City officials provide clarity on budget

“It’s interesting that at the same time utility rates are going up, the city is subsidizing airplane owners.”

That was one of the many observations by members of the public during a contentious city council meeting that spent nearly an hour discussing hangar leases. Again.

But there is an important aspect to all of this contention that may be lost on the 99.9% of regular folks who are not totally versed in the ins and outs of municipal finances. That aspect is something known as an enterprise fund.

The Boulder City Review recently sat down with members of city staff including City Manager Taylour Tedder, Finance Director Cynthia Sneed and Utilities Director Joe Stubitz to, hopefully, provide some clarity.

When one looks at a city budget it is not as simple as one might hope. And even the explanation in this piece is going to be simplified to a great degree. It is not a simple case of tax money coming in and everything the city pays for coming out of one big pot. There are a number of ancillary pots and the one at issue in the controversy over hangar lease rates is an enterprise fund. Boulder City has three such funds — one for the utility, one for the airport and one for the cemetery.

When first discussing what an enterprise fund is, Sneed used the term, “business-lite” which is a great place to start.

In general an enterprise fund is set up to be separate from the general fund. These funds are almost like mini businesses within the city. Fees are charged for services and the revenue from those fees goes into a specific fund. It does not fund general city activities but, rather, is intended to support the “enterprise,” hence the name.

In Boulder City, the city utility provides pretty much everything except for natural gas service. The utility provides water, electricity, wastewater services, landfill services and recycling to residents and businesses for a fee. The revenue from that fee feeds an enterprise fund that is used to pay the expenses of providing the utility as well as basic maintenance of infrastructure and keeping a certain amount as a “prudent reserve” to fund future activities and guard against the possibility of shortfall.

Likewise, the airport takes in revenue from a variety of sources including the general aviation hangars as well as rent and other fees paid by what are known as FBOs or fixed base operators. This is an aviation term that covers a plethora of aeronautical services.

In Boulder City, it includes things like the tour companies who fly in and out of the airport. The revenue from all of those sources goes into another enterprise fund that is used to pay for the operations of the airport itself. It also pays for some maintenance but there is a crucial difference here specifically for the airport.

The majority of funding for large projects such as current efforts to repave taxiways and the future construction of a proposed control tower is provided by the federal government via the FAA. The city, via the airport fund, pays a portion —in general about 10%.

Tedder pointed out that the amount of reserve, per Nevada Revised Statute 354.6241 mandates a minimum amount of reserve.

“It’s 16.7% for the general fund and 20% for other funds which would include the enterprise funds,” he said.

The simplest of the enterprise funds is the one used to run the municipal cemetery. The city collects revenue from the sale of burial plots and that revenue funds personnel, activities and maintenance of the cemetery.

While it is possible that, if the enterprise fund were to come up short, the city might have to support it via its general fund, revenue from the enterprise fund can’t just be diverted to fund other city activities.

There is one exception to that, as was pointed out by Sneed.

“There might be a little bit of confusion because there is an amount that goes in that direction,” she said, referring to revenue that goes from the enterprise fund to the general fund. “It’s to pay for what we call central services. So we have payroll, purchasing, services provided by the city manager and the city attorney and the finance department. Services that the city provides to the enterprise fund.”

Using the utility as an example, she said, “Joe is running utilities. he recruits people so that is an HR function. He pays bills, that is purchasing. All of that is a burden on the central services that are paid for out of the general fund. So we do transfer a little bit of money out of the enterprise fund to pay for services provided by city employees who are not a part of the enterprise.”

Both Sneed and Tedder were quick to point out that this kind of an arrangement was ultimately less expensive than the alternative, which would mean having a separate, for example, HR department just for the city utility.

“It would be more money and a big duplication of effort,” Tedder said.

Sneed continued: “So sometimes when people see there is money going in that direction they question it and don’t understand it. “

“That has been a point of contention in the past,” Tedder said, noting that some people think the amount paid for central services should be lower. “But the reality is, we don’t charge the enterprise funds anywhere near the actual cost for services. For example, we don’t charge rent for the use of city-owned property.”

A final point of clarification: In the city council meeting of Aug. 22, under questioning by Councilmember Steve Walton, when asked if it was possible that the city might ever have to bail out the airport fund, his reply (referring to city staff) was, “We would not let that happen.”

“To expound on that a little,” he said, “Boulder City is unique in that we can’t take out any debt over $1 million without first taking it to the voters for their approval. It all comes down to budgeting. If there is an issue, we would look at the cash we have on hand and the projected cost and budget accordingly. And our revenue estimates are always ultra-conservative.”