By the end of the third quarter of this past fiscal year it was clear that the coronavirus pandemic was going to have a significant impact on economic activity and, therefore, revenue for sales tax reliant municipalities like Fountain Hills.

Town Manager Grady Miller stated his staff would use great caution in addressing expenditure needs through the end of the fiscal year and into the current year that began July 1.

At the Aug. 24 Town Council meeting, town Finance Director David Pock presented the final word on how the town finished the 2019/2020 fiscal year, and the news was quite good considering the situation.

“Once reserve policies and budgeted transfers are made, there should be a surplus of $1 million to $1.5 million that will be moved to the Capital Projects Fund,” Pock reported. “The increase in fund balance for FY20 is due to collecting more revenues than anticipated and spending less than budgeted.

“Revenues account for roughly two-thirds of the increase, and the other third is attributable to reduced expenditures.”

The council had approved a budget in 2019 with $32.6 million in expenditures. The town finished the year with $26.6 million spent, or $6 million under budget. The town had underspent its budget across the board in seven categories.

Revenues were closer to budget with the year, ending with $27.9 million in revenue. The approved budget anticipated $26.9 million.

Sales tax activity declined sharply in April as the pandemic took hold. However, activity for May through June this year showed an increase that is inconsistent with early summer months the previous three years.

Pock’s report indicates that wholesale and retail sales tax collections were relatively stable through the second half of the year. Construction sales tax collections were erratic over the entire year with a couple of peaks in October and January and showing a climb as the year ended.

As might be expected, the sales tax revenue generators that have taken the biggest hit through the economic downturn are restaurants and bars. The decline has been steady since February, but there is a bit of a bright spot with some climb for May and June.

Last year the Town Council approved a sales tax increase of .3 percent, which went into effect in November. However, since the tax was not approved or implemented at the time the budget was approved in June, none of that revenue was anticipated in the budget numbers for the past fiscal year.

Pock estimates the increase generated $900,000 to $1 million in revenue for the town during the past fiscal year.

Miller has committed to providing the council with a formal financial update on a quarterly basis through the new fiscal year. Informal updates will also be provided as monthly figures come in. The update for the first quarter of the new fiscal year would be presented in October.

Miller has said staff would anticipate making expenditure adjustments based on revenue figures as the year progresses.