Upcoming city budget reflects healthier outlook

By Beth Duckett
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.

Conservative approach

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.”

Proposed budget

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.

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