STURGIS, S.D. – The City of Sturgis is confronting budget challenges that will require a united effort from the mayor, city council, and city staff to successfully overcome.
Through review of the city’s finances over the past year it has been discovered that the city’s expenses are outpacing revenues.
Mayor Angela Wilkerson, in working with city staff on the 2025 budget, realized that considering the council’s goal for realistic revenue projections combined with the city’s current cash reserve levels, the city would be unable to balance the budget with the departmental budget proposals that were submitted. Recent municipal sales tax trends are trending lower than anticipated and the costs of doing business is up considerably versus past years.
The mayor then asked each city department head to resubmit their budget proposal request cutting 10% of their total minimal operating budgets.
“I know this is not going to be easy and it might mean you have to reduce or eliminate some services provided by your department,” Wilkerson said in the memo.
She also tasked staff with looking for ways to increase revenue in their departments.
In some cases, fees for specific municipal services have not increased in 10 or 15 years although the cost to provide these services has increased in that timespan. In other cases, the city provides municipal services at zero cost to users or groups, although these services are not free to provide.
“This is a really trying time but please remember that we are all in this together. We will get through this,” Wilkerson told staff.
So how did Sturgis get to this point?
In the past, the city had cash reserves to depend upon when revenues were tight. But when the city used $1.4 million to purchase the Richards’ Property in 2022, that cushion deteriorated.
Another reason the city’s reserves have fallen is because the city invested in infrastructure improvements through Tax Increment Finance Districts that will be slow to be returned from taxes on new developments.
Ideally, the city should have 20% of its budget as cash on hand. This year’s budget totaled about $30 million. That would mean the city should have $6 million in reserves.
Reserves ensure there is cash on hand to cover the costs for emergency or major problems within the city, such as a water main break, catastrophic road failure or a natural disaster.
Besides the efforts to develop a more accurate 2025 budget, the city has implemented other initiatives to correct the budgetary deficits. Department heads have significantly cut back on spending in 2024, deferring new initiatives or projects, delaying upgrades or improvements, and creatively operating day-to-day.
Their efforts are appreciated, the mayor said.
Also, the city is reevaluating its plans for the Richards’ property given the aquatic park, although a popular concept, was not a financially viable project.
The city has also considered issuing sales tax revenue bonds to provide a secure way for the city to consolidate its debt and plan for future infrastructure developments within the community.
Sales tax revenue bonds are backed by the future revenue expected from local sales taxes. They are a common financial tool used by municipalities to support its growth and development initiatives.
A final recommendation on issuing a sales tax revenue bonds has not been made and the city is still exploring other ways to restore the city’s financial stability.
While budget cuts are coming, the mayor said she’s committed to working to restore the city’s financial stability which will require tough decisions and a commitment from all involved.
“We are focused on finding solutions that balance fiscal responsibility with the needs of our community,” she said. “Together, we will navigate these challenges and secure a stronger future for Sturgis.”
