The Republic | azcentral.com
Projections for the upcoming budget in Scottsdale show a slight uptick in revenues, including crucial sales-tax collections, offset by rising health-care and pension costs.
Compared with the massive budget cuts of recent years, early estimates reflect a healthier budget outlook, although revenues continue to drag behind pre-recession years.
The city released key forecasts for the 2013-14 financial plan, which will cover the year from July 1 to June 30, 2014.
“My message to the council is going to be, ‘We are like the rest of the country, in a period of slow recovery from the recession,’ ” City Treasurer David Smith said. “But we are by no means back to what one would call the good old days.”
The projections, though still very early, are a far cry from previous trends as revenues spiraled downward in the recession, forcing the city to cut spending and find inventive ways to stave off multimillion-dollar shortfalls.
Sales-tax collections, a major revenue source and key indicator of the city’s economic health, are expected to rise by 4 percent next year compared with current end-of-year projections.
Compared with a peak of $120.2 million in 2006-07, revenue from the general sales tax are projected to reach $99.7 million next year.
The general sales-tax rate in Scottsdale is 1.1 percent.
Likewise, dollars distributed to Scottsdale from the state, including the city’s share of sales and income tax, are expected to increase 5 percent.
On Tuesday, staff will present key budget forecasts to the Scottsdale City Council, which is set to vote on a proposed budget this spring. The council typically adopts a final budget in June.
Sales-tax collections this year have fallen short of projections adopted in the current budget, which ends June 30.
The city is forecasting annual revenue to come in at $95.8 million, down from an initial $97.3 million.
“That has caused us a bit of concern in trying to make (up) ground,” said Mayor Jim Lane, noting that the city will have to look “very critically” at projected revenues and take a cautious approach “ not to over-estimate and over-forecast.”
“To suggest we’re going to be a higher rate is something we’re going to have to look at very closely,” Lane said.
Similarly, City Councilman Dennis Robbins said that “starting out conservatively is a good way to go.”
Scottsdale has several months of sales-tax collections left to analyze before adoption of the final budget.
“Right now, we’re talking about revenue projections in January for a budget that we’re not actually going to adopt until June,” Robbins said. “As we get closer to the actual budget adoption, we might be able to bump it up 1 or 2 percent.”
A key decision council members will face is whether to approve a propertytax increase.
In 2011 and 2012, the council declined a maximum-allowed 2 percent increase in the tax levy. Property owners still paid a slightly higher property-tax rate to offset plunging home values.
“I think in the last two budgets, we have not allowed (an increase) to happen,” Robbins said. “I think we will probably stay on that same course.”
In the new budget, council members can reverse prior decisions to reject a property-tax increase, making up those lost revenues.
Any allowable increases not taken in a given year accumulate and can be taken, in whole or in part, during a future year, Smith said.
Lane opposed the idea, calling it “an irresponsible position to take given the continuing difficulty of the overall economy.”
The proposed budget is due March 19.
Scottsdale forecasts little change in the overall pay and benefits for city employees.
Exceptions include health-care costs, which are expected to rise 8 percent next year, and a 4 percent increase in payments to the Arizona State Retirement System and Public Safety Personnel Retirement System. Down the road, health-care costs are expected to rise more than $1 million a year through at least 2017-18.
Also included in the budget is $1.2 million to raise the salaries of nearly 400 employees, a move the council approved this month to keep Scottsdale fair and competitive in the marketplace.
The strategy raises minimum salaries to as much as 5 percent above market average. The majority of employees are not affected.
Council members will have the option to incorporate pay raises into the new budget, which could involve market-adjustment or pay-for-performance raises.
Also on Tuesday, Derek Earle, acting executive director of public works, will give a presentation on the city’s 2013-14 capital-improvement plan budget.
The plan, which outlines ongoing and future city projects, is similar to past years, with “very limited funding” available from the general fund to pay for future projects, Earle said.
Major projects under construction include a park-and-ride in the Scottsdale Airpark and the Brown’s RanchTrailhead, set to open this spring north of Alma School Parkway and Dynamite Boulevard.
Improvements at TPC Scottsdale are in the design phase and include $9 million upgrades to the main Stadium Course and $3 million to improve a clubhouse.