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3:05 AM Sun, Dec. 16th

Economy Series, Day 3: Prescott Valley government avoids layoffs while trimming costs

Matt Hinshaw/The Daily Courier<br>
The Town of Prescott Valley’s 
new library takes shape.

Matt Hinshaw/The Daily Courier<br> The Town of Prescott Valley’s new library takes shape.

PRESCOTT VALLEY - The town government has weathered the economic slowdown by preparing as early as October 2007 for a revenue decline, town officials said.

"I think we are keeping our heads above water generally," Economic Development Manager Greg Fister said. "We are experiencing some bad times, but I don't think it is as tough as some (governmental) jurisdictions in the state."

With bad times on the horizon, Town Manager Larry Tarkowski in October 2007 imposed a freeze on hiring and new capital projects, and instructed department heads to cut their budgets by 10 percent. He said the town has about 225 employees, with the hiring freeze creating a vacancy rate of 8 percent.

"We started seeing the signs in September 2007" of revenues declining, Tarkowski said. "We started seeing a dramatic decrease in the number of new housing starts" that month.

His foresight proved true for a local government that lacks a property tax and derives 30 percent to 35 percent of its revenue from new residential and commercial growth.

Town officials anticipated a continuing slump when they prepared the budget for 2008-09, which concludes June 30. In fact, the Town Council adopted a budget of $92 million for 2008-09, down from $111 million for the past fiscal year.

The council adopted a smaller budget in part because a number of capital projects had been completed, according to Bill Kauppi, management services director. The capital projects budget dropped 48.8 percent, to about $28.3 million.

Smaller savings apparently will result from the hiring freeze. Kauppi's budget analysis projects employee costs to drop $336,398 to $16.5 million.

Kauppi and his staff prepared a budget that took into account sales tax revenues as of March 2008 declining 16 percent over the previous year. The budget overview report also anticipated an increase in retail sales tax collections in 2008-09 of 13 percent thanks to the addition of The Home Depot, Sam's Club, other retailers, and the Comfort Suites and Hampton Inn hotels.

The 2008-09 budget projects $11.7 million in town sales tax revenues, more than $3 million apiece from state sales taxes and Highway Revenue User Funds, and about $1.1 million from impact fees from developers.

Prescott Valley collected $4.1 million in sales tax revenues from July through October, down 9 percent from $4.5 million during the same period in 2007-08, Fister said.

"It's not good, but it's not dire," Fister said.

However, the direst news came on the home front. The town issued only one permit for single-family homes in September and zero in December.

The downward trend began in August 2007 with 27 permits for single-family homes, Fister said.

While the end of the housing slump is nowhere in sight, Prescott Valley is feeling an economic boost from a major capital improvement project that predates the October 2007 freeze: the $19.6 million construction project for the library building.

"We have approximately 30 different subcontractors on that job," said Allen Sander, project manager for Barton Malow, the Tempe-based company that landed the construction contract. He added construction of the 52,000-square-foot building is pumping $300,000 to $400,000 a month in the local economy, mostly for labor.

The reliance on construction has its drawbacks, Tarkowski and other town officials have acknowledged. He said town officials are trying to diversify the economy by working with the Prescott Valley Economic Development Foundation to retain and recruit job-creating businesses.

Town officials also seek to get a piece of the pie from the economic stimulus package that incoming President Barack Obama has promised. They have prepared a wish list of nearly 40 public works projects that are ready to go.