Where Does the Money Come From?

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City Manager’s Desk
Matt Mueller

Funding is an essential part of any organization, and this is certainly the case at the City of Guthrie.  The amount of revenue that comes in directly affects what services the City is able to provide and what projects we are able to prioritize.  Since funding plays such a role in determining the activities of your local government, I just wanted to take a little bit of time to talk about the City of Guthrie’s funding sources. 

Like other municipalities in Oklahoma, the City of Guthrie’s primary source of funding is sales tax.  The sales tax projection in this year’s budget is $3,660,000 which easily makes it the highest source of revenue.  The dependence on sales tax is a little bit unique to Oklahoma as most municipalities in other states do not rely on sales tax as their primary funding source.

The reliance on sales tax presents some challenges for local officials.  Sales tax is a form of revenue that is highly affected by the economy, and it is a volatile source of funding.  We do our best to forecast sales tax revenue for the year when we prepare the annual budget, but sales tax numbers can see dramatic fluctuations month to month based on external scenarios and this causes some level of uncertainty throughout the fiscal year.

Another challenge that sales tax presents is the issue of retail leakage.  Retail leakage occurs when citizens leave Guthrie’s market area to go and do their shopping in other communities.  When this happens, the money being spent is going to fund the municipal services for residents in other communities rather than going back in the local economy.  Guthrie’s proximity to the Oklahoma City Metro area means that we have a significant amount of leakage.  When comparing our sales tax returns with communities of similar size that are not located near a metro area, a once cent sales tax in their community  produces almost three times the amount of money than a one cent sales tax in ours.  Nearly $15,000,000, over four times the amount of sales tax revenue that we receive, is lost to retail leakage in the Guthrie market area.

Guthrie’s overall sales tax rate is 8.50%, which is about average for the state.  The total 8.50% is broken down into the following: 4.5% is a state sales tax, 1.00% is a county sales tax, and 3% is the municipal sales tax.  The last time Guthrie changed the municipal sales tax rate was nearly 33 years ago and we are about ¾ of a cent below the state municipal average.

A small source of revenue I want to address is the revenue that comes from the municipal court.  This revenue comes from speeding tickets, code enforcement issued tickets, and other citations.  A common misconception in many communities is that the City encourages its police officers or other employees to write tickets in order to make up for declining revenues.  I can’t speak for every community, but I can assure you that this is not the case in Guthrie.  There are no such things as quotas, in fact they are illegal, and municipal court revenues make up only 3% of the total budget. Citations are not viewed as a revenue source, but rather as a punitive measure to encourage adherence to local ordinances and laws.

Another common misconception is that many people think when they pay their property taxes, they go to the City.  This is not normally the case.  In Oklahoma, property taxes can only be used by cities to fund capital improvements through General Obligation Bonds voted on by the public, or to pay for a judgment against the City.  There is a small caveat in Guthrie’s case as our Fire Department does contract with the local EMS board to provide ambulance services to the area and the ambulance district is funded by property tax.

The City Council also serves as the Board of Directors for the Guthrie Public Works Authority, which is a separate public trust.   The GPWA is responsible for oversight of the enterprise functions and for providing several of the utilities that many of our citizens use.  The GPWA’s revenue comes mostly from the rates and fees collected on utility sales.  The rates and fees that our utility customers pay are directly related to the cost to provide theses utilities to those who use them.

Regardless of where the funding comes from, the important thing is how it is used.  There are always spirited discussions about what funding priorities should be, but one thing that we should all agree upon is that all public money should be spent with a high amount of integrity.  At the City of Guthrie, we strive to be extremely effective and efficient so that our citizens receive the maximum amount of value from their public dollars.  A copy of our annual operating budget, annual audit, and several other sources of financial information can be found at the City of Guthrie website at www.cityofguthrie.com.

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