SIOUX FALLS, S.D. (KELO) — The 2022-23 winter has ended but city officials are planning ahead for the 2023-24 winter.
The city has typically averaged around $10.1 million for its snow removal budget and through March 2023, the city has used $8.9 million. The main costs came from three different snow alerts in 2023. A snow alert is typically called when the city receives more than 2 inches of snow.
Shawn Pritchett, finance director for the city of Sioux Falls, said a supplemental budget request for snow removal would be likely to bolster the $1.2 million heading into the final months of 2023.
“We’ll assess what that will look like and come with a supplement request at the end of summer or early fall,” Pritchett told city council members at Tuesday’s informational meeting.
Sioux Falls averages 41.2 inches of snow each winter. In the 2022-23 winter, Sioux Falls received 64.8 inches of snow. Pritchett said snow removal costs are hard to predict.
“It’s a critical service for our community,” Pritchett said. “We have to not be under budget in that category because you run out of time to supplement. We wash a lot of the savings from snow removals in prior years into reserves and then when we need it we can supplement from the reserves.”
Sioux Falls reserves grow in 2022
In a presentation to city councilors last week, Pritchett showed the Sioux Falls general fund had $82.8 million in reserves at the end of Dec. 2022. That $82.8 million accounts for 38% of the city’s total budget (219 million).
The city had $77.7 million in budget reserves last year and added $5.1 million in 2022, Pritchett said.
Pritchett said the city always tries to target having 25% of the budget in reserves.
“This policy target is extremely important during the creation of annual budgets and in terms of looking out five to 10 years in advance,” Pritchett said, adding 67% of the general budget is made up of wages and benefits for employees. “This thoughtful approach provided us time to manage and adapt to the impacts that we were having.”
Pritchett said the 25% budget reserve target has long worked for the city.
City councilor Greg Neitzert said all the numbers have been distorted in the past few years but asked if the city is just stockpiling cash?
“We’re way over our reserve target,” Neitzert said. “At what point do we have to act and do something?”
Pritchett said there is a concern about the city carrying too much cash but said that’s why projections are important.
“There are years where we have used our reserves, it just hasn’t been in recent memory,” Pritchett responded.
On Tuesday, councilor Rich Merkouris asked about fire stations being added to Sioux Falls and how that impacts the city’s reserve planning.
Pritchett said the city’s models have sales tax growth rates of 4%, but those numbers could be 0 or even negative.
“They look and appear very robust and that’s a good thing from a financial support standpoint,” Pritchett said. “I don’t disagree that we shouldn’t have too much reserves. We also have to be cognizant that if we were to hit an economic blip, going negative or even 0, really throws that model off and brings us to that 25% much more quickly.”
Pritchett again highlighted much of the city budget is focused on employee salaries and benefits.
Sales tax, building permit updates
The cumulative, 12-month rolling growth rate over three years for sales tax in March 2023 was 9.3%. Pritchett said year-over-year, sales tax growth is at 4.6%.
“That will likely continue to fall here in the months ahead if we continue to bring in 4,5 and 6-percent sales tax rates,” Pritchett said.
Sales tax collections had a 3% change in Dec. 2022 compared to Dec. 2021, while Jan. 2023 vs. Jan. 2022 was a 6% increase and Feb. 2023 vs. Feb. 2022 was a 7% increase.
Inflation, measured by the National Consumers Price Index, was at 5% in March 2023. “It’ll be a slow, sticky inflation rate as it continues to come down,” Pritchett said, who added food prices remain stubbornly high.
On building permits, Pritchett said the total is about $106 million less than this time last year, which was a record year for building permits. He said when looking at 2021 numbers, building permits are $57 million ahead.
In 2022, the city issued $1.93 billion in building permits which was the result of “a perfect storm,” chief building official Butch Warrington told KELOLAND News earlier this month.
Councilor Curt Soehl asked about the state’s $200 million housing infrastructure money being delayed in the state and how it could impact Sioux Falls.
Pritchett said he didn’t believe it would directly impact the city budget. He said the impact is on the capacity to invest in housing and development for the community.
Soehl said he’s heard from people in the construction industry that projects have been held up by the two-year delay.
“Single-family housing is real concerning. That it is down significantly, when we have a housing crunch,” Soehl said. “Building permits will be ramping back up for single-family (housing). People are getting accustomed to a higher rate.”
