Orem's Financial Dilemma

This Opinion appeared in the Daily Herald newspaper May 30, 2012.  This is not the entire piece.  Please refer to the link to see the entire article.  Herald Extra.com

MAY 30, 2012 12:05 AM

"Orem may have a citizen rebellion on its hands over a plan to raise property taxes by nearly 50 percent to cover projected shortfalls in city operations as well as payments on the lethargic (read failed) UTOPIA fiber-optic network.

Officials are asking for a $3.3 million tax increase -- $2.8 million to make the year's UTOPIA payments combined with $477,000 for pay raises for city employees. They don't like looking at it that way, but it fits.

Those two items alone account for the total tax increase. What is less easy to see is the $600,000 of new revenues, which can be used for maintaining Orem's current level of services to residents. Some new police cars are needed, along with increases for gasoline, maintaining the swimming pool, fertilizing the parks, etc.

City leaders meeting with the Herald editorial board last week said they prefer to view the budget as a whole, rather than singling out certain line items for blame. So, while $3.3 million does represent the total shortfall, they'd rather stir operations, compensation and UTOPIA into a larger budget soup.

We don't blame them. But it is quite natural for taxpayers to note the total increase of $3.3 million and ask what it's paying for.

The boat anchor, or course, is UTOPIA, which was supposed to be Orem's grand entry into the high-speed digital age. Unfortunately, like the iProvo network next door, it can now be labeled a boondoggle.

UTOPIA is the gift that keeps on taking. Not only are residents of the city obligated to pay $2.8 million in the coming year but they must make higher payments each year for the next 28 years. Payments are scheduled to rise by 2 percent annually so that in the final years of the contract payments will be about $5 million per year.

This means it's very likely that Orem will be coming back for yet another bite at the tax apple not far down the road.

As tax revenues have declined in the recession, the city has eaten through its healthy reserve (call it a rainy-day fund) to maintain the lifestyle to which Orem has become accustomed -- including making UTOPIA payments. Not long ago, the reserve was flush at the legal maximum of 18 percent of revenues; today it's nearing the legal minimum of 5 percent. If it bleeds below that, the Utah Legislature will force the city to raise taxes.

How could this happen? Basically by gambling on a sputtering economy and not confessing to residents immediately when there wasn't enough money to sustain current levels of service.

The economy didn't rebound and bring in fresh dollars. But rather than acknowledging annual shortfalls forthrightly to the taxpayers -- and seeking more money when it might have been a bit less painful -- Orem officials simply tapped reserves.

Billy Joel touched a certain political truth when he sang that honesty is a lonely word. Yet, there was never going to be an easy way to explain to taxpayers that they were stuck paying for a major boat anchor called UTOPIA. It was an unwise venture from the start, undertaken by starry-eyed elected officials who saw in it a chance to be on the cutting edge.

With only about a third of Orem able to choose fiber-optics after a decade, this cutting edge wouldn't cut Jell-O. But somebody still has to pay the bill. Sorry, Orem.

Councilman Hans Andersen, a CPA, has proposed dumping the wage increase for city employees, and he's got a point. In an economy in which many workers in the private sector can't remember their last raise, it's asking a lot to take money out of their pockets to fund public sector pay increases.

Public employees, moreover, typically enjoy unusually good fringe benefits, which leads Andersen to his second recommendation: decrease the city's 401(k) retirement match. A 50 percent match would not be out of line with private businesses that offer such programs.

Finally, Andersen wants to see all this on the November ballot for a non-binding advisory vote. That wouldn't hurt. But making decisions is what city officials were elected to do. If residents disagree with the direction of the city, they need to speak up strongly and in a timely manner.

Maintaining the status quo is always the default position of government. It shouldn't be. Orem faces a financial dilemma. Whatever course it chooses will involve some pain to somebody. The city would benefit from some private-sector thinking in place of its rigid "current level of services" analysis.

Most of all, Orem officials should listen very, very carefully to residents on this one."


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