“Why doesn’t local government act more like a business?”
That's a question Lunda Asmani, Newton's assistant city manager for budget and finance, hears from time to time. Although some business principles also apply in government, government ultimately has a different mission than private enterprise, he said.
“Local government by design is designed not to act like a business,” he said.
He encouraged city commissioners to remember that difference during his presentations at Tuesday's commission meeting and work session. He spoke about Newton's 2012 financial year in review, as well as the 2014 budget outlook.
Asmani said while business is driven by a profit motive, local government is about providing services rather than making money.
In the private sector, people pay for a specific service or product. In government, people pay taxes that fund a variety of services, whether they choose to use those services or not. For example, all community members pay taxes to support the school district, regardless of whether they have children who attend public schools.
The budget process also is different for business and government. Asmani said the budget of a private business is about financial control, while government budgets are about balancing power.
"The budget process by design is set to have those balances in place," he said. "That’s why we have those public hearings when we adopt a budget."
He said the No. 1 priority for the city's 2014 budget process is to maintain the city's good financial health. He said it is important to have money in reserves to serve as an “emergency fund." This fund helps the city to pay for unexpected expenses, such as a major natural disaster or crime event.
One of the city's main concerns is continued uncertainty at the state and federal level, and how much funding the city can expect from those sources in the future.
“As a city, as a local government, we are an extension of the state," Asmani said. "... Therefore, decisions that are made at the state, specifically funding decisions at the state, impact our ability to provide those services for citizens in our community.”
One of those concerns is the Property Tax Transparency Act. If passed, the legislation would require local governments to adjust the mill levy rate if the assessed valuation goes up, so the government does not start automatically collecting more in tax money. If a county or city still wants to increase its budget, they will have to vote on not adjusting the mill levy.
City Attorney Bob Myers said complications could arise because the city of Newton determines the budget, not the mill levy. The commission votes on the budget in August, then several months later, the county sets the actual mill levy.
Page 2 of 2 - “We don’t set the mill levy, we set the budget," Myers said. “... They (state officials) want us to be transparent, even if they aren’t.”
Asmani also added even if a city's assessed valuation and tax revenues go up each year, operational costs — such as fuel and supplies — often go up as well.
Value vs. profit
Asmani also shared information on the Meridian Center, which had its first full year of operation in 2012. Although the city had to contribute $145,577 to the convention center in order to make up the difference between revenues and expenditures, this wasn't unexpected.
Convention centers typically don’t make an operational profit, city staff said, and the center ended up performing even better than expected.
“These aren’t about turning a profit. These are about adding value to a community," said Tim Johnson, assistant city manager.
Johnson reported about 250 events were held at the conference center last year, an average of about five events a week.
Commissioner Ken Hall said having the conference center, as well as the Sand Creek Station Golf Course, brings events to Newton, and people who attend those events often end up spending money at other local restaurants and shops.
“I think if you look at the big events that happen, you’ll see the results downtown on some of that,” he said.