Town Council revenue discussions have become a repetitive rite of budget review each spring to prepare financial plans for the coming year. It has become repetitive to the point that Vice Mayor Art Tolis has taken to calling the process “groundhog day” with a nod to the Bill Murray movie of that name.

Finance Director Craig Rudolphy reports once again a five-year projection with the cumulative shortfall expected to reach $4.4 million by Fiscal Year 2022/2023.

It is all but a certainty that the council will consider an increase in the local sales tax when it comes time to vote on the budget in June. The amount and whether there are four votes to pass it remains uncertain.

There was no shortage of other ideas kicked around during a four-hour council meeting on March 26; some practical, some not so much. The Times asked council members to restate some of their discussion in writing, which in part is being presented in this article.

“It’s now obvious that all council members agree that additional revenue is needed to keep our town moving forward and meeting basic budgetary needs – public safety, infrastructure and street maintenance, park enhancements, etc.,” Councilman Mike Scharnow said. “The rub, of course, is how we do that and how quickly.”

Mayor Ginny Dickey was pleased with the discussion that took place.

“Addressing revenue options is never going to be easy for any council. It was encouraging to be part of a discussion with colleagues who are straightforward and strong enough to consider the recommendations staff put before us, and add our own ideas,” Dickey said.

“We are residents and tax-payers ourselves, but that doesn’t always come through to citizens. I hope the level of scrutiny, while making the meeting longer than most, demonstrated how seriously we take the question of increased funding and capital improvement for our community.

“As I said [at the meeting], I appreciate the overall recognition – including the Strategic Planning Advisory Commission’s reprioritization – that we do need to raise operating revenue, while not abandoning limiting expenditures wherever we can.

“The nature of this issue is one which requires negotiation and cooperation. I am leaning toward raising the sales tax, a concept I normally would rather not support. Combined fees of hundreds of dollars, even with a sunset, is more difficult still…but we are going to work together and hope to land on something that is both palatable to our neighbors and enough to make meaningful progress to reduce the shortfall.”

Councilman David Spelich made a suggestion somewhat akin to searching the sofa cushions, albeit with much larger stashes.

“There is no doubt that the town should focus on expanding revenue sources,” Spelich said. “I [feel it is] imperative that before we ask residents for money, that I look for money that might not have been collected.”

One of those places with uncollected funds is the environmental fee. Spelich notes that even with a collection rate of about 90 percent there is still $126,000 delinquent. One single entity owes $9,000 on the fee, according to Spelich.

He is proposing that, as incentive, they offer a 30-day amnesty to bring accounts current. He suggests that after that, the names of those still in arears be published in the newspaper and posted to the town website.

“Isn’t our town worth $36 a year?” Spelich asked.

One of the ideas on the table to increase revenue is to double that fee, from $3 to $6 per month collected annually.

Spelich also pointed out that the town is owed $654,993 in delinquent court fees and fines over the past five years ($285,904 of that would go to the town’s General Fund). He suggests the hiring of a part-time court collections officer. At one time this was done by the Marshal’s Office with fairly effective results and, according to Spelich, the authorization to implement this system is still in Town Code.

“I refuse to leave money on the table while reaching our hands into residents’ pockets,” Spelich said.

Spelich also mentioned the public safety and infrastructure maintenance fee he has proposed.

“Further investigation must be done to explore the Public Safety/Maintenance and Infrastructure fee that I had previously proposed,” Spelich said. “I will always look for ways to cut spending and eliminate waste wherever possible.”

Tolis is looking at a different approach.

“The need for additional revenues for our community is real. We need to have funding for the ongoing infrastructure improvements [and] maintenance into the future and we are currently underfunded,” Tolis said. “The solution to this issue is multi-faceted and is not to vote in a fee, in my opinion. A fee would be a short-term revenue source which would not be enforceable to collect and also would be an unfair unequitable fee, which would be universally charged to all homeowners. I am not in favor of this type of unfair, unenforceable fee.”

Tolis also chastised the council for overreach on the failed property tax.

“The property tax initiative, which was proposed last year, was too much and unfortunately should have been the $3.5 million that I had proposed,” he said. “This would have created an equitable fair tax based on property values for all owners whether full-time residents or second homeowners/seasonal residents.

“The current sales tax revenues suffer when seasonal owners are not here to contribute to the community businesses which fund the sales tax revenues. The only way to fairly collect revenues from seasonal owners is the property tax option.

“I am not in favor of increasing the current sales tax in our community. We already have a high rate and tremendous vacancies in our commercial areas. Increasing the tax will only hurt current business owners and will create another reason for people to shop out of town.”

Tolis prefers an economic development program to boosting revenue. He proposed the sale of vacant town properties, determining the highest and best use of existing commercial properties and encouraging commercial building owners to invest in their properties.

“High-priced sales items should be an economic development target market. Creating a ‘Rodeo Drive’-like downtown will encourage high-end shopping and the higher the ticket item the more sales tax we generate,” Tolis said.

“It is critical we focus on creating something very special downtown. We have significant long-term risk associated with adjacent communities developing commercial property which will cause our sales tax to suffer.”

Tolis and Councilman Alan Magazine have an ongoing disagreement regarding the effectiveness of economic development.

“Some say that we should entice more businesses to come to town and the accompanying sales tax will solve our problem. Not so,” Magazine said. “It would take approximately $40 million in sales to produce $1 million in sales tax. At present, our sales are approximately half of that.

“The town’s costs continue to climb. Our environmental costs have risen from $478,000 four years ago to $854,000 while the environmental fee income is about $500,000 (these are costs the environmental fee is designed to partially offset).

“Public safety is 50 percent of our budget and still rising. This year Rural Metro increased their costs to the town by 3 percent ($108,400) and MCSO costs have risen 14.3 percent ($584,000). And roads – well, we all know about the continued deterioration.

“Unfortunately the Town Council finds itself in a conundrum,” Magazine continued. “Latest analysis indicates that we face a $4.5 million shortfall during the next four years, which will continue to rise unless some action is taken. Based on State law we must balance the budget each year. So what have we done? We have eliminated a large number of infrastructure needs and are told by staff that we will never be able to fund them unless we can find significantly more revenue. These are not sexy items. They have no constituency like parks or street repairs. They are necessary, nevertheless, if we hope to keep our town functioning at the level we have all come to expect and enjoy.”

Scharnow said the council members are striving to do what’s best for the community but they will never have unanimous support of the community.

“Some citizens may think the council and staff simply ignore expenditures or that budget cuts should be implemented rather than exploring sustainable revenue options,” Scharnow said. “I don’t think that thought pattern is fair or responsible at this point in time. It’s impossible to please every resident in town. Someone can always find a project or an idea they don’t like. This is part of living in a community and having your voice heard.

“Even if you voted against the property tax ballot measure last May, nothing has changed in terms of the need and the fiscal realities we have as a community. I completely agree with staff that we have a structural revenue issue and not a spending problem.

“A vote against the property tax was in essence a vote for the Town Council to pursue other revenue options. ‘Doing nothing’ is, I believe, not an option.”

At the meeting March 26 Scharnow voiced his support for an increase in the sales tax rate, noting that the last time the sales tax rate was increased was in 2003, some 16 years ago.

“We are looking at a three- or four-tenths increase in the local rate, which is currently at 2.6 percent,” he said. “There are nearly a dozen cities and towns that have higher sales tax rates at this time. I don’t believe a small increase such as this will hurt our local businesses or our retail climate.

“I realize some people don’t like government and certainly no one ‘loves’ taxes. This is always a controversial subject area. One of my main campaign themes was working to restore citizens’ trust in their Town Council and staff. I’m hoping folks will examine the facts and get behind our efforts to keep the Town of Fountain Hills healthy, vital and attractive for both residents and visitors alike.”

Councilwoman Sherry Leckrone said she believes the town must take steps to generate revenue.

“We must take seriously the forecast [for a shortfall] that is in front of us,” Leckrone said. “There is no monopoly on ideas. I think we will find the best mechanism to be a multi-faceted approach.

“I want to hear from the public and their ideas as we go forward.”

Staff is taking the bull by the horns for the time being. Town Manager Grady Miller outlined the steps they will take in the coming weeks.

“Based on council’s consensus last [week], we will be preparing for the council to provide direction to staff on the sales tax increase on April 16 [regular council session],” Miller said. “This will start the clock count on the 60-day notice requirement so the council can officially take action on increasing the sale tax rate at a future council meeting. The actual amount of the increase in the sales tax rate can take place as part of the budget process.

“We will be identifying a date for a special council meeting in April for the council to continue its discussion on revenue options and to provide direction to staff their preferences on other revenue options to start the 60-day notice requirement on the possible fees.”