Chairman Kill had several speaker cards submitted from members of the audience who wished to speak on Item 2.
Helen Dankwerth, a Citizen of Oro Valley, addressed the F & B Committee stating she was the member on the Town Council who initiated the original Utility Tax. The idea being this would be a way to secure revenue for the Town. Discussion at previous Council meetings centered around other Towns with Utility Taxes and or Franchise Fees. At the time the cost came to $7.38 per household. This was not an easy sell among the council members as a 4% tax was a no go, but a 2% was feasible with a sunset clause. Ms. Dankworth asked the Committee to please consider requesting the Town Council continue the current Utility Tax. Ms. Dankwerth stated she feels very strongly that this group has as a responsibility to bring this forward to the Council for the best interest and the well being of the Town. She would like to have a quality of life tax brought before the Town Council to help the Town have a stable revenue source. Ms. Dankwerth stated in order to do this it will require educating the public.
Bill Adler, a Citizen of Oro Valley, spoke to the Committee regarding the anticipated deficit for next year. Mr. Adler stated no one is addressing what the quality and level of service will be if cuts are made. Mr. Adler stated the only way for the Town to raise income is through raising taxes. The Committee should not only recommend continuing the Utility Tax but should double it and earmark it toward specific departments where the greatest need is. He suggested that whatever monies are raised should be directed towards the departments with the most need. This will not make that much of an impact on individual households. Mr. Adler feels strongly that it is the Committee and the Town Council’s responsibility to maintain the level of service the citizens require.
Stacey Lemos, Finance Director, informed the Committee she had a statement in the form of printed material from Mr. John Musolf. Mr. Musolf was not able to make the meeting and had requested that the Committee be provided with the handouts he provided. The information discusses the history of the Utility Tax and this packet will become a part of the permanent record to the minutes of this meeting.
Upon review of the handouts Chairman Kill asked if this states the money derived from the of the Utility Tax was to be used to fund 18 positions and were these positions temporary or permanent.
Ms. Lemos replied the money derived from the Utility Tax was for 18.5 new permanent positions.
Chairman Kill - The amount is approx. 1.2 million and how much of that money was related to fund these new positions. Ms. Lemos replied almost dollar for dollar. Chairman Kill then asked what was the plan for the Town to permanently fund these positions. Ms. Lemos replied when this was looked at in the Five Year Forecast, it was anticipated that the tax revenue from the Oro Valley Marketplace was to be used to carry the Town through for the funding of these new positions.
Ms. Lemos then informed the Committee the Town Council has on the March 4th Agenda to discuss and consider the continuance of the 2% Utility Tax. Councilman Garner brought the Utility Tax renewal issue back to the Finance and Bond Committee for a recommendation. Ms. Lemos handed out a copy of the Five Year Forecast for the Committee’s review. Ms. Lemos told the Committee we are looking at a $5.2 million revenue shorfall next year with the sunsetting of the Utility Tax, decreases in building permits, retail sales, tax activity, state shared revenue and no or limited new growth.
Ms. Lemos stated there are a number of recommendations being presented to the Town Council at the March 4th meeting. Possible actions being considered to cut the 5.2 million dollar deficit include:
Staffing Reductions
Reorganization of Departments
Revenue Enhancement
Use of the Bed Tax Fund for the General Fund
Renewal of Utility Tax
Scrubbing Operational Budgets
Deferring Vehicle Expenditures
Possibility of Receiving Economic Stimulus to
help pay for Police Officers
There is also a possibility that the Town Council could look at further reductions including:
Closing Library for Additional Hours
Cutting Parks and Recs Programs Including Aquatics
The Dept. Heads have entered their budget requests into the system and the budget will be presented to the Town Council on April 1st.
Member Harris asked if this should note that we are not going to tap the Contingency fund. Ms. Lemos replied the Council will be made aware of what is available for use in the Contingency Fund.
Town Manager, David Andrews stated he is not recommending that the Contingency Fund be tapped into as this would be against our current Budget Policy. Chairman Kill asked Ms. Lemos if the F & B Committee could recommend that the Town Council tap into the Contingency Fund. Councilman Garner stated that Mr. Andrews cannot go against Budget Policy to recommend tapping into the Contingency Fund for recurring expenses.
Chairman Kill asked if an option could be to sell the land for the Naranja Town Park. Ms. Lemos stated yes, but it would have to be placed on a ballot for a public vote. Ms. Lemos stated that would be a one time fix to the current situation.
Mr. Andrews stated there are numerous options that are not listed. Mr. Andrews feels what is being presented is the best alternative due to time restraints.
Chairman Kill asked about the Economic Stimulus Projects and the fact that the Naranja Town Site was on this list. Mr. Andrews stated the voters had not vetoed the park, only the funding of the bonds for the park.
Member Lamm told the Committee that several months ago he recommended that the Town Council not utilize more than 1/7th of the Contingency Funds and if they did that it only be able by a super majority. Member Lamm proposed that the Town Council consider the option of using up to 1/7th of the beginning of the year FY2009/10 cash reserves/fund balance in both the General Fund and the Highway Fund as a means toward closing the projected $5.2 milllion budget deficit in those funds.
MOTION: A motion was made by Vice Chair Lamm and seconded by Member Harris to recommend that the Town Council change its policy to have the option of utilizing up to 1/7th of the contingency fund (general and highway fund).
MOTION carried, 4-1 with Member Parks opposed.
Councilman Garner asked Mr. Lamm to clarify if the Town Council’s vote for use of the contingency fund would be by a super majority or a simple majority and Mr. Lamm answered it would be by a simple majority vote.
Member Lamm told the Committee he believes the Town’s finances are totally unsound and the Town needs a revenue source that is as stable as the economy that drives it. Member Lamm stated if we are not going to have a property tax then he would propose we raise the Utility Tax to 4% to make the finances of this Town more stable.
Member Parks asked how this Utility Tax compares to other Towns’. Ms Lemos directed the Committee to material in the packet they were given and informed the committee there are only 6 Towns in Arizona who do not have a Utility Tax and/or some type of a Franchise Tax. We do not have a Franchise Tax. Ms. Lemos directed the Committe to a handout chart that shows what portions make up our General Fund Revenues. Sales tax make up 46% of our budget and 39% of the budget is state shared revenues with the remainder of the budget being provided by various sources. This shows how economically sensitive our tax base is with sales taxes, state shared revenues and residential building permits making up our tax base.
Member Lamm asked Ms. Lemos what percent of the revenue estimate would have been from building permits 5 years ago and what percent of sales taxes would have made up our budget. Ms. Lemos stated the bread and butter of five years ago was made up from residential development. These taxes were in the 7-8 million range vs. 4 million in the current budget. Of the Town’s $32 million adopted budget 75% is for personnel.
Ms Lemos told the Committee what is driving this is the unprecedented budget shortfall. When recovery does happen we will not be back to the way we did business before this recession. Growth will not happen at the pace it has been happening and we will be in a different economic situation. The Town is bringing these budget recommendations forward to the Town Council keeping in mind the changing situation.
Chairman Kill asked what would the total town budget savings be by doing a reduction in force. Ms. Lemos stated $1.5 million dollars. Chairman Kill asked how many positions are being recommended for reduction in force. Ms. Lemos stated 21 filled positions will be cut.
MOTION: A motion was made by and seconded by to
Discussion centered on whether Member Harris’ motion contained a sunset clause. He said no it did not contain a sunset clause per se.
Member Lamm stated this proposal is asking for a fundamental rethink of our revenue sources. Member Lamm proposed a change to Member Harris’
motion to include a 4% utility tax in lieu of the 2% utility tax. Member Harris rejected this proposed change stating he would like to leave the motion as presented.
Chairman Kill stated what the Committee is recommending to the Town Council is to review overall revenue sources for the Town and to come up with a complete mix that will sustain the Town in the future.
Member Parks stated he feels that changing the motion to 4% would confuse the issue.
Chairman Kill told the Committee it concerns him that we are raising taxes on people who cannot currently afford it. The possibility of a property tax was brought up in addition to the Utility Tax and then you would have an additional tax.
Councilman Garner stated you could have 10 nuisance taxes and end up paying more than you would with a property tax.
Member Lamm stated the citizens of this Town are going to have to decide what level of services we require. What’s on the table here is a viable revenue source. What we have before us right now is dealing with a specific revenue source.
Member Harris asked that his motion be moved on.
MOTION carried, 4-1 with Chair Kill opposed.
Chairman Kill told the Committee that he does not feel all the managers of the department are as cost conscious as we would like them to be.
Ms. Lemos invited the Finance and Bond Committee to the March 4th Town Council meeting.
Chairman Kill asked for any other questions or comments.