Town officials debate Prop. 443

Sales tax increase proposal generates opposing views

Prescott City Councilman Steve Sischka, left, and former City Councilman Chris Kuknyo, interacting with the audience during the Tuesday forum.

Prescott City Councilman Steve Sischka, left, and former City Councilman Chris Kuknyo, interacting with the audience during the Tuesday forum.

One side sees the City of Prescott’s proposed pension-related sales tax increase as “attacking the problem head-on,” while the other side sees it as “putting gas in a car that you just wrecked.”

A current Prescott City Councilman and a former Councilman faced off Tuesday, June 6, over the city’s Aug. 29 ballot measure that will ask voters to increase sales tax by 0.75 percent to help pay down Prescott’s more than $78 million in unfunded liability with the Public Safety Personnel Retirement System (PSPRS).

Current Councilman Steve Sischka voiced support for the measure, while former Councilman Chris Kuknyo argued the opposition.

Sischka emphasized the city’s obligation to continue to provide services to its residents despite the growing PSPRS obligation, which will require a total city of contribution of $7.8 million in the coming fiscal year.

Without the sales tax increase, Sischka said, the city would have to make deep future cuts in services such as police and fire protection and library and parks and recreation services — moves that he said would cause continued harm in the community.

“Having Prescott hurt for a few years is not the salvation of Prescott,” Sischka said.

Kuknyo, on the other hand, stressed the statewide problems with the PSPRS system, and said a sales tax increase in Prescott would fall far short of solving the problem.

“We don’t think the (PSPRS) fund has been very responsible with our money, and if we continue to fund this, it’s not going to help solve the problem at all,” Kuknyo said.

Rather, he maintains that the city’s tax would “buy a little bit of time – maybe three to four years” for the city. “If you look at our payments going up and up and up every year, we don’t think the tax is going to fix that,” Kuknyo said.

The Prescott Chamber of Commerce-organized forum, which attracted about 60 people to Yavapai College’s community room, featured a number of written audience questions, which were read by forum moderator and Chamber President Sanford Cohen.

Several of the questions focused on the impacts to the community, should the sales tax fail.

Sischka predicted “tough times” in Prescott without the sales tax increase and said the opposition had no alternative plan. “Chris, with all due respect, your solution was doing nothing,” he said.

Kuknyo responded that it is not the responsibility of the opposition to come up with a solution.

Likewise, Sischka said it was “not Prescott’s job to fix PSPRS.” Rather, he said, the city should focus on providing needed services for its residents.

That is a view that resonated with audience member Dan Fraijo, a former Prescott Fire Chief and past candidate for mayor.

“The argument Steve Sischka made was very compelling,” Fraijo said later. “It’s not Prescott’s job to fix PSPRS; it’s all about services.”

Audience member Bob Betts voiced similar views. “I know we have to do something,” he said after the forum. And of the notion that the city should wait to let the state fix the problem, Betts predicted that until the City of Phoenix feels the full impacts of its PSPRS problem, “nobody’s going to fix anything.”

Sischka and Kuknyo also debated about what the city should do with the money freed up in its general fund, if the sales tax passes.

While the City Council has committed the entire proceeds from the sales tax increase to paying down the PSPRS shortfall, the use of the multi-million-dollar contribution that typically goes to PSPRS each year for the unfunded liability is less certain.

Kuknyo asked Sischka if the council would commit the sales tax proceeds and the freed up money to the PSPRS shortfall. Although Sischka initially said yes, he later clarified that he was referring to the city’s normal pension cost (excluding the amount dedicated to the unfunded liability).

In the coming fiscal year, the normal pension cost is expected to be about $1.3 million. “The general fund can handle that,” Sischka said, adding that it is the growing obligation for the unfunded liability that is causing the issue with the city’s general fund.

Kuknyo worried, however, that the freed up money would cause the City Council to shift its spending practices. “The general fund was called a general fund for a reason; not a slush fund,” he said.

City officials say that although the council has verbally committed to contributing the entire $7.8 million in the coming fiscal year to the PSPRS shortfall, the use of the freed up money in future years likely would be an annual policy issue for the council during its budget process.