PRESCOTT VALLEY - The Town Council plans to adopt a leaner tentative budget for the upcoming fiscal year Thursday evening.
The council will consider a $66.9 million budget - down about $5.3 million from the current fiscal year - for fiscal year 2011-2012, which begins July 1.
The council reviewed the tentative budget May 4 and 5 when Town Manager Larry Tarkowski, Management Services Director Bill Kauppi, and other department heads and managers made presentations. Tarkowski indicated that he believed "the darkest days" of the Great Recession were over.
Management Services staff, who prepared the tentative budget, project total revenue sources exceeding $46 million, according to the budget summary. Those sources include town sales tax revenues exceeding $8.9 million, $7.7 million in the water fund from fees and other sources, about $4.3 million in Highway User Revenue funds, $4.6 million in the wastewater fund and more than $2.5 million in grants.
Local sales taxes account for the largest single source of revenue for the general fund, which will exceed $21.8 million of the overall budget and largely covers the costs of operating the town government.
Anticipating revenues would drop, town officials began taking austerity measures in October 2007 by imposing a hiring freeze. The national recession struck in December 2007, and hit home with sales tax revenues and building permits declining while unemployment and foreclosures climbed.
In November 2008, town officials boasted about building up reserves of $22 million.
"We are going to be in good shape," Mayor Harvey Skoog said during a press conference at the time.
At the time, Kauppi said the reserves amounted to about 80 percent of the town's annual operating costs. Town governments like to build up reserves to cover emergencies and other unexpected costs.
Those reserves have fallen in half to $11 million, Kauppi said.
"One (reason) is our revenues have declined primarily in the sales tax area," he said. "And we have not laid any employees off at this point."
Kauppi acknowledged the town lost about 50 employees through attrition.
"Also, we have some obligations, some main developer obligations like the Crossroads in what we have to pay out" to reimburse developers from sales tax collections for infrastructure improvements, he said.
The town government reimbursed Kitchell, developer of the Crossroads, for widening Highway 69, and installing traffic signals and storm drains, Kauppi said.
The question of whether $11 million in reserves is healthy "depends on who you want to ask," Kauppi said. He added the town's financial policy recommends $7 million to $8 million for reserves.
"It is primarily to be used for a downturn in the economy," Kauppi said.
Kauppi likely will make a presentation on the tentative budget during the special council meeting Thursday. The council is prepared to adopt the budget Thursday and approve the final budget June 23.
The council plans three meetings Thursday beginning with deliberations on tentative budgets for eight community facilities districts. The meeting starts at 5:30 p.m. in the library auditorium, 7401 E. Civic Circle.
The council will conclude with a work/study session with discussions, presentations or both on water resources and public transit updates, a contract for the sewer plant and "inside NAU screening."