Woodland Hills reviews budgets and debt; consultants recommend borrowing to speed $2.6M road work

Woodland Hills, Utah — At a city council work session Oct. 14, city finance staff reviewed the municipality’s current revenues, payroll costs and outstanding debt, and a Zions Bank representative told the council the city could borrow to complete about $2.6 million of road work now rather than paying the program out over many years.

The discussion centered on how the city’s various revenue streams are earmarked, the size and timing of annual debt-service payments and whether to use reserves plus new bonding capacity to complete a multi-year road program. Chris, a city finance staff member, led the review and said the budget is “a living, breathing document.” He laid out salary and benefit totals, revenue sources and the city’s loans and leases.

Why it matters: Woodland Hills faces rising construction costs for roads and a backlog of needed maintenance. Council members and staff debated whether borrowing at current municipal rates and doing the work now would cost less over time than paying cash year-by-year while construction inflation raises prices.

Chris told the council the city’s payroll costs for a core group of full-time/key employees (including health insurance and pension contributions) total about $690,000 per year; when the city’s roughly 50 total employees (many part-time) are included, total salaries and benefits are “roughly $925,000,” he said. Chris also explained which revenues are restricted: Class C road funds, for example, are “all used in roads account, period,” he said. He said water is run as an enterprise fund and the city has historically not transferred water revenues into the general fund.

Mark, a Zions Bank representative who has worked with the city before, reviewed Woodland Hills’ capacity to borrow against the same revenue pledge used for the 2019 sales-and-franchise tax bond. He said the combined telecommunications, energy and sales tax receipts tied to that pledge total about $415,000 per year now and that a standard coverage covenant would limit new borrowing to what that revenue can support. “With that $415,000 of revenue, you can only... approximately $276,000” in annual debt service under a 1.5x coverage covenant, he said.

Mark outlined one approach that “wraps” a new bond around the 2019 debt and would provide the city roughly $1.45 million of additional bonding capacity while keeping near-term payments lower for the first several years and rising later when the 2019 bonds mature in 2033. He and council members discussed using a mix of reserves and new borrowing to cover an estimated $2.6 million of road work. Mark said municipal borrowing can save money in some situations because construction inflation can push pay-as-you-go costs far above current construction prices: he and staff used conservative construction-inflation assumptions (roughly 6% annually) to compare scenarios.

Ted Mickelson, who represents public works and fire operations, joined staff explanations about leases and equipment. The city currently has multiple equipment and vehicle leases; examples cited included a front-end loader at about $26,000 per year and a service truck at about $22,000 per year, with other leased trucks accounting for roughly $68,000 annually and a fire-chief vehicle at about $17,500 a year. Chris said total annual payments (true debt) across the city’s loans are about $382,000 per year.

Debt details discussed by staff and shown in the packet included: - A 2014 water bond originally for $920,000; roughly $480,000 remains outstanding; interest just under 3%; last payment shown as October 2034; paid from water revenues (annual payment roughly $61,000). - A 2019 sales-and-franchise tax bond (refinanced from 2015 debt); annual payment roughly $107,000; callable in February 2026; interest shown about 2.43%. - A 2020 Bank of Utah loan of $580,000 (used for roads), with about $316,000 outstanding and an interest rate shown at about 1.5%. - A 2021 water revenue bond originally $2.8 million, about $2.5 million outstanding, 0% interest in the packet, annual payment roughly $99,000 paid from water revenues. - A loan for a fire engine originally $432,000 at about 4.79% interest, with annual payments shown at roughly $60,000.

Council members asked staff for more granular documentation about wildfire response revenue and overtime: staff confirmed the city’s wildland response crews generated about $456,735 in revenue for the calendar year through September, with expenses of about $274,875, producing a net positive of roughly $181,000 for the year to date. Chris clarified the city had been retaining a portion of that revenue for department needs and compliance obligations under state contracts.

Several council members and staff pressed for follow-up figures: how much of the wildland crews’ compensation is reimbursed by incidents, the detailed breakdown of wages and the share of vehicle lease costs charged to water versus general accounts. Chris and Laurie (city staff) said they can provide more detailed payroll and revenue documents on request.

What’s next: staff and Mark agreed the city does not need to decide financing at the meeting. Mark noted market rates change daily, the 2019 bonds are callable in February 2026, and the council could pursue a blended strategy using reserves plus a bond sized to match useful life of the road improvements. Council members suggested additional modeling and asked staff to return with more precise cash/reserve scenarios and a recommended financing structure.

Ending: The council did not vote on a financing plan at the Oct. 14 work session. Staff said they will prepare more detailed documentation on salaries, wildfire reimbursements and a concrete borrowing proposal for a future meeting so the council can decide whether to move forward with debt to accelerate the road program.