This is part three of a series of articles The Times is doing related to Town of Fountain Hills finances as residents prepare to go to the polls May 20 to consider a primary property tax.

Part 1: Series begins on property tax vote
Part 2: Here is an overview of the Town's financial picture

The town’s budget includes several separate funds that, unlike the General Fund, are not discretionary. This money needs to be used for specific purposes that are usually defined by law, constitutional decree or town policy.

Fountain Hills has in its budget for the current fiscal year categories of these funds that include special revenue funds, debt service funds, development fees and capital project funds.

The special revenue funds include the Highway Users Revenue Fund (HURF); excise tax revenue, which includes downtown development and some bond payments; court special revenues; and grants.

Debt service funds are divided into general obligation bonds and special districts.

Development fees are those revenues collected from new development to improve infrastructure to meet the needs of growth.

Capital projects are generally one-time expenses to add or improve amenities or facilities. Town Hall construction and improvements at Fountain and Desert Vista parks are examples of capital projects.

The HURF fund is one of the most widely used by the town because of its application to streets.

These funds are restricted by the state constitution for use specifically for streets and highway purposes. HURF monies may also be used for principal and interest on highway or street construction bonds.

The town budgeted $1,900,633 in HURF revenues for the 2007-2008 fiscal year. That money is raised from gasoline taxes and other transportation-related fees and is allocated by the state to communities based on population.

It should be noted that gasoline taxes are set per gallon and are not directly related to the sale price of gasoline, which is running near all-time highs.

The HURF fund is used to pay for street department personnel as well as routine annual maintenance work, traffic signals and construction work. This year the street department is expected to have more in expenses than revenue coming in. The budget will be balanced using the streets fund balance, or surplus from previous years.

As of June 30, 2007, the end of the last fiscal year, the town had $26,121,455 in outstanding principal on bond debt.

That included voter approved general obligation bonds for the Library/Museum building, the acquisition of land on the ridge above Fountain Lake and acquisition of portions of the McDowell Mountain Preserve.

This portion of the debt is being repaid with revenues from secondary property tax.

There were additional revenue bonds purchased by the town’s Municipal Property Corporation for funding the Community Center, Town Hall and the balance of the land within the McDowell Mountain Preserve.

The money for the Town Hall and preserve debt is raised from a designated portion of the sales tax. The revenue for the Community Center bond is transferred from the General Fund.

There is also debt from the Eagle Mountain Community Facilities District, which is repaid with a secondary property tax levy on property owners in the Eagle Mountain subdivision.

The Town Council is currently within a comment period for a proposed adjustment to its development fees. The proposed change would increase the fees in line with inflation.

The town collects development fees in seven different categories for use. The Arizona Constitution restricts the use of these revenues. The funds may only be allocated within the category they were collected for, and they can only be used for infrastructure that is expanded to accommodate new growth.

Fountain Hills collects development fees for law enforcement, streets, parks and recreation, open space, general government, fire department and library.

Development fees collected for Parks and Recreation are being used to help fund, along with a grant, the development of Desert Vista Park currently under way.

Development fees for streets have been used for new traffic signals, and revenues in the open space fund have been used for design work on the trail head in the McDowell Mountain Preserve.

For the current 2007-2008 fiscal year the town has budgeted $3,469,059 for capital improvement projects.

Some of the revenue for these projects has come from development fees, grants and the capital improvement fund, which was at $8.7 million at the beginning of the fiscal year.

The Town Council has established a policy that calls for 85 percent of the construction- related sales taxes to be placed in the capital fund.

The list of projects includes sidewalks, drainage improvements along Saguaro Blvd., a sweeper decant disposal facility for the street department, Desert Vista Park upgrades and development (includes dog park lights), Fountain Park irrigation, a fire truck and a portion for unanticipated costs.

The use of the special dedicated funding highlights the difference between the town’s discretionary General Fund and what is seen in the total budget.

The town’s General Fund revenues over the previous three years are as follow:

04-05 - $15,561,387
05-06 - $17,196,192
06-07 - $16,907,188

This compares with total revenues for the past three fiscal years:

04-05 - $36,300,000*
05-06 - $30,337098
06-07 - $25,498,295

The town’s General Fund expenditures over the past three fiscal years were as follows:

04-05 - $12,692,032
05-06 - $12,930,543
06-07 - $14,271,327

The town’s total expenditures over the past three fiscal years are as follows:

04-05 - $32,844,693*
05-06 - $22,527,535
06-07 - $21,365,765

*Includes $7.8 million in bond refinancing.

Next week The Times will be looking at the town’s decision to look at long-term finances and the concerns raised by that examination.