This is part five 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
Part 3: Here’s an overview of town’s financial picture
Part 4: Overview of town’s finances

Shortly after the group was formed in 2006, the Town Council asked its Strategic Planning Advisory Commission (SPAC) to study the issue of the town facing a potential revenue shortfall in the future and come up with recommendations on how to address the concern.

The council had identified one of the important goals of the strategic planning process as adopting a solution for the anticipated revenue shortfall by the end of the 2006 calendar year.

When that deadline approached SPAC members told the council that the amount of research needed to propose an answer would likely take another year, and the deadline was extended to Dec. 31, 2007.

SPAC put together a committee of around 20 people drawn from all demographics of the community. It included several seniors normally active in the community, younger people, business people and members of key stakeholder groups in the community. SPAC Commissioner Jerry Butler was selected to head this committee.

The council had prided itself in making the strategic planning process a public process involving as many citizens as possible, and the goal was that this review continue in that vein.

There were focus group discussions and a number of public town hall sessions to discuss the issues. The committee also asked and received permission to get professional assistance in the form of TL Hocking & Associates, a municipal finance consulting firm.

While the property tax is the core recommendation and certainly the most controversial element, it is just one of several recommendations the council discussed and is considering or acting upon.

The primary property tax question being sent to the voters would annually collect $4.5 million for the town’s General Fund.

The council has also already approved an ordinance that would reduce the town’s local sales tax by .5 percent (2.6 to 2.1 percent) if the primary property tax is approved by voters. That reduction would be effective at the time the town begins to collect new property taxes.

The council also approved a resolution which stipulates that the revenue raised by the proposed property tax would be dedicated to public safety services such as the fire department and law enforcement.

It should be noted that such revenues would go into the town’s general fund and cannot legally be tied to any specific use. While the resolution signifies the commitment of the council that approved it, that is subject to change with each budget approval.

The SPAC subcommittee relied on the recommendations of the Hocking Report in making its presentation to the Town Council in December 2007.

There are five key recommendations from the committee, and only one of those deals specifically with finding ways to increase revenues.

The property tax is just one of five of those proposals.

The other revenue enhancement options include a program to assure the town is collecting all revenues and fees it currently has coming to it in the form of retail sales taxes, residential rental sales taxes and permit fees.

Hocking estimates the town could increase its sales tax revenues by 5 to 10 percent simply by improving its oversight.

This program would include the possibility of hiring staff to do this task, and currently no action has been taken.

Another recommendation is to increase the development and permit fees.

Steps have already been taken to adjust development fees based on inflation over the past two years since the last fees were implemented. The council is to consider approval of the fee change in May and if approved they would take effect on Aug. 1.

The inflation adjustment would add about 7 percent to the development fees.

The committee also proposed an increase in the town’s bed tax for hotels and resorts. No action has been taken on this item at this time.

It was suggested the town could increase some building revenues by making changes in the zoning ordinance related to building coverage on large residential lots.

This month the council approved a change that increases the lot coverage on one acre lots from 15 percent to 20 percent. It is also hoped this measure will help the town compete with surrounding communities for people in the market for purchasing an upscale home lot.

The final proposal for revenue enhancements is the formation of a storm water environmental utility. This utility would collect from all residents to help fund drainage improvements and maintain a system to comply with federal regulations for storm water quality standards.

The council has held an informational study session on this item but has not taken any further action. It could take up to two years to form such a utility and begin collecting fees.

The committee also had several recommendations that relate more to financial management and improving communication with the public on financial matters.

The committee asked for a three-year financial forecast that shows trends in sales tax revenues, shared revenues, reserve accounts, and the General Fund. This report would also identify funds available for key infrastructure needs.

Another proposal would be designed to reduce the amount of revenue needed to be raised with the primary property tax.

This would include spending guidelines that are triggered by changing revenue situations.

Also, the committee is asking for the implementation of an economic development program working with the Chamber of Commerce Business Vitality Team.

One final recommendation is a proposal that the town put on hold any major investments related to the implementation of the Strategic Plan three- to five-year goals.

A proposed fund management policy would put all construction-related revenues in excess of operating revenues into the General Fund reserve in an effort to build up a Rainy Day Fund.

Currently 85 percent of all construction related revenues go into the Capital Reserve Fund.

The committee is also asking the town to include in future town budgets a brief, easily understandable overview. The conclusion is that a 250-page document heavy on numbers is overwhelming for most citizens and can create mistrust.

Bob Deppe is one member of the Revenue Solutions Committee who disagrees with the conclusions regarding the property tax.

“We have been told for some time now that the town’s finances are in good shape,” Deppe said. “Additional revenues will not be needed for eight to 10 years.”

Deppe also questioned the need to build up future reserves.

Next week The Times will conclude this series with information about the proposed property tax including restrictions, calculations and collections.