Sioux Falls

Financial Review of the City of Sioux Falls in 2020

l3wis April 11, 2021 10Comments

EDITOR’s NOTE: This is a guest post by Mike Zitterich. I found a lot of the information helpful. He does opine towards the end of the post, feel free to comment.

My thoughts based on studying the 2020 C.A.F.R – The City of Sioux Falls did fairly well considering the rest of the Country, Sales Tax was not as bad as first thought, and the population grew to 195,000 residents. While the sales tax remained constant from 2019, we did not seem to lose $1 compared to the year before, we simply lost our “gains” of $3,500,000 a year we have been accustomed to. Here is a list of Excise Taxes, Duties, and Imposts that I have noted within our 2020 CAFR along with our Net Position (State of the City), along with fun statistics regarding Water/Water Reclamation and Public Parking the two most hotly contested topics of the “people” …  

Direct Property Taxes:
Sales Tax (First Penny) – $67,135,048Sales Tax (Second Penny) – $67,135,016Property Tax – $70,288,580Sales Tax (Third Penny):

1. Entertainment Tax – $7,170,446
2. Lodging Tax – $681,346
3. Hotel BID Tax – $1,492,011
4. Frontage Tax – $15,362,566
5. Other Taxes – $127,780

Duties (User Fees):

1. Electric/Light Fees – $10,257,468
2. Public Parking Fees – $2,585,491
3. Landfill Fees – $10,402,978
4. Water & Water Reclamation Fees – $74,847,388

Imposition Fees:

1. License & Permits – $6,675,773

State Motor Vehicle Funds:

1. SDCL 32-11-4.1 (b) – $13,475,000 (state bridge and road fund)
2. SDCL 32-11-4.1 (c) – $10,208,000 (contributions from counties)

**The City Council should discuss ‘auditing’ these Motor Vehicle Funds Collected Each Year to determine proper collections, use of funds, manage the funds, appropriate the funds, etc. We get these funds from two sources within the law itself – Minnehaha and Lincoln Counties transfer payments quarterly (sub-section c), while the State Dept of Revenue deposits 0.335% annually into the City Treasury (subsection b). By choosing to audit these funds, we can assure that they are being properly appropriated and used. 

Total Cash In Bank Accounts – $300,345,555Net Position of City of Sioux Falls:  $1,949,969,607 or $9,999.84 Per Resident

Total Cash in Enterprise Funds (Net Position of Fund):

• Electric/Light Fund – $9,218,960  ($29,232,123)
• Public Parking Fund – $3,251,888 ($13,882,250)
• Landfill Fund – $14,373,200  ($32,789,126)
• Water & Water Reclamation Fund – $66,146,302  ($515,824,329)

NET POSITION = defined as the total net worth of the CITY OF SIOUX FALLS after Expenses, Liabilities, Debts, Future Employee Obligations are paid for…
Water & Water Reclamation Statistics:

• Average Water/Sewer Payment of City Resident:  $1,288.27 Per 12 Months or $107.36 For 1 Month

Public Parking Statistics:

• Public Parking Spaces – 3,973  > 67% Spaces Used or 2,661 – $971.62 Annual Space Revenue or $0.47 Per Hour

*Note:  IF we would had 95% Spaces Used it would have generated $3,721,390.44 Annually; the City 10 Year Average Spaces Used is 86% of total parking spaces; so if we use the ten year average, we can expect to generate a projected $3,369,367 in revenues for Public Parking with annual expenses of $2,638,179 + $1,200,000 Debt Payment for a negative 468,812 deficit. Our goal should be to maintain 95% Spaces Used to maintain sufficient revenues, and keep from having to use as much of the 2nd Penny Sales Tax as possible. As per the 2021 City Budget, we are projecting revenues to be $3,320,213 about on par with the 86% User Rate. 

Tuesday, 13, 2021 during the Informational Meeting, the City Council will get updated by the Finance Department of the Results of the 2020 Fiscal Season, I’d say, our finances are much better than realized, and the State of the City is in very good hands. 

My only question for the City Council is as follows – Where was the so called “emergency” or pandemic that was supposed to cause such a racket, and did the City of Sioux Falls really need to take the “CARE ACT FUNDS” based on the 2020 Financial Report. The difference in “CASH VALUE” as stated on page 28 of the C.A.F.R is $300,690,042 million dollars, roughly an increase of $54 million from the year prior. If my memory is correct, that is the same dollar amount we as a city took from the Federal Government as part of the Care Act Funding. Now, I do understand, much of those dollars are being appropriated thru-out the 2021 Budget in Capital Expenditures – but I do not see a huge decrease in Tax revenues from 2019, that we necessary had to take such federal monetary funding. So what was the so-called “Emergency” really about? 

My answer to that question, in “my opinion” was to allow the States and Municipalities to grab more and more federal dollars in order to expand their already bloated ‘budgets’ of wants and needs. Which then obligates us to federal rules, codes, regulations the more we take such funds, this tends to dampen our ability to self rely on ourselves in the sovereign whelm.
I have become a big advocate for ‘knowing’ our total TAX REVENUE as it relates to the actual budget to determine where the excessive revenues derive from over and above the actual ‘tax revenue we collect from state and local taxes (excises, duties, imposition fees). 

The City Council has approved to spend the Care Act Funds in places such as:

• Fire and Police Academy 
• Pay for 5 New Law Enforcement Officers
• Pay for the Water Reclamation Projects (part of it)
• Maintain Current Payroll and Liabilities
• To Help pay off prior debts (which proves we could lower the 2nd Penny)

Which leads me to my next thought: “Economic Local Stimulus Plan“ 
This city is in great shape, even thru the Economic Emergency Crisis I felt was caused by many federal policies in the past, and our future; and I often thought, what if we can build a “Economic Stimulus Package” here in Sioux Falls, that encourages residents, businesses, to not only save money,  but to invest those dollars more so in the future providing us new found tax growth. 

Something I thought of more as I drove around this city, if we can lower the 2nd Penny to let’s say the 2005-2009 rate of 0.92% for two years, as we as individuals do as we manage and control our personal incomes while committing a small portion to debt, if we:

What if we held this such discussion during the summer months of 2021, as we discuss future budgets, goals, and projects, plug into that discussion a “City Wide Economic Stimulus Plan”, that that in the short term (2 years) lowers the 2nd Penny to the 2005-2009 rate of 0.92%.

The big question would be can we decrease the 2nd Penny at the same time having debt obligations, but I ask the council, what and how do private citizens deal with loss of income while affording to keep up with such obligations of debt, they simply ‘change’ or ‘amend’ the terms of the contract during that short term period of time until their income expands. Here are my thoughts to interject within conversation of passing or establishing a “Economic Stimulus Package” as it relates to the City of Sioux Falls:

Agrees to:

• Create a Stimulus Package to Rebuild Our Economy helping businesses and individuals expand their Income;
• Commit, or promise a % of that 2nd Penny to maintain our current debt payments, protecting that current debt;
• Commit to no less than a 2 Year Plan (1 Election Cycle);
• Promise to Set the Rate of the 2nd Penny back to 1.00% at the expiration of the two years;
• Set forth a plan on to spend, invest, and build and repair Streets and Highways in Sioux Falls during the two years, and thereafter;
• Set parameters on any new ‘tax base’ that becomes of the increased buying power in years 3, 4, 5, and beyond;
• Set goals for businesses local and foreign to invest in new jobs, increased wages, benefits, and infrastructure within the private sector;
• Encourage the Residents to support locally owned companies in order to build the new tax base, employment, and higher wages;
• Create and Modernize new citywide policies regarding the 2nd Penny, any Future Debt Planning, and Prudent Use of the 2nd Penny.

I believe we have the ‘sovereign ability; to as a governing body and/or the people to adjust our tax rates at anytime as per state laws, that was proven by precedent in 2005; we can adjust them lower and higher as the need is warranted, but most importantly, in times such as these, establishing tax policy in times where we need to re-energize the economy, to benefit the long term planning of the city, is the key motivator here.

Keep in mind, the direct sales tax is tied to population growth, as it adjusts itself in subsequent years following the rate change; we should study the effects of population growth of the City as it relates to the gains or losses we have had over the past 10 years. 

Until this economic emergency crisis where many of the Multi National Corps were following C.D.C Guidelines, adapting to federal resolutions, laws, causing so many people to spend less income, the Sales Tax of Sioux Falls has constantly remained at a steady growth of $3,500,000 per year in direct comparison with the growth of our population. Even if we cut the rate of tax this year, what will the gains be in years 2, 3, and 5? 

Those are just a few points of reference I would raise as part of this economic discussion moving forward, and I think my ideas coincide with many of our stated goals of protecting the health of the city, protecting our economy, and encouraging people to invest fully into the city through private/public partnerships. 

What would a small rate cut in our sales tax mean for the people of the city, we do such a great job of maintaining reserves, managing our debt payments, to investing in the city, instead of giving back as some have stated, a ‘refund payment’ of any concurrent surplus of revenues, a small decrease in the rate would effectively accomplish the same goal, without any liability of the city, cause my theory is as such – those residents, myself included would then be able to increase our buying power, spend more locally which then affords us to collect more tax revenue, let alone attract more new jobs, tourism, and visitors to the city, in coalition with the population growth, the tax base automatically expands. 

With All Due Respect, and Continued Support, I thank you for your time…