Scottsdale council looks at choices to spend $4M windfall

by Beth Duckett – Oct. 17, 2011 08:50 AM
The Arizona Republic

On the heels of ongoing budget cuts, Scottsdale got some good financial news this week.

City Manager David Richert proposed options to spend a $4 million windfall from last fiscal year, including a one-time “thank you” stipend for employees who have faced pay cuts and salary freezes in the battered economy.

The City Council will decide how to spend the money.

City Treasurer David Smith this week recapped final figures from the city’s 2010-11 general-fund budget, which ended June 30.

An “unreserved fund balance” is “$4 million better than we thought,” Smith told the council at Tuesday’s meeting. The fund is an accumulation of previous savings.

With the extra money to spend, Richert proposed a one-time concession of $2.5 million to be divided among employees, which several council members supported.

“We have not given increases in a very long time,” Vice Mayor Linda Milhaven said. “Those savings are due thanks to the staff’s savings.”

Employees faced 3 1/2 years of a “tough time,” Mayor Jim Lane said. In addition to pay freezes, the city this year increased the amount that employees and early retirees contribute to their health-insurance premiums.

Councilman Bob Littlefield said the stipend should apply only to employees who suffered through the slump, not new hires.
Property-tax decrease?

The unreserved fund balance totals $20.2 million. It is savings from prior years that carries forward, accumulating year over year, City Budget Manager Judy McIlroy said.

Earlier this year, the council divvied up a portion of the funds, dedicating $3.4 million to repay debt early, $2 million to the city’s capital improvement program and $5 million toward contingency funds for unexpected expenses.

That leaves $9.8 million that is “uncommitted.” Council members talked about tapping the uncommitted funds to lower property-tax rates. The quickest way to get money back to taxpayers is to lower the property tax rate, Littlefield said.

Earlier this year, the council rejected a 2 percent allowable increase in the city’s property-tax levy, which is the amount the city plans to raise through property taxes.

However, the primary property-tax rate still increased to about 44 cents, from about 38 cents, per $100 of assessed value. The city sets the levy, which determines the rate.

The city’s property taxes have two levies: primary and secondary. By paying down debt, Lane said, the city could reduce its secondary rate, which pays for debt on voter-approved bonds.

Lee Guillory, Scottsdale’s finance manager, said it is too late to lower the current property-tax rates.

The council could apply a portion of the unreserved fund balance toward next year’s levy, which would reduce the shared amount that property owners pay.

“While there would be a reduction in the levy, it is unknown if this would result in a reduced tax rate,” Guillory said.
Good financial news

The city appears to be on solid ground financially. In the first three months of this fiscal year, revenues were $1.9 million higher than expected, Smith said.

The 1 percent sales-tax revenue – an indication of the city’s economic health – was close to $1 million higher. The tax pays for general city services.

“Bottom line, sources are up $1.9 million compared to what we have budgeted for these first three months, and that’s a good result,” Smith said.

He noted that the city’s general-fund operating sources, except for sales tax, still lagged behind last year. During the first three months of 2010-11, total revenues reached $51.2 million, compared to $49.4 million this year. Revenues include sales, state-shared and property taxes and building permits.

Revenues from interest earnings and state-shared income taxes are down from previous years.

On a positive note, Scottsdale has experienced a drop in employee-related expenses, Smith said. From July to September, the city spent $53.4 million on personnel and operating expenses – $2.1 million below projections.

“If we can hold onto these kind of savings, it will turn out to be a comfortable year financially,” Smith said.

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