Plan B: What if the sales tax hike vote fails?
Short-term steps are in the works
Facing rapidly growing public-safety pension costs, Prescott officials say the city’s entire fund could one day be absorbed by the costs of police and fire services.
That would leave other general-fund costs – parks and recreation, airport, library, community development – with virtually no revenue source.
It was that dire scenario that led the city to ask voters in 2015 to increase the municipal sales tax by 0.55 percent to pay down the pension shortfall, which now stands at more than $78 million.
After the voters said ‘no’ two years ago, the city made major budget cuts in 2016, and has since grappled with how to “stabilize” its general fund.
Earlier this year, a council committee came up with a number of ideas for paying down the shortfall. Chief among them: Another sales tax ballot measure – this time for 0.75 percent – that will appear on the city’s primary ballot on Aug. 29.
City officials say they are planning to get out the word about the need for the sales tax increase, using everything from online surveys, to an education campaign, and presentations by council members.
Still, they acknowledge the possibility that voters won’t agree, and they say they have a “plan B” – for the short term, at least.
City Manager Michael Lamar says four main actions are under consideration. They include:
Further spending reductions
Because the fate of the 0.75-percent sales tax will not be known until two months into the upcoming fiscal year, Lamar says the budget will be compiled without the hopes of additional sales tax revenue.
Already, he has prepared for that possible scenario by opting not to fill a number of department-head-level positions (deputy city manager, economic initiative director, tourism director, field and facilities director) – moves that will save the city more than a half-million dollars.
With those cuts, Lamar said, “We could keep close to the existing levels of service (for fiscal year 2017-18, which begins July 1).” Currently, no layoffs or drastic service reductions are planned for the coming fiscal year, he said.
But, “The crunch is going to be going forward,” Lamar said, noting that by fiscal year 2018-19, more severe cuts would be needed – “likely leading to service reductions in areas like police, fire, library, recreation services.”
Sale and/or lease of surplus city properties
During a special meeting on Feb. 7, the City Council heard a presentation on the city’s “surplus” properties that could be put up for sale within the next six months.
Although council members made no decisions at that meeting, they did express interest in looking further into several of the parcels, including: Wildland Fire Station 7 on Sixth Street; a 0.68-acre parcel on South Alarcon Street in front of the Boys and Girls Club; a 0.29-acre old water-tank parcel on Tank Road near Copper Basin Road; and 2.29 acres at the Old South Reservoir located near Senator Highway.
Since that meeting, all of the council discussion has taken place in closed-door executive session. Although city officials have largely declined to discuss the properties, citing the confidentiality of executive sessions, some direction has emerged.
For instance, Fire Chief Dennis Light told a group of family members of the fallen Granite Mountain Hotshots in late February that the city would wait until May 1 to make a decision on the Station 7 property to give the group time to plan for the possible lease or purchase of the parcel for firefighter training or a museum.
And this past week, Lamar said he expects the city to list six to 10 of the other properties on the Multiple Listing Service (MLS) in the coming weeks, although he declined to discuss specific properties or their values.
Use of the capital reserve fund
Through the years, the city has maintained an “unassigned” reserve fund in its general fund to cover the cost of large capital expenses and economic development initiatives.
The money is accumulated through higher-than-projected sales tax revenues, as well as actions such as the 2012 sale of the Elks Theatre.
In the current year’s budget, the reserve totals about $14.5 million. In mid-February, the council considered using anywhere from $1 million to $10 million of the reserve to pay down the $78 million shortfall with the public-safety pension system (PSPRS), but ultimately decided that the city would be better served by keeping the bulk of the reserve on hand for future needs or emergencies.
Budget and Finance Director Mark Woodfill said the fund has been used over the years for large projects such as construction of the downtown parking garage, the Prescott Adult Center, and the Prescott Public Library expansion. In the current fiscal year, the city is devoting about $1.5 million of the reserve to new arena lighting and a grandstand electrical overhaul at the Prescott Rodeo Grounds.
Meanwhile, Lamar said the city also may need to tap into the reserve to maintain service levels in the coming year if the 0.75-percent sales tax proposal fails. But, he cautioned that the reserve is a finite source, and not a long-term fix.
Use of water/sewer funds to offset operating shortfalls
While the City Council has considering tapping into its utility capital-improvement funds to cover the PSPRS shortfall or general operating costs, Lamar said there was little interest in taking from those funds, which are earmarked for water and sewer line replacements and plant maintenance.