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Mulling over revenues for the town

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Is the town facing a budget crisis in the future?

“Crisis” might be too strong of a word, but the answer depends on who you talk to…

There is no question the Town of Fountain Hills relies too heavily on state-shared revenues and sales tax revenues – both of which are heavily dependent on the state of the economy and subject to dramatic ups and downs.

Combined, these two sources constitute 88 percent of the General Fund.

It’s tough to fund ongoing town expenses when the amount of future such revenue is questionable on an annual basis.

Recently the question has been introduced if the town should enact a public safety fee or not.

Town Manager Ken Buchanan doesn’t really have any skin left in this game – he’s set to retire soon – so perhaps his recent keen and unbiased observations are worth noting.

In a memo to the Town Council to introduce the 2015-16 budget, Buchanan outlined funding issues the town faces looking ahead:

*Increased costs for maintenance, repair and replacement of aging infrastructure (roads, buildings, parks, the Fountain, etc.).

*Dependence upon state-shared revenues to fund operating expenses.

*Dependence upon “economically volatile” local sales tax to fund operational expenditures.

*Decreased proportionate share of state-shared revenues due to increased population of surrounding cities combined with negligible population growth or decreased population in Fountain Hills.

*Lack of a growing, sustainable and diversified revenue base to fund ongoing operating costs.

*Potential state legislation impacting revenues, such as “sweeping” of state revenue or unfunded mandates.

*Retaining adequate human capital to maintain current service levels.

*Public safety costs as an increasing proportion of total expenditures, resulting in less funding for other core services.

Public safety costs represent an ever-increasing proportion of the town’s total expenditures. For about the past dozen years, total General Fund expenditures increased nearly 26 percent, while public safety costs increased 54 percent.

Law enforcement and fire costs represent 52 percent of the General Fund.

While most everyone agrees we are getting “good deals” from Rural/Metro and the Maricopa County Sheriff’s Office for public safety services, that’s not the issue here.

Back in 2001 the town’s total General Fund costs were $10.8 million. Thirteen years later, those costs have increased by $3.1 million.

Public safety costs accounted for $2.4 million of that $3.1 million increase.

That means revenue available for the remainder of the town’s core services has increased by only $400,000 over the past 13 years.

Buchanan wrote, “The problem lies not in total public safety costs to the town, which are fair and reasonable, but rather in the lack of a growing, sustainable and diversified revenue base.

“In order to provide the core services and amenities that the residents of Fountain Hills expect, new sources of revenue must be found in the near future.”

The town is fairly hamstrung when it comes to raising revenue from other sources.

Voters to date have been reluctant to approve a property tax, even when it’s been tied to specific costs. Voters rejected a $30 million bond package to pay for road maintenance and repairs. Sure, the electorate eventually approved $7 million to re-do Saguaro Blvd., but that $23 million is still needed to fix all the other streets in town.

With only a fraction of that now available in the annual operating budget, the town will never catch up with the annual street maintenance it needs to get done.

Meanwhile, those public safety costs sure aren’t going to come down.

Folks can say “cut, cut, cut” the budget all they want and that the town is doing fine.

But the long-term trend isn’t viable – it’s not a reasonable long-term approach to sound governance and having the Town of Fountain Hills continue providing core services.

I don’t think it’s unreasonable that some council members are looking to raise revenue. I also don’t think tourism is going to solve this issue.

No doubt there will be plenty of sniping about this issue, but I think the numbers speak for themselves.