It’s never been much of a secret.

Town officials began to sound warnings at least a decade ago that the community could not sustain itself on revenue from growth indefinitely.

They knew the Town of Fountain Hills has finite borders and eventually there would be no where else to build.

Or there would be economic downturns like the one being faced currently.

The town’s first town manager, the late Paul Nordin, knew this and reminded the council members frequently that there needed to be a diversification of revenue.

Nordin was, in fact, a driving force behind the development of Four Peaks Plaza with the Target department store. He persevered through two community-wide referendum elections in which the citizens overwhelmingly supported the project.

Deputy Town Manager/Finance Director Julie Ghetti learned much working for Nordin.

In more recent years Ghetti has prepared extensive revenue projections demonstrating how declining construction would impact town revenues as much as 25 years into the future.

However, no one anticipated that the drain in construction revenues would be any more than a manageable slow leak.

The current economic crisis has all but completely stopped income from construction.

 In 2000 the total value of the building permits issued by the Town of Fountain Hills was $150 million. That was halved to $71 million by 2002 following the Sept. 11 terrorist attacks, but exploded again during a housing boom to $152 million in 2005.

Last year the value of building permits issued by the town was just $35 million.

“Building permit revenue has declined almost 50 percent from the previous year,” said Mayor Jay Schlum. “(That) has resulted in a reduction of general fund revenue of approximately half a million dollars.”

There were barely more than two dozen new houses built in Fountain Hills during the 2008 calendar year, and through the first third of 2009 things do not look promising.

The town issued permits for just two single-family homes between Jan. 1 and April 30.

The decline in building revenues is also having a major impact of funds for capital improvement projects.

The town designates 85 percent of the revenue from construction sales tax to the capital improvement fund. All revenues from development fees are restricted for capital projects.

“Those fees are expected to decline 87 percent in (the next fiscal year), which will affect the timing of future capital projects,” Schlum said. “Projects may have to be deferred until sufficient revenues are received.”

Through the years the growth of Fountain Hills has had its ups and downs, but following incorporation in 1989 things generally moved upward.

The year 1997 was the peak year for residential construction.That year the town issued permits for 1170 residential units including single-family and multi-family units.

In 1998 the town reached the peak for single family home construction with 582 permits issued.

The current economic downturn is uncharted territory for long-time Fountain Hills builders.

How to persevere

Tim Yoder is one who has pretty much made his career as a home builder in Fountain Hills. His dad started building here in 1973, and Tim arrived a couple of years later to join the business.

There are about 450 homes in Fountain Hills that can claim to be “Yoder Built.” In 1978 they built about half the houses that went up in the town.

During 2008 the Yoders did not build a single home in Fountain Hills, and according to Tim, they have yet to talk with anyone about a new house this year.

Known as a man with an optimistic outlook, Tim said this recession has hit hard.

“This is worse than I originally thought it was going to be,” he said.

The Yoders are keeping busy with remodel projects and home additions. Those with some money available want to do what they can to maintain the value of their home.

“People are not interested in spending anything right now,” Yoder said. “This is probably the worst I’ve ever seen.”

Yoder is not really complaining – he recognizes that his company has been the beneficiary of a number of good years in housing in Fountain Hills.

He expects things will get better again, but he is not sure when. He said the value of existing homes is well below the cost of a new home right now. He said people will start building new homes again when the value of an existing is closer to what you can build new for.

Jack Bercel of Bercel Builders started building homes in Fountain Hills 28 years ago around 1981. He had been building in the Valley prior to that.

In recent years, remodeling has been the staple of Bercel’s business.

“We haven’t done a new home in three years,” Bercel said. “You can do nothing with a spec, and pre-solds are few and far between.”

Bercel said he is doing a lot of bidding on all types of remodel projects. He said that while kitchens and bathrooms are common remodeling projects, people are doing more of them together right now.

He said there are older homes that need restructuring, and there is a significant cost to doing that.

The availability of money for remodel projects is also an issue. Bercel said many people have had their home equity line of credit reduced or taken away altogether.

Also, when Bercel bids projects people are somewhat surprised that the cost is not lower. The cost of materials in this economy has not gone down that much, according to Bercel.

“We are all cutting our margins to increase our chances of getting the job,” he said. “But we use quality subs, there is only so much you can do.”

Review: 
Economic series, Part One: Surviving financial fallout
Economic series, Part Two: Sanitary District
Economic series, Part Three: School District
Economic series, Part Five: Town surviving
Economic series, Part Six: Laid off teachers
Economic series, Part Seven: Stimulus money
Economic series, Part Eight: Food Bank
Economic series, Part Nine: Retailers
Economic series, Part Ten: Mayor impacted
Economic series, Part Eleven: Real Estate