Lehi City 2026 Budget Retreat: Fund Accounting, Utility Rates, and Revenue Overview (2026-02-03)
Lehi City 2026 Budget Retreat – Governmental Accounting, Utility Funds, and Revenue Discussion
This budget retreat, held on February 3, 2026, from approximately 12:30 PM to 3:30 PM, provided city council members with an in-depth review of government fund accounting, utility fund health, and revenue sources. Finance Director Dean (along with staff members Allison and Carmen) led presentations on fund structures, sewer/water/power/garbage fund performance, sales and property tax trends, and franchise taxes. No formal votes were taken; the session was primarily educational and preparatory for upcoming rate decisions and budget discussions.
Discussion Items
- Government Fund Accounting: Dean explained fund accounting principles, distinguishing governmental activities (general fund, special revenue, capital projects, debt service) from business-type activities (enterprise funds: sewer, culinary water, pressurized irrigation, power, garbage; and internal service funds: fleet, IT, risk management, buildings). He noted that the general fund can have up to 35% of annual revenue in unassigned fund balance (state law), and that the city currently has about 30%.
- Sewer Fund: Operating revenue of approximately $15 million vs. operating expenses of $19.6 million (including depreciation). Removing depreciation yields a $1.7 million cash loss. The fund pays about 75% of its costs to Timpanogos Special Service District (TSSD). TSSD increased rates 50% in January 2024 and announced additional 15% increases in 2025 and 2026. The city raised sewer rates 25% two years ago and 15% last year, and is now considering another 15% increase. Cash reserves are $5.6 million (123 days of operating expenses). Councilmember Rachel questioned why TSSD rates vary across cities and why Alpine appears to pay less; Dean noted rates are based on metered flows and capital project needs.
- Culinary Water Fund: Healthy with large cash reserves and debt service coverage ratio of 5.5 (very strong). No rate increase planned. Pressurized irrigation (PI) fund has negative cash but is paying itself back for past capital projects; all new meters will be installed by 2030. A rate study consultant will use metered data to design a new rate structure with base and usage components.
- Garbage Fund: Operates essentially as a pass-through with Waste Management. Contract includes CPI escalation and rising landfill fees. Current rate $16.94/month; proposed increase of $1.50 in July to keep pace. Recycling contamination rate affects costs; cameras on trucks may be used for education (contentious issue previously).
- Power Fund: Unrestricted cash of $27 million (188 days). Debt service coverage is good. A rate study is underway; a gradual base charge ramp-up (up to $10/month) was implemented two years ago. Power costs spiked during the Texas winter freeze event, causing a $7 million monthly bill for two months. The fund has since recovered.
- Revenue Sources: Sales tax at 1% city portion – half is point-of-sale, half distributed by population. Property tax: Truth in Taxation laws require council approval to exceed certified tax rate. Sales tax growth: 9.15% year-over-year through November 2025, but state forecasts 3.5% growth for 2026. Property tax revenue stable with modest growth from new development. Franchise taxes: 6% on electric/gas, 5% on cable TV, 3% on telecom; cannot tax internet service.
- Comparisons with Other Cities: Lehi has the highest taxable property valuation in Utah County. Sales tax per capita is roughly average. Property tax rate is lower than many Salt Lake County cities, but those cities often have separate police/fire districts with higher fees. Council discussed pros and cons of creating dedicated public safety districts (transferring oversight, losing federal funding flexibility).
- Legacy Center & Recreation: General fund transfers ~$2 million annually to cover recreation programs (facility, youth sports, pools). The largest cost driver is the indoor pool.
Key Outcomes
- Preliminary Utility Rate Increases Proposed (to be finalized later):
- Sewer: 15% increase (to take effect July 1, 2026)
- Garbage: $1.50/month increase
- Power: New rate structure from ongoing study, to be presented at a future council meeting
- Pressurized irrigation: New metered rate structure to be developed after consultant receives sufficient data
- No votes taken on rate increases; these will be brought to council for formal adoption.
- Staff to provide separate reports on culinary and pressurized irrigation fund balances for council review (currently combined in financial statements).
- Council to receive a follow-up presentation on power rate study results in the coming weeks.
- Continued monitoring of sales tax trends and state legislative proposals on property tax caps (discussed as a concern for bedroom communities).
Meeting Transcript
You know what I'd be really interested in? I'm sure you have it is the year over year percent change. It makes sense. We can get yeah. So I'm so sorry. So it's station. Oh okay, okay. Okay. But there's also like 27 million in the T million cash. Can you hear me? Okay, we're there. Can you hear me in the back? You can Matt, you can hear me? Okay, it's 1230, so let's go ahead and get started. Welcome uh staff, all of our council members, we're all accounted for today. Uh welcome to our 1A of our budget retreats. So we'll start today. I'm gonna you guys have a calendar in front of you or a schedule in front of you. Um kind of rock and roll. So I think the Dean, are you ready to go? Okay, council members, just so you're aware, this is a recorded meeting. So if you have questions, please you have to speak into the microphone. So don't ask your question without not speaking into the microphones so that this can be okay with that. Um Jason, I know has a microphone that'll be passed around the back in the case um that there's comments from the back. So any questions? There's plenty of food in the back. There's drinks. Uh there are planned breaks in here, so um we should have a successful session here as we work. So Dean, with that, I'll turn it over to you. Is the mic work in? Okay. All right, thank you. Um what the main question on everybody's mind is what in the world hours, right? In fact, I was trying to put together slides and I'm like, four hours. So I actually broke them up like seven little sessions and we'll um put this together a little bit quicker. So you see typos like five up there. And I've got a lot, there's a lot of things in here, but if we want to talk more deep into anything, that's fine too. This was just hard to put together just because it's so much, and I just trying to get what I can and we'll um go. So our first presentation, we're just gonna talk about government accounting, which is like the most boring worst topic. Mel's had my class. Cameron's had my class. Not necessarily the most riveting stuff, but Armin Allison, yeah, Carmen Allison are here to answer questions that I'm not I'm unable to ask or unable to answer. So um Emily brought her ACFER. All this an ACFR. It's actually really what it's called. Annual comprehensive financial report. Um not that you need to memorize it or go in and highlight things, even if you but if you want to, you sure can't. Yeah, not at all. Um I just tell her I always joke that um my main job is to produce long complicated documents that no one reads. So but I'm glad that I'm glad we have someone who's reading it.
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