Good evening. Let me thank you for this opportunity to address you. The past couple of weeks have been intense – and invigorating. They have been made all the more encouraging and uplifting by the attitude with which the Council has greeted my Administration in these early days. I thank each of you for your candor, cooperation, and hard work.
Assessing and conveying the State of the City after two weeks in office is a daunting, and perhaps unrealistic, task. However, there is much that can be, and should be, addressed. In the spirit of open and accountable government, I will offer my candid observations and recommendations on a number of issues, with respect to which I believe we can, working together, make a positive difference for our community. Since I can only touch on a few issues here, please do not assume that I have downplayed or ignored other issues. I simply hope to provide information and discuss here a few of the most pressing challenges facing us.
Budget – Expenses and Revenues
Let me begin with a few observations about our budget and those facets of Salt Lake City's economy that impact heavily on the budget.
First of all, Salt Lake City's revenues are comprised primarily of property taxes (32%), utility franchise taxes (12%), and sales taxes (28%). The other sources include grants, fees for services, permits, parking and court fines, interest income, and parking meter collections. The Utah State Legislature has, over the years, severely limited the ability of the City to raise revenues, while distributing more and more dollars away from Salt Lake City and to other areas of the State.
For instance, Highway User Revenues, from such sources as the motor fuel tax, vehicle registration fees, and safety inspection fees, are allocated, in part, to cities and counties, according to a formula that works against Salt Lake City. Instead of road funds being distributed according to the usage of roads, they are distributed according to the number of miles of roads, including gravel and dirt roads (with different weighting for paved, gravel and dirt mileage).
Likewise, a cap has been placed by the Utah Legislature on Salt Lake City's Innkeeper Tax revenues. If we were able to increase that tax from 1% to 2%, we could generate about $1.5 million more each year.
In 1983, the Legislature changed the allocation of sales taxes from being based 100% on point-of-sale to 50% on point-of-sale and 50% on population. Therefore, as other areas of the State are growing in population at rates greater than Salt Lake City, they are benefiting from the change in the sales tax allocation formula and Salt Lake City is being penalized.
From the perspective of Salt Lake City, the situation is aggravated by the fact that our rates of growth in retail sales and sales tax revenues have plummeted in recent years. Adjusted for inflation, the taxable sales grew at a rate of 11.11% in 1992; 10.82% in 1993; then dropped to 1.82% in 1997 and .65% -- less than 1% -- in 1998.
I am committed to not raising property taxes unless, in my view and in the view of the City Council, there is no other appropriate means of meeting vital city services and repairing and maintaining our City's infrastructure. Therefore, we must do everything in our power to increase the sales tax base of Salt Lake City by revitalizing our central downtown area, by supporting our locally-owned small businesses, and by focusing far more of our economic development efforts on the long-neglected west side.
Currently, if we are to commit 9% of the general fund to repair and maintenance of the City's infrastructure, we are facing a shortfall in next year's budget of about $8 million. Coincidentally, that is approximately the amount for which the City sold one block of Main Street last year. Because the City will not be selling any of Main Street during my Administration, the challenge will be to find $8 million in reductions in expenses; additions to revenues; and ways in which expenses can be covered other than from the general fund.
The budget will be severely impacted by what happens with respect to federal funding for the so-called intermodal hub. Let me describe the history of that project as far as we have been able to ascertain it. In October of 1997, the City and UDOT signed an inter-local agreement that led to shortening the I-15 viaducts into downtown. This opened 650 acres of inner city property for development, but was – and is – extremely expensive for Salt Lake City.
In order to accomplish the removal of existing railroad tracks that would have made the viaduct shortening impossible, the Council agreed to support what has become known as the Intermodal Hub by forming an enterprise fund. The project cost was estimated at about $10.5 million. The Council agreed to loan the fund a total of $6.155 million. The RDA agreed to loan $2.25 million. The balance of $2.15 million was to come from initial federal funds. The decision to make the loans from the City and the RDA was apparently based upon the prospect of substantial federal funding.
Much of the work on the project has been completed. However, the City has not yet received any federal funds. We are currently working to process the $2.15 million first promised to the Council in February of last year. In addition, we have successfully negotiated a new $1 million grant from FTA. Therefore, we are expecting to have $3.15 million in hand by April of this year.
Even if those payments are made in a timely manner, Salt Lake City will be left with a shortfall of at least $7.4 million. Add to this the fact that as a part of the intermodal hub agreement, Salt Lake City is committed to building a permanent Amtrak facility by November 15, 2001 at a cost of $1-2 million and we have enormous budget pressures looming.
Adding to the budget pressures are our human resource costs. Typically, 64% of the budget is dedicated to payroll related costs, including salaries and wages, benefits and working conditions. We must assess the efficiencies in every department and cut where we can. Total salaries for Salt Lake City employees have increased 50% in seven years, from $75,536,000 for FY 1993 to $113,438,000 for FY 2000. Benefits during that time period rose by nearly 70%. The rising cost of benefits is partly a reflection of pressures on the cost of health care in the economy as a whole. While the increase in our salary costs on a percentage basis are not far out of step with the local economy, it remains clear that we are going to feel pressure to reduce our costs while maintaining service levels. In light of the budget problems we are facing, this challenge is paramount. The simple truth is that salaries and benefits have risen substantially, while our ability to raise revenues has been severely constrained.
At the executive level, we must reassess the benefits, particularly severance packages and accrual of vacation and personal leave. I will recommend that vacation and personal leave shall accrue over the course of the year, rather than on the first day of the year, for purposes of termination benefits. Also, I will recommend that no severance, or greatly reduced severance payments, be offered new City employees. The City's budget does not contemplate major expenditures for severance, yet Salt Lake City recently paid a total of almost $454,000 in severance to 8 people, including one person who had earlier expressed his intention to voluntarily resign and who received a letter of involuntary termination less than two hours before I was sworn in so he could receive almost $44,000 in severance.
In order that we can responsibly and reliably budget for expenses, we must pay salaries and benefits that will attract good people, but refrain from exposing the City to budget-busting severance and leave payments each time a new administration is elected. We should do all that we can to protect against self-serving abuses by our elected leaders and city employees that create understandable resentment and cynicism by working men and women who pay taxes for the operation of our government.
Tonight, I am not advocating specific proposals regarding major new revenue sources; rather, I will discuss various options, all of which should be considered as we work together to solve our budget problems.
Among the measures that should be considered in order arrive at a balanced budget are the creation of a Special Services District for fire protection, in order that all – including those who own approximately 20% of the property in Salt Lake City but do not pay property taxes – contribute toward the fire protection provided to them. Without any net increase to property tax payers, Salt Lake City could achieve approximately $4.8 million in additional revenues from the creation of such a Special Services District.
Raising business license fees to 75% of the costs of regulating the businesses would generate an additional $641,000 in revenues. Another $384,000 would be generated if 100% of regulatory costs were covered by business license fees.
Recapturing the amount by which Salt Lake City taxpayers are being double-taxed through subsidization of unincorporated Salt Lake County areas alone would raise approximately $4 million in revenues for Salt Lake City.
The day-time population of Salt Lake City is more than double the resident population. In 1998, the resident population was 173,000; the day-time population was 359,000. Yet, the residents and businesses located in Salt Lake City pay almost all the taxes to support the infrastructure and city services enjoyed by all who comprise the day-time population. Among the measures that should be considered for supplementing the revenues of Salt Lake City is some variant of a commuter fee.
I have described some of the options here because public dialogue about these issues should be informed. We are all looking for answers to the difficulties facing us in terms of our budget. With a $150 million backlog in infrastructure needs, and with a projected $8 million budget shortfall, we can achieve solutions if we collaborate and work together toward the best answers. In that spirit, I ask and invite the City Council, both as a body and as individual members, to work with me and my staff in formulating a budget for the next fiscal year and in reaching the decisions regarding expenses and revenues that will balance our budget and best serve the interests of our community. This will be a tremendous challenge, but one that we can meet working diligently and cooperatively.
Affordable Housing
Salt Lake City does not have adequate affordable housing. In 1988, Salt Lake City was one of the best affordable housing markets in the United States; by 1998, Salt Lake City was one of the 25 worst in the country. [Douglas D. Perkins, "Utah Cities Must Make Affordable Housing for Families a Top Priority for 1999," The Salt Lake Tribune, December 6, 1998.] Home prices in Utah increased 75 percent during the five-year period from 1993 to 1998, more than in any other state. [Id.]
Hand-in-hand with the affordable housing crisis is the issue of wages. A minimum wage should no longer be an option for most adults. Rather, all adults who put in a full-day's work should be paid a living wage. Just consider: According to a recent National Low Income Housing Coalition study, a minimum-wage worker in Salt Lake City must work 95 hours a week to afford a two-bedroom apartment. [Dennis Romboy, "Affordable Housing Out of Reach: Report Says 45% of Renters Can't Afford a 2-Bedroom Unit," Deseret News, September 15, 1999.]
Residents of Salt Lake City must earn $11.49 per hour – 223% of the present federal minimum wage -- to afford the fair market rent for a two-bedroom unit. Forty-five percent of renters in Utah are unable to afford Fair Market Rent for a two-bedroom unit, which is $598 per month. In 1998, 38 percent of Utah renters spent more than 30 percent of their income on housing; in 1999, the percentage of renters who spent more than 30 percent of their income on housing jumped to 45%.
Our City can, and will, do far more to provide affordable housing for those who earn less than the area mean income. In fact, already we have included in specifications for the sale of Redevelopment Agency properties requirements that certain percentages of the units built be affordable at either the 80% or 60% levels of area mean income. We have also insisted that many of the units built be "visitable" by those with disabilities requiring wheelchairs.
In FY 2000, Salt Lake City will receive approximately $1,209,000 in federal HOME Program funds. That funding may be used by private, non-profit, for profit, and public entities engaged in the financing, development, rehabilitation and management of affordable housing. In the past, the City's division of Housing and Neighborhood Development followed a policy of setting aside 10% of all HOME appropriations to cover administrative costs. Because of that policy, $346,000 of HOME Program funds remain unspent from prior years. Such wasted opportunities have resulted in less affordable housing for the people of our City. We will set aside for administrative costs only an amount that reflects what actual administrative costs have been in the past, with all other HOME funds freed for affordable housing needs.
Similarly, in FYs 1998 and 1999, Salt Lake City was awarded a total of $400,000 from the Department of Justice for the Weed and Seed program. Weed and Seed incorporates a strategy that is intended to "weed out" violent crime, gang activity, drug use, and drug trafficking in targeted high-crime neighborhoods and then "seeds" the target area by restoring these neighborhoods through social and economic revitalization. The funds were originally managed by the Police Department, which apparently utilized some of the funds for the law-enforcement, "weeding," aspect of the program, but did not utilize the remaining funds for the constructive revitalization of the affected neighborhoods. As a result more than $171,000 of the two grants is unspent – another loss of tremendous opportunities to assist those areas of our City most negatively affected by crime. We will aggressively pursue an extension for the use of the FY 1998 and 1999 Weed and Seed funds, then utilize them in a manner that will help restore long-neglected neighborhoods on the west side of the City.
In 1991, the Department of Community and Economic Development started an Economic Development Revolving Loan Fund. In the last nine years, eight loans, not related to light rail construction, have been made from the revolving loan fund to local businesses and fifteen loans of $10,000 each were made to businesses on Main Street impacted during light rail construction. Because available funds have not been lent, largely because of a failure in the past to effectively market the program among the business community, the current balance in the revolving loan fund is in excess of $4,294,000. The Division of Housing and Neighborhood Development will immediately undertake to inform local businesses of the availability of the loan fund and seek input from the Vest Pocket Business Coalition and a Small Business Advisory Committee regarding the loan criteria and how to more effectively market the program.
Under the City's Housing Rehabilitation Program, loans up to $20,000 are made available at rates ranging from 0-6%, based on household income. Over the last four fiscal years, the total number of units rehabilitated by the City's program has declined by almost 40 percent. Currently, the loan fund balance is more than $1,221,000. Because this program is an important community-building tool, which can be used in our efforts to revitalize neighborhoods, the Division of Housing and Neighborhood Development will soon develop and implement an effective marketing plan.
In short, the state of affordable housing in our City is presently dismal – but the provision and rehabilitation of affordable housing will be aggressively pursued under my Administration.
Community and Economic Development and the Redevelopment Agency –
An extremely low rate of growth in taxable sales in Salt Lake City emphasizes the importance of consumers buying locally whenever possible. A dollar spent at Sam Weller's Books is regenerated in our community because Weller's utilizes local accounting services, local legal services, local copiers, local advertisers, and local designers. The regeneration of consumer dollars is a good thing for our economy – and, I will add, it is a good thing for our quality of life. I, for one, will do what I can to preserve the uniqueness and charm of our City – and work to stop the construction of more look-alike strip malls and cookie-cutter developments consisting of nothing more than national chains.
We will focus the efforts and resources of the Department of Community and Economic Development as much as possible on the Central Business District and the needs of locally-owned small businesses throughout the City. Salt Lake City should be a destination capital city – open, vibrant, interesting, and convenient. The first months of north-south light-rail have proven to be a huge success, with ridership far exceeding UTA's projections. We will build on that success, working to obtain a full funding grant from the Federal Transit Administration for the east-west light-rail spur, then moving on to add other spurs to West Valley City, West Jordan, the Airport and other locations. Each addition to light-rail will help make it the sort of comprehensive mass transit system that will someday make car ownership an option rather than a necessity in this valley.
We will also add to the benefits light-rail has bestowed on the Central Business District by developing a comprehensive parking system in the downtown area, by making the City more bicycle- and pedestrian-friendly, by making certain that adequate parking is provided for downtown businesses and their customers, by promoting more housing of every sort in and near the downtown area, and by generally chilling out – bringing dining out onto our City's sidewalks; encouraging, rather than citing, street artists; promoting an active night-life; and sponsoring events that will bring people together in our downtown area. The First Night celebration less than three weeks ago proved that people in our community want to come together to have a good time. Fun is nothing to be afraid of; it's a good thing – a good thing for families, for friends, and for building a better community.
The revitalization of our downtown area will be a major priority of our Administration these next four years. Soon, the Old Navy store and the Morton's Steakhouse will be up and running. The Department of Community and Economic Development will move forward with a vigorous business recruiting effort to bring more businesses – both large and small – into the downtown area. In addition, we will endeavor to make the licensing and permitting process much more consumer-friendly, including a filing system through the City web site.
City Attorney's Office and City Prosecutor's Office
The Office of City Attorney has performed great work for Salt Lake City, dealing with many diverse issues – from campaign finance reform, to the establishment of an Administrative Court, to abating fraternity house disturbances, to winning the fly-over tax issue (thereby increasing the City's tax base by about $3 million), to pressing the City's claim for indemnification for Olympic liability exposure. We are fortunate to have the caliber of lawyers we have in the City Attorney's Office and I look forward to working with them on the many challenging issues now facing us, including the Main Street lawsuit and legislative lobbying on several issues of importance to Salt Lake City.
We have a new City Prosecutor, Sim Gill, who brings with him incredible energy and a sterling reputation. We are working on several new strategies for the City Prosecutor's Office, including the incorporation of a restorative justice model wherever possible. That model would include victim restitution, victim-offender reconciliation, and a condition of probation or plea-in-abeyance that would require the offender to pay back to the City all costs, direct and indirect, related to his or her case. To hold offenders fully accountable to both their victims and to the community as a whole is beneficial to everyone concerned, including the offender.
Fire Department
Salt Lake City firefighters have performed extraordinarily well during the past year. Major incidents, during which our firefighters responded quickly and professionally, included shootings, terrorist incidents involving alleged Anthrax, and the devastating tornado. Also, Fire Safety Training was provided to 33,870 citizens during the year.
We owe it to our firefighters to provide them with staffing consistent with federal safety standards, including staffing of each fire apparatus with four firefighters. They should also be provided with equipment that will permit them to access all emergency agencies.
The recurring issue as to whether Fire Station #9 should open will no doubt be considered once again this year. The problem is that we are presently extremely limited in our ability to generate revenues and the projected cost to open and staff the fire station the first year is $1.2 million. Had we the money, I would favor finally opening the station in order to provide better fire protection in the northwest quadrant of the City. I'm open to any ideas anyone has as to where we can find the money.
Police Department
We have been extremely fortunate to have an Acting Chief of Police like Mac Connole. Immediately after assuming his position, Acting Chief Connole set about taking measures that have improved, and will further improve, the morale among what was a badly demoralized police force. For this entire community, I want to thank Acting Chief Connole for his tremendous service. And I want to thank our extraordinary police officers for hanging in there under very trying circumstances and responding so positively and constructively to the new police leadership.
Although Salt Lake City's homicide and rape rates remain high, overall crime rates in Salt Lake City are down, mirroring a national trend at the moment. This may be largely attributable to demographics and the fact that our economy has remained strong.
Even with crime down statistically, we cannot afford to become complacent. For one thing, the demand for police services has not diminished. Salt Lake City Police responded to over 260,000 calls in each of the past two years.
Also, we are facing a serious problem with an increase in methamphetamine production and use. Our Administration is committed to pursuing a number of new and existing initiatives to educate the public and to raise through the roof the cost of doing this sort of drug business in Salt Lake City. I am happy to report that two drug houses were rooted out just this past weekend. The presence of drug rings creates other crimes and destroys lives throughout the city. Effective action will require additional assistance from the State and Federal levels, but we absolutely cannot tolerate this element in our community, and we will not.
Our hardworking officers deserve the best support we can give them. The problem – as always – is paying for it. Several positive programs have been put in place over the past several years using federal revenue sources. Past federal funding has been a good thing for our police department, but it now presents a new challenge as the funding for many programs expires.
Community Policing, meth lab enforcement, the Victim Resource Center, in-school programs, and several additional officers hired over the past few years are all elements of our police department that will lose federal funding in the near future. The challenge will be to determine – with your help – which programs we cannot afford to lose, and how to fund them.
Planning for the Olympics in 2002 has now passed into the critical zone. Two years from today we will be on the final approach to the Games. We must begin realistic and formalized planning for what could be a huge strain on our law enforcement resources. As I have made abundantly clear, we presently have far too much exposure on this front. But, by all indications of late, we might very well be on the road to a resolution of our Olympics city-services funding needs.
Olympics-Related Expenses for City Services
For many years, Salt Lake City taxpayers were promised by several elected officials, including former Governor Bangerter and Governor Leavitt, that Salt Lake City would not be stuck holding the bag for Olympics-related costs or indebtedness. The Utah Legislature even made mention of the State?s indemnification agreement with Salt Lake City in legislation. However, the legal commitments have not been satisfactorily tied down and issues regarding payment for city services have been left unresolved for several years.
After many discussions with legislators, Salt Lake Organizing Committee (SLOC) officials, elected officials from other venue cities, and the Governor, I have reason for some optimism that city services required because of the Olympics will be covered, at least in large part, by a combination of SLOC and federal funding. At its most recent meeting, the Management Committee of SLOC, which includes both the President of the Utah Senate and the Speaker of the Utah House of Representatives, voted unanimously to adopt certain venue-funding principles, including the principle that "[t]he venue communities should not be expected to exclusively bear the costs of Olympic-related services," and "[t]hrough state leadership, executive and/or legislative, timely resolution is achieved as to the financing of venue city and county Olympic-required service costs."
Timely resolution can only mean resolution during the current session of the Legislature. Therefore, we will devote all necessary efforts to develop a good-faith budget of anticipated Olympics-related city costs, then proceed to work with the Legislature, SLOC, and the United States Congress to obtain all necessary funding.
Youth Programs
I have created a new position in the Mayor's Office entitled Director of Youth Programs. The position will be filled by Janet Wolf, who will explore ways in which we can provide nurturing and safe after-school, summer and employment programs for our youth. Such programs will be possible only through collaboration with schools, churches and other community organizations. Already, the indications of support from school board members and administrators, as well as church representatives, has been very heartening. We also expect that volunteers from throughout the community will help make this program a great success. We have every reason to believe that grants will be available to help us provide these constructive programs for our children – programs that will help reduce crime, build better lives, and create a safer community.
Conclusion
I realize I have presented a rather sobering analysis this evening. However, you, the Council, and the people of Salt Lake City are entitled to the facts. Only with total candor can we work effectively together.
I am convinced we can meet the challenges ahead. I have already experienced an extremely productive collaborative relationship with the Council as a whole, and with each Council member individually. Working together with the same fundamental goal of best serving the people of Salt Lake City, we can meet the tremendous challenges facing us. Also, we can take advantage of the great opportunities we have to serve the interests of all the people of Salt Lake City, while making this a richer, healthier, more livable community.
