Originally Published: March 30, 2018 6 a.m.
With Prescott’s new 0.75-percent sales tax bringing in nearly $1 million in its first month, the city took another step this month in erasing its crippling pension debt.
City Budget and Finance Director Mark Woodfill reported to the City Council on Tuesday, March 27, that the voter-approved sales tax increase had generated $910,298 in January, the first month of its existence.
The sales tax report came in late Friday afternoon, Woodfill said, and he wired the entire amount to the Public Safety Personnel Retirement System (PSPRS) on Monday, March 26.
That brings the city’s total additional payments to the PSPRS to about $12.5 million in the current fiscal year. This week’s payment is in addition to the $11 million that the city paid from its reserves in November 2017, as well as $579,625 from last fall’s sale of Fire Station 7, and $25,000 from the sale of the Hotshot buggies.
The 0.75-percent tax, which is dedicated to paying down the PSPRS debt, is expected to continue to bring in similar monthly amounts in the next five months of the fiscal year — money that will also go toward the PSPRS debt.
Based on a similar revenue generation, the city’s additional payments for the 2017-18 fiscal year would total nearly $17.5 million.
That will be in addition to the city’s regular “annual required contribution” to PSPRS, toward which the city has already paid about $5.3 million this fiscal year.
Woodfill told the council that the city’s entire annual required contribution to PSPRS totaled $7.8 million in the current fiscal year, and is expected to be $8 million in the coming fiscal year, which begins July 1.
That is the money that is needed to cover the city’s normal cost of the pension, along with the unfunded-liability portion.
With the annual required contribution absorbing a growing portion of Prescott’s general fund each year, the city took a sales tax increase to the voters in August 2017. The ballot measure was billed as a way to pay down the city’s pension liability early, in order to bring down the growing annual costs.
At last count — in December 2017 — the city’s unfunded liability with PSPRS stood at $86.4 million.
Woodfill has emphasized that the new unfunded number does not factor in the city’s November payment of $11 million from the reserve fund, or the amounts from the sale of the fire station and buggies. Those payments came after the end of the previous fiscal year, which is the basis for the $86.4 million liability.
The next accounting of the city’s unfunded liability is expected to come in late 2018, and Woodfill said it will include the additional payments that occur in the current fiscal year, which ends June 30.
City Council members expressed optimism Tuesday that the sales tax revenues would serve to quickly pay down the pension debt. “This is a day to celebrate,” Mayor Pro Tem Billie Orr said. “It says to the public, ‘This is what we told you we were going to do, and this is what we’re doing.’”
Based on the council’s direction, Woodfill said, the city intends to budget the entire $8 million for the coming fiscal year’s annual required contribution to PSPRS out of its general fund.
Mayor Greg Mengarelli asked Woodfill to provide a regular report to the council on the status of the PSPRS-related sales tax.
He and other council members have emphasized the need to continue to pay the entire annual required contribution from the general fund, along with the additional payments from the sales tax.