materials and labor, it's just incrementally more expensive to, our dollar doesn't go as far as it did last year or the year before. And so while fund balance is an important thing to look at and consider, just everything in general has gone up, and so budgeting for projects or large pieces of equipment is very challenging. The cost for asphalt has gone up, you know, anywhere from about five to 10%, and so our ability to get streets done is just more expensive, and so that's one salient example that I think anyone in the community can feel is what are the condition of our roads? To go back to the fund balance a little bit, and how that impacts our bonding capacity, some of the things that we do with bonds is that we go out and buy large pieces of equipment like a fire truck. To pay for a fire truck with cash, those are very expensive, and we don't have just a bunch of money sitting around that we can do that. By taking out bond money and buying those large purchases really helps the city move forward."
The notification was passed by the city council unanimously. The Revenue Neutral Rate hearing was set for Sept. 3.
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