Originally Published: February 1, 2017 6 a.m.
PRESCOTT – The details are still to come, but a tax-related ballot measure definitely will be going to Prescott voters in the city’s August election.
In a unanimous vote Tuesday, Jan. 31, the Prescott City Council called a special election for Aug. 29 – the same date as the regular City Council primary.
While a majority of council members were not ready this week to finalize the particulars – the percentage of the sales tax increase, for instance – all agreed that setting the election now would serve to “hold (their) feet to the fire” to come up with a revenue solution.
Meanwhile, the council intends to conduct weekly meetings until it works out the details of the ballot wording. The next such meeting is scheduled for 3 p.m. Tuesday, Feb. 7, at Prescott City Hall, 201 S. Cortez St.
Although the city’s $78 million to $82 million in unfunded liability with the Public Safety Personnel Retirement System (PSPRS) is central to the need for more revenue, the resolution that the council approved mentions only a special election, but does not refer to the pension system or a sales tax measure.
Before they finalize the details, council members stressed that all other options should be considered before going to the voters. During this week’s two-hour meeting, the council reviewed a list of 14 possible revenue solutions, and ultimately eliminated all but six.
Bankruptcy, a business tax, an income tax, and an increase in property tax were all eliminated – either because they were not feasible, or not legal in Arizona.
Among the remaining possibilities were: the sales tax-increase option; reducing spending; use of city financial reserves; borrowing money – either from other city departments or through bonding; and selling unneeded city property.
Budget and Finance Director Mark Woodfill pointed out that the city currently has about $13.3 million in its “unassigned” reserve fund. The money has accumulated through the years from higher-than-expected sales tax revenues, Woodfill said, as well as through actions such as the sale of the Elks Opera House.
The unassigned fund is in addition to the $6.7 million that the city has in its operations reserve (based on the policy of maintaining a 20-percent reserve in the general fund).
Council members appeared to support using a portion of the $13.3 million unassigned reserve to pay down the PSPRS liability, which, in turn, would reduce the city’s annual pension obligation.
The amount of the possible pay-down is still up for discussion, though, with Mayor Harry Oberg advising against paying down as much as $10 million, because of the risk of a coming market downturn, which he said could result in a loss by PSPRS of a portion of the $10 million.
Council members also appeared amenable to selling off some of the city’s unneeded property, and they asked City Manager Michael Lamar to evaluate the list of city properties to determine which, if any, would be feasible for sale or partial sale.
While the council’s Strategic Plan Committee has proposed a 0.75-percent sales tax-increase measure, the amount could change as the city works through its other options.
Also at issue is whether the revenue from a sales tax increase should be restricted to paying down the PSPRS shortfall, or whether it should be dedicated to public safety (fire and police) in general.
Mayor Pro Tem Jim Lamerson urged the council not to restrict new sales tax revenue to paying down the PSPRS; rather, he said, the sales tax should serve as a revenue stream for public safety.
On the other hand, the Strategic Plan Committee members have pushed for a 10-year tax, which would go exclusively for paying down the PSPRS obligation.
The council also heard from several members of the public, who voiced views that ranged from “no new taxes” to “do not touch the budget reserves” to “halt all fire and police hiring until after the new, less-expensive PSPRS tier goes into effect on July 1.”
On the hiring issue, Lamerson referred to comments that the council heard Monday, Jan. 30 from State reps. Noel Campbell and David Stringer, questioning the city’s move toward hiring new employees under the more-expensive existing pension tier. (Prescott plans to hire about 11 fire and police employees in coming months to fill vacancies, under the existing tier.)
Pointing out that governments around the state are set to add about 250 new officers under the existing pension tier (including 53 for the Arizona Department of Public Safety), Lamerson said, “I think the state needs to clean up its own act before it comes up and lectures us.”