clock menu more-arrow no yes

Filed under:

Population shifts threaten city sales tax revenues

A house is built in Herriman, the fastest growing city in the Beehive State.
A house is built in Herriman, the fastest growing city in the Beehive State.
Scott G. Winterton, Deseret News

Shifting populations across Utah are forcing city governments to cut employees and services as residents, and a greater share of sales tax revenues, leave mature communities and head to new developments.

Every hour, Sandy City's population drops by one person. Across the valley, Herriman City is taking up some slack, growing by the same amount in twice the time. It's a far cry from the booming 1980s when Sandy became the nation's fastest growing city. Since last May, Sandy's population has declined by 9.5 percent, the biggest drop among Utah communities with more than 20,000 residents. During the same period, Herriman added 23 percent more people, making it the fastest growing one.

"Communities are redefining who they are; it's an evolutionary cycle that repeats itself," said Kenneth Bullock, executive director of Utah League of Cities and Towns.

As communities mature and become more expensive, areas with new property developments are attracting growth, and along with that, a bigger share of the state's sales tax revenue.

Population growth plays a key roll in how cities fund their operations. Utah uses population measurements to redistribute some sales tax revenue, so newer communities have funds to support their growth. For every $100 spent, communities keep 50 cents of sales tax, while another 50 cents fund a statewide pool that is doled out based on relative population size.

"It's just so difficult to provide the services because they lack the income," Sandy Mayor Tom Dolan said about younger cities. "Your retail tax base follows population. You have to get through those early years. The services can't be as good as you mature as a city."

Because of the sharing and the population decline, Sandy's monthly share of sales tax is dropping by $44,927 per month, or 5 percent, in the past year as it gives more to the pool then it receives. To put it in context, the city's average salaried employee earns $36,919 per year, said spokeswoman Trina Duerksen.

"The city has matured," Dolan said. "The children have grown up and moved away except for those that come back because they are struggling. Mostly we have lost population because we have an aging community."

With lower revenue the city is putting several capital projects on hold including the roughly 60 acre Quail Hollow park, remodeling the old city hall and a recreation center, Dolan said.

Provo has also experienced struggles of its own, losing 5.1 percent of its population from last year, cutting revenue by $18,637 a month.

As some revenue declines, Provo increased its franchise tax on city utilities, helping it raise the city's budget, said John Borget, Provo's director of public services. In July, Provo will hire 25 employees.

"We're still trying to be very cautious because just as it has turned positive before, it can go the other direction," Borget said about Provo, which ranks as the fourth fastest declining city.

Next door, Orem's story is similar, with the third biggest population drop in the state. Orem's population fell 5.3 percent in the past year, cutting revenue by $15,573 a month. But a conservative budget hasn't kept the city from losing employees, senior budget analyst Jeff Pederson said.

"We built a budget that would take care of our employees to this point," Pederson said. "We're not hurt other than we hope we could have more benefit out there."

This year, Orem's budget totals $15.2 million. Next year it will likely rise by $100,000, Pederson said. If revenues fall more, then some employees would need to be cut.

"You would hope that your sales tax would increase a little better than now, so your forecast is not quite as rosy," Pederson said. "We built a surplus into our budget that we hoped we'd be able to do something with, but now that opportunity is kind of going away on us."

As Utah's fastest growing city, Herriman will spend its increased share of sales tax on strengthening its infrastructure.

"It's challenging keeping up with the growth," said Herriman Mayor Josh Mills. "It was difficult to keep up with the maintenance when there was so much new stuff going on."

With the slow down, it gave us the opportunity to step back and say 'what do we need to maintain to expect another growth spurt.' "

The city is spending two thirds of its new funds on road projects, including its 5600 West piece. They are also spending money on storm drain maintenance and upgrades. Each month the city receives 12 to 18 building permits for single family housing, Mills said.

"We continue to build new things, but we're not maintaining what we have," Mills said. "It's a problem keeping an eye on both the new and the old."

Awkward Finances

"All the communities you'll find are in an awkward spot because revenues are down but demands for services don't go down," Bullock said. "If anything, there comes a higher level of expectations."

Not even the winners, as a whole, can claim smooth sailing in the recession's troubled waters.

South Salt Lake City, the fifth fastest growing city, reported a 9.3 percent increase in population, adding $18,526 in sales tax revenue since last year.

The city, whose population balloons from 24,000 to 75,000 during business hours, keeps more of its point of sale taxes under a Utah statute to help it maintain services, said Kyle Kershaw, the city's finance director. The statute expires in 2013.

"The city council and mayor know we will need to be very careful in the next few years to be prepared for the time that it will expire," Kershaw said.

Spanish Fork is receiving $28,581 more a month after a 10 percent population rise. Assistant City Manager Seth Perrins was not yet convinced the city could "go anywhere" with regards to thawing their employee pay freeze or increasing the employment or city programs overall.

"Not to be Johnny Raincloud, but we're still digging out of a hole," Perrins said. "We're still not seeing revenue like we did a few years ago."

Employee cuts in recent years came purely from attrition. City employment fell to 150 from 161 three years ago. No police officers have been added. And that may not change any time soon.

"We've chunked away slowly at our needs," Perrins said. "Some positions we've eliminated for good because we've found a way to fill it without compromising the position."

Syracuse also remains far from cautiously optimistic, despite a nearly 10 percent population increase and a $19,531 sales tax revenue increase.

Because of previous economic struggles, the city cannot be by any means liberal in its surplus, City Manager Robert Rice said.

"The gain is nice, but it's not six figures," Rice said. "Six figures is something you can wrap your arms around."

The city has grown 24 percent since 2006, but total city employees have been cut by 6 percent to 70 since that time, Rice said. Such cuts have come through both attrition and layoffs.

Any gain they receive from any tax revenue will build and fix the city's roads, Rice said.