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What are the state of the roads?
Over the last few years, a consistent compliant from residents has been the condition of the roads. In the 2017 resident survey, 70% of the respondents stated that roads should be the top priority for the City. Out of all 19 service categories, roads received the lowest quality rating with only 19% of respondents thinking they were good or excellent. The Mayor and City Council have been working diligently to find the best solution.

In fall 2016, the City Council hired PEPG Consulting to inventory all the roads in Highland. Unlike previous studies that were largely based on computer models, this study was based on visual assessment, core samples, and subsurface testing of all roads. This approached allowed the City to evaluate the condition of each road, identity the cost effective maintenance or repair strategy, timeline, and prepare cost estimates. Based on the results of the study, 45% of our roads are in poor or failing condition. In addition, many of our roads are deteriorating quickly from fair to poor making them much more costly to repair.

Rehabilitation Repair Map

Right now, the City spends about $450,000 on road maintenance. The Road Maintenance Map identifies the maintenance projects completed since 2012. This money comes from funds that are collected as part of the gas tax. The study showed that this $500,000 is the proper amount to spend on road maintenance for only those roads that are not failing. This is within the current City Budget.

Additional money is needed for the rehabilitation of poor and failing roads and future maintenance of these improved roads. In order to rehabilitate all these roads, $7,140,510 is needed or $1,000,000 per year. Of the $7,140,510, $5,623,000 need to go toward pavement repair and $1,517,510 going toward curb/gutter, drainage issues, etc. The study estimated that postponing these necessary repairs would increase the cost by 83%.

The Maintenance and Rehabilitation Plan and Treatment Map show the City's plan year by year for the next seven years to maintain and rehabilitate roads. Again, the funds for the maintenance projects are currently within the City budget. However, there are currently no funds in the budget for the rehabilitation projects.

Right now we are faced with two choices: 1) increase funding and begin to repair and maintaining the roads properly or 2) continue with the status quo, allowing our failing roads to continue to deteriorate, thereby significantly increasing the costs in the future.

What will this mean for me?
After considering all the options, the City Council is currently deciding between a property tax increase and a road fee to pay for the needed road money. If a property tax increase was approved, the increase would be close to the estimates below:

Property Tax

If a road fee were approved, the cost would be about $18.50 per month per home.

What are the pros and cons to the property tax increase?
Some of the positives to a property tax are:
1) The Highland City general property rate has not increased since 2006. The Library portion of the tax rate was added in 2007. There was actually a decrease in the rate in 2010.
2) A property tax increase would allow all money to be gathered in November – January so the City could bid projects in the winter and do construction in spring thereby saving money.
3) Property tax is state and federal income tax deductible.
4) Highland City general property taxes only make up 12% of your total property tax bill.

Some downsides of a property tax increase are:
1) In 2012 a property tax increase was passed by City Council. It was subsequently referred to the ballot, but because of timing, the vote would not have taken place until 2013. As such, the City elected to take away the proposed increase.
2) Tax exempt properties such as schools and churches do not pay property tax.
3) Property tax is based on property value and therefore not uniformly applied to those who benefit from it.

What are the pros and cons to a road fee?
Some of the positives to a road fee are:
1) $18.50 per month per home on utility bill regardless of property value.
2) All properties including tax-exempt ones such as schools and churches would pay a fee.

Some downsides to a road fee are:

1) Monthly city bills were raised last year to prepare for future pressurized irrigation and storm drain projects. While a road fee would be separate than those monies, it would still mean an increase to the utility bill every month for the second year in a row.
2) Fees are not tax deductible.
3) A road fee was passed in 2013, was subsequently referred and went on the ballot where it failed with 64% against and 36% for.

Why wouldn’t the City bond for the money?
Bonding is an option that was considered. However, it does not appear to be the best option for a number of reasons:

1) Bonding is valuable when you have a single or possibly a few large projects that need to get done relatively quickly such as a constructing a building, purchase of land, development of park grounds, etc. As you can see from the map, Highland has many comparatively small road projects that are spread throughout the city. These roads are at varying stages of deterioration. Some need immediate attention while some can wait a couple years. Their priority for receiving maintenance and/or rehabilitation work is based on the road quality or failure. While we may benefit from some volume pricing and inflation money savings, the impact to residents by closing so many roads and the geographical difficulties to manage the work would be significant. Most of those benefits would be lost due to the need to break the projects down into smaller yearly projects.

2) Bonding would still require an increase in city revenue whether a property tax increase or fee. There would be a need for additional revenue to pay the required bond payments. Residents have spoken loudly and often asking the city council to not increase the city debt levels. Right now we pay a little over $1.3 million from the General Fund per year on bond payments. In addition, while we would get a large amount of money up front, bonds like any other loan, would have to be paid back for the amount borrowed with interest leading to additional costs of $1.5-1.9 million.

3) Road maintenance is an ongoing cost. As stated above, part of the reason our roads are in such poor condition is we haven’t been spending enough money on proper repair and rehabilitation. A revenue increase for just the bonding expense would not be enough to cover the future costs of maintaining these newly improved roads. An increase in city revenue would still be needed to cover these increased maintenance costs up and above the current $450,000 budgeted.

Can’t the City make cuts to budget and find the money there?
Any extra money for roads would need to come from the City’s General Fund. The City’s budgeted General Fund for this year is $8.8 million in revenue with $8.65 million in expenses. Of the $8.65 million, non-discretionary money makes up $5.4 million. This is money that we are contracted, or required by statute, to pay such as police and fire services, debt payments, and library operations. Essentially that money cannot go towards anything else.

That leaves $3.25 million. Of that, $1.8 million makes up departments that are funded by fees for service. For example, court fines pay for the operation of the court and garbage fees pay for the garbage tipping and dumping fees.

That leaves $1.45 million of truly discretionary funds. Those funds pay for City departments which include Administration, Finance, Records, office equipment, utilities, parks and trails, city events, etc. Over the last several years, the City Council has reduced expenditures and will continue to find ways to reduce future expenditures. Unfortunately, the amount of funds needed to meet the road repair and rehabilitation needs cannot be met with these discretionary funds as the need is too big. When the total road rehabilitation needs are $1 million per year, it is impossible to find that much savings in $1.45 million by simply making cuts.

See the chart below for an illustrated version of this.

Discretionary Monies Graph

Didn’t the state just raise the gas tax for more money for roads?
In 2016 the State Legislature passed an increase in the Class B and C gas tax to go towards roads. However, because gas prices have stayed lower than expected, that intended increase did not actually happen. In the 2017 session, the Legislature did make efforts to correct this, however the increase is not anticipated to come until 2018. This money is needed for road maintenance and can’t fund the vast rehabilitation projects needed.

Can’t the City borrow money from itself?
State law does allow municipalities to borrow money for the General Fund from enterprise funds.

This is an option, but has the potential for some very negative impacts to the city. Highland City enterprise funds are designed to have the proper amount of cash coverage needed for ongoing expenses and in case of an unexpected system failure or emergency. If those cash coverages are eliminated by borrowing against them, the City would not be prepared in case of an emergency.

In addition, it creates a similar situation to bonding in terms of needing additional revenues from property taxes or fees for repayments, interest costs, and the ongoing nature of road maintenance.

Couldn’t bringing in more businesses solve this problem?
Economic development and shopping locally is truly a good thing for our City. However, it does take a substantial amount of sales to generate sales tax revenue for the City. In order to generate the required $1,000,000 in additional revenue needed for roads, Highland City businesses would need to generate $200 million in additional sales. This would require more than triple the current number of businesses currently located in Highland. Highland simply doesn’t have the land capacity to achieve this. In addition, the expansion and/or addition of commercial property presented to the community in the past, has been met with opposition. At minimum, if these potential opportunities ever become a reality, it will take time for those changes to come and their additional revenues will come in the future. The roads must be addressed sooner than later to prevent increased costs.

Can the City pull the money from reserves?
Reserves are similar to a savings account. A reserve helps in managing cash flows and emergency needs. Using money from reserves is not a sustainable model because this is not ongoing revenue. Right now Highland City reserves are as low as $500,000 depending on the time of year. The City Council does not feel its good financial policy, because of the city’s cash needs and the risks involved, to further lower the reserves as this money is needed for unexpected expenditures. See the 2014-2017 balance sheet below.

Balance Sheet Graph

Does this need to be done now?
Yes, it is in the best interest of the residents to properly repair and maintain the roads. The City can take the option of waiting to repair the roads. However, continuing the status quo will result in repair and maintenance costs that are estimated to be 83% higher than are today. Roads are much cheaper to repair than to rehabilitate. Once roads become so bad that they have to be rehabilitated or replaced, costs become much more expensive. See the attached PCI (pavement condition index) infographic below.


How can I be sure the increased money will be spent on roads?
The annual city budget is openly discussed, approved and published each year for all residents to see. To be more transparent and get input from residents, over the past several years, we have had a City Open House each May to discuss the proposed budget. These additional expenditures for roads will be clearly visible in future budgets. The current City Council and staff is dedicated to improving city roads and using the proposed increased revenues for spending on the roads. Ultimately however, it will take citizens staying informed and involved to ensure this happens.

How can we be confident in the study?
Unlike previous studies that were largely based on computer models, this study was based on visual assessment, core samples and subsurface testing of all roads. This approach allowed the City to truly evaluate the condition of each road, identity the appropriate maintenance or repair strategy and timeline, and prepare cost estimates. It goes well beyond what we previously had to use.

Where can I find more information?
The Mayor and City Council are asking for your input to address this important issue through a series of public open houses. At each open house, the results of the Road Study will be presented along with information about possible funding options. The City Council and staff will be there to answer your questions and receive your feedback. Each meeting is scheduled to begin at 7:00 pm as follows:

We encourage you to attend the meeting in your area as it will have road information specific to your area. However, if you are not able to attend your area’s meeting, please come to one that does work for your schedule.

If you are unable to attend any of the open houses, please come to the City Open House on Thursday, May 11 from 5:00-8:00

In addition, please see the past newsletter articles below, read the newsletter each month, watch City Council agendas, follow us on Facebook and Twitter, or stop by at City Hall. It is anticipated that City Council will approve the tentative budget on June 6 or 20.