City administrator responds to finance questions

To what do you attribute the difference between the projected revenue and the projected expenses for the current fiscal year?

Walden: The original adopted budget reflected expenses being funded from a combination of 2021-2022 fiscal year’s revenue and spending down prior year’s fund balances. As sometimes happens, during the year revenues and expenses came in different than what was originally budgeted. Some budget adjustments have already been presented to [the City of Salem Board of Aldermen], others will be as needed for total expenditures not to exceed total revenues and available prior year fund balances.

2. At what point in the year did it become apparent that expenses were going to outperform revenues?

Walden: The original budget as adopted reflected use of revenues and prior year fund balances to cover budgeted expenses for the fiscal year.

3. Once observed what steps were then taken to minimize loss to city funds?

Walden: In cases where funds were needed for approved projects not in the original budget and/or if actual revenues were less than budgeted, some projects were delayed or modified to be done for a lower cost.

4. The city received $900,000 through ARPA. Is that sum already represented in projected figures? If so, would you please explain to us how and show us where?

Walden: Yes. The ARPA funds are reflected in the projected revenues in the General Fund. The General Fund includes a dedicated line item for ARPA.

5. Why are we seeing $1.7 million less in revenue than originally budgeted while spending only $700,000 less than originally budgeted?

Walden: The original budget adopted by the [the City of Salem Board of Aldermen] reflected a portion of the total expenses funded from spending down prior year’s fund balances that was not reflected in the referenced projected revenue amounts. The city’s primary revenue sources include sales tax generated from applicable sales in the city limits and revenue from city utilities. Weather is one component of how much utilities are consumed and some businesses and residential consumers are still transitioning from pre-pandemic usage patterns. Inflation has resulted in many of the city’s expenses increasing 20% or more, including fuel, wholesale power given the February 2021 weather event, and some supplies the city uses. The city has tried to manage expenses to accommodate for the increased cost of many of the items in the city’s budget.

6. The city collected approximately $15.2 million for all utilities during the two-year span of fiscal years 2017-18 and 2018-19. That number dropped to $12.5 million during 2019-20 and 2020-21, a drop of 18%. That drop of $2.7 million over a two-year span coincided with the utility billing issues. Are those issues the main reason for the drop?

Walden: The city’s utility customers used approximately $950,000 less in utility services for the two-year span of 2019-20 and 2020-21 vs. 2017-18 and 2018-19, which accounts for some of the difference in amount collected. Customers put approximately $460,000 of past due balances on payment contracts starting in June 2021, some of which are scheduled to be paid over two-three years.

The city suspended disconnects and charging penalties for non-payment during the COVID-19 pandemic and had a number of customers that did not pay during that time until disconnects for non-payment resumed with the July 2021 bills. The cash impact of those customers resuming payments on their accounts will be reflected in the 2021-2022 fiscal year cash collection reports.