The Town Council will end its summer hiatus on Tuesday, Aug. 13, and one of the items on the agenda for that meeting will be consideration of an increase to the local sales tax.

The last hike for the sales tax was effective the first of April in 2003 with an increase of a full percentage point from 1.6 to 2.6, where it has remained ever since.

That increase was implemented to help offset the cost of fire and emergency medical services which the town had taken over when the council dissolved the fire district in 2001.

A study panel was formed to make revenue recommendations after a proposal to implement a primary property tax was nixed by voters in 2002. The panel recommended the sales tax hike, but also another attempt at a property tax vote and also endorsed an effort to re-establish the fire district, which would operate as an independent governmental body using a secondary property tax.

The council action in the spring of 2003 was to implement only one of these options and the sales tax increase would have been erased had either of the other options been successfully implemented, which they were not.

The proposal before the Town Council on Aug. 13 is to increase the sales tax by three-tenths of one percent (.3), raising it from the current 2.6 percent to 2.9 percent. With the state sales tax of 5.6 percent and the Maricopa County tax of .7 percent the overall sales tax rate for the Town of Fountain Hills would increase to 9.1 percent from 8.9.

The sales tax total of 9.1 percent would put Fountain Hills above Scottsdale (8.05); Tempe (8.1); and Mesa (8.3). However, Fountain Hills would remain below Cave Creek and Carefree (both 9.3) and Payson (9.6).

The Town Council has established four individual funds to which local sales tax is dedicated. For the current fiscal year these funds are budgeted as follows: Downtown Strategy Fund, $82,000; Economic Development Fund, $378,000; Pavement Management, $819,000; and capital improvement fund, $640,000. The remaining $9.1 million is in the General Fund.

Local sales tax revenue for the town has been relatively flat since coming out of the Great Recession. In the 2016/17 fiscal year the town took in $9.4 million; in the 2017/18 year the amount was $10.3 million, as it was again in the 2018/19 fiscal year.

Staff has projected and budgeted $11 million in local sales tax revenue for the 2019/20 fiscal year. That does not consider an increase. Staff is projecting that the .3 percent local sales tax increase would generate approximately $1 million. Any revenue generated in the current fiscal year after the increase took effect would not be spent because it is not budgeted. Funds would likely be directed to the capital fund temporarily.

The council is also considering the implementation of a public safety fee when it meets on Aug. 13. Between the sales tax increase and the public safety fee of $185 per year, per land parcel within the town, staff is projecting these actions will generate approximately $4 million per year.

The staff recommendation on these revenue options states that “while the proposed sales tax increase and public safety fee will address the revenue shortfall in the near future…the Town of Fountain Hills will likely need to find additional revenue sources beyond the next five years.”