Arnold officials say they need to find a way to rein in expenses after the City Council approved a budget that has the city spending $2,781,885 more than it is expected to bring in during the 2022-2023 fiscal year, which runs from Sept. 1 through Aug. 31, 2023.
According to the new budget, Arnold will bring in a projected $23,747,585 and will spend $26,713,970, shrinking the city’s reserve funds from $4,428,188 to an estimated $1,646,303 by the end of the current fiscal year.
In order to find ways to lower the operating expenses, city officials will begin working on the 2023-2024 budget in October instead of June 2023, which is the usual time Arnold begins formulating budgets.
“We will have to have a much different budget a year from now,” Arnold City Administrator Bryan Richison said. “There will be some difficult choices that we are going to have to make. We need ample time to work through all the numbers, discuss different options and see what our priorities are.
“We have been slowly running deficits over the years, and those days are at an end. We have to buckle down and make some difficult decisions.”
Shrinking reserves
Richison said Arnold’s reserves have shrunk over the years because of three factors.
“The biggest things that I have been fighting against to get the budget balanced are personnel costs and the rec center and golf course causing us to lose money,” he said.
Arnold closed the Arnold Golf Club, 1 Golfview Drive off Jeffco Boulevard, in 2020 and turned it into a 100-plus-acre park. It had cost the city more than $12 million over a 12-year period to operate the course.
“We stopped that bleeding,” Richison said.
Richison said the bulk of Arnold’s $18,286,280 operating budget, about 69 percent, is committed to paying the city’s 131 full-time and 92 part-time employees, with the city projected to spend $12,544,072 on employees’ salaries and benefits for the 2022-2023 fiscal year.
He said all employees received a 5 percent raise as part of the new budget, increasing personnel costs by $511,333 this fiscal cycle.
“We had been doing 2.5 percent raises,” he said. “We were concerned about remaining competitive with our pay because of inflation and what other employers are doing, so my feeling was 2.5 percent was not going to be enough. We needed to do more this year.
“Hopefully, inflation will come back down, and we can go back to where we had been. We certainly can’t give 5 percent (raises) every year. It is not something we can sustain.”
Arnold is projected to spend $5,173,952 to operate and make improvements at the rec center this fiscal year. The rec center is projected to generate $2,440,250, and the city will transfer $2,733,702 from its general operating fund to subsidize the facility.
The rec center is projected to begin the year with $265,037 in its reserve funds, but that is projected to shrink to $1,335 at the end of the fiscal year.
The city expects to spend $2,169,500 this fiscal year to make improvements at the rec center, including $763,000 to replace four sections of the roof and $680,000 to replace two pool paks, or large dehumidifiers.
Arnold will fund the repair projects with a $2,404,500 lease-purchase agreement with Commerce Bank that council members voted 7-1 to approve on Aug. 25. Ward 3 Councilman Rodney Mullins voted no.
The city also will spend $235,000 of the lease-purchase funds to purchase equipment for the streets and stormwater departments, according to the agreement.
The agreement has a fixed interest rate of 3.81 percent, and the city will pay off the loan over the next 10 years. Arnold, which will also use the money from Commerce to buy equipment for the Parks and Recreation, Public Works and Stormwater departments, will spend $2,936,557.40 over the next 10 years to pay off the lease-purchase agreement, according to city documents.
The city has received $4,255,859 from the American Rescue Plan Act (ARPA) of 2021, and Richison said the city initially was going to use nearly half of that to fund the rec center repair projects.
However, the federal government changed how those funds could be used, allowing entities to spend the first $10 million they receive without restrictions. Before, entities had to spend most of the money on specific items.
He said the lease-purchase agreement was the only way Arnold could cover the cost of the rec center repairs while also funding other stormwater improvement projects with ARPA funds.
Richison said $890,000 will be spent on stormwater work and improvements at the Little Muddy Creek watershed, and $520,000 will be spent at Christ Drive and Maple Meadows. In addition, the city will spend an estimated $711,000 to rebuild retaining walls near Church Road and Arnold Tenbrook Road.
“If we weren’t financing it, it wouldn’t be done,” Richison said of the rec center repairs. “There is no other way to pay for it because the rec center is losing money. It is easy to say only do what you have cash for, but that is why we are in the situation we are with the rec center. We have tried to find ways to do it without financing, and there is no other way to do it that we can find.
“Things are breaking in the rec center. The roof has had problems with leaking for several years, and the pool paks are close to failing. You can see rust on the steel girders on the roof above the indoor pool, and if we keep letting them rust, they will fail and the roof above the pool will be structurally unsound.
“Not a lot has been done structurally to the building since it opened (in 2005).”
Fixing the budget
Richison said officials will strip the 2022-2023 budget down to what Arnold must spend to cover all operating costs.
He said after that number is determined, all solutions will be considered to eliminate deficit spending and increase the city’s reserve funds.
Richison said he would like to keep about $2 million in reserves, which is just more than 10 percent of the city’s operating costs.
“I look at the reserve funds as a cushion for emergency situations,” Richison said.
Richison said Arnold may have to reduce the number of people it employs to fix the budget.
“I don’t know if that will be the answer,” he said. “My feeling, and I think the elected officials share it, is cutting personnel is the last thing we want to do. People is how we provide service. If we do that (eliminate positions), yes, we are cutting expenses, but we are cutting services. There would be things that won’t get done or can’t get done if we cut people.”
The City Council voted 7-1 Aug. 25 to approve this year’s budget.
Mullins voted against approving the current budget. He said he could not approve a budget that calls for the city to transfer $4,771,000 from its operating fund to cover deficits from the Arnold Recreation Center and Stormwater Department and balance the overall budget.
“I feel we need to be more diligent in our budgeting process,” he said. “Approving something that is going in the wrong direction is not something I believe in. I stand for complete fiscal responsibility, and I don’t know that this budget is fully fiscally responsible.”