Prescott Council gives tentative OK to $220M budget
Proposal 15% higher than last year; pension debt remains subject of debate
Despite continuing debate over the City of Prescott’s schedule for paying down its pension debt, a $220 million budget received tentative approval from the City Council this week.
The total represents a 15.1 percent increase over the previous fiscal-year budget of $191.3 million.
Many of the budget details had already been worked out during previous meetings when the council considered its tentative budget adoption on June 11.
But one issue continued to raise questions from Councilman Phil Goode.
Earlier, Goode had urged the city to devote more of its general fund to go toward paying down Prescott’s $69 million unfunded liability with the Public Safety Personnel Retirement System (PSPRS).
Already in the budget, the city is poised to devote the nearly $13 million that it is expected to raise through the 0.75 percent sales tax that voters approved in 2017’s Proposition 443.
In addition, the city will pay its $7.3 million in the “annual required contribution” that PSPRS requires. That money will come from the city’s general fund — per the existing council policy.
But during a meeting in May, Goode advocated for paying about $1 million more from the city’s general fund, and he continued that push this week.
His contention is that the city should continue paying the amount that the PSPRS required before the Proposition 443 money began reducing the amount of the annual required contribution.
That way, Goode says, the city would be able to pay off its PSPRS debt sooner than the 10 years that the Proposition 443 sales tax allows.
Such a strategy would get the city to the “end point” sooner, Goode said at the previous meeting, referring to Proposition 443’s ballot language, which stated that the 0.75% sales tax would end either in 10 years (on Dec. 31, 2027), “or at such time as the city’s PSPRS unfunded liability is $1.5 million or less.”
Goode maintained that PSPRS’s investments have “chronically underperformed,” and that the city should be proactive in preparing for similar underperformance in the future.
“I’d rather be diligent,” Goode said. “This is a marathon, not a sprint.”
City Budget and Finance Director Mark Woodfill pointed out, however, that the city already is paying “essentially three times” what PSPRS’s actuarial calculations have indicated.
Based on Woodfill’s calculations, the city should have the PSPRS paid down to the $1.5 million unfunded-liability level by December 2025 — about two years before the required sunset of the sales tax in 2027.
Other council members have stressed that the city is doing what it promised in the policy that accompanied Proposition 443. That policy states that the city would pay its PSPRS annual required contribution out of the general fund — in addition to the amount raised by the sales tax.
At issue for Goode is the fact that the annual required contribution likely will drop regularly as the city pays down its unfunded liability.
For the coming fiscal year, for instance, the amount of the annual required contribution is expected to drop by nearly $1 million — from about $8.3 million in fiscal-year 2019 to $7.3 million in fiscal year 2020.
Still, other council members have emphasized that the city policy requires paying the annual required contribution (ARC) from the general fund, with no mention of maintaining the previous level.
“I appreciate Councilman Goode’s opinion, but that’s what it is — it’s his opinion,” Councilman Steve Sischka said. “We’re doing exactly what we promised.”
Council members have also noted that the rationale for Proposition 443 was to pay down the PSPRS debt while maintaining the level of city services.
Goode ultimately cast the only “no” vote against the 2019/20 budget. “Because (the PSPRS payment) is not sufficient, in my opinion, I will be a ‘no’ vote on this,” he said.
The tentative budget was approved by a 6-1 vote.
Still to come in the city’s budget deliberations is a public hearing and final adoption on June 25, and adoption of the property tax levy on July 9. The new fiscal year is set to begin on July 1.