Conservative approach has kept city finances stable | Local News

The first six months of the current fiscal year reflect a rather positive financial situation for the City, according to Chief Financial Officer David Pock. Reporting to the city council at its annual planning retreat on Feb. 22, Pock said nearly all revenue categories are ahead of budget projections for the first six months of the fiscal year.

Pock pointed to what he described in his report as “financial headwinds” that will require careful fiscal planning going forward. These challenges include inflation and increased pressure on the Federal Reserve to address inflationary concerns, a possible recession caused by interest rate hikes, sales tax categories that remain sensitive to economic conditions such as restaurants, bars and services, a potential reduction in Fountain Hills’ share of state-shared revenue, fewer development opportunities in the city, and increased infrastructure maintenance costs.

Mayor Ginny Dickey also noted that the Arizona State Legislature’s agenda could impact the city’s ability to collect transaction lien tax (sales tax), particularly in the category of building materials.

On the positive side of the forecast, Pock said the city’s conservative approach to revenue projections and close monitoring of spending has led to budget savings at the end of each fiscal year.

He also said the City’s sales tax base is relatively stable. Additionally, there is an increased number of hotel rooms which, together with short-term rentals, account for 57% of the city’s TPT revenue from the services category. The federal stimulus received has relieved some funding pressures for the city’s immediate infrastructure needs.

By the end of December, the City had collected $6.77 million in local sales taxes, compared to the $6.47 million budgeted. The service sector, including restaurants/bars, utilities and communications, was the main driver of revenue, according to Pock.

Intergovernmental revenue was $3.36 million for the period compared to a budget of $3.3 million. Pock said state-shared sales tax revenue was better than expected, but there was a slight decline in income tax revenue for FY20 (there is a lag two years in the income tax figures).

Other revenue categories collected $1.28 million compared to $1.13 million forecast.

Pock also reported on fund balances as of December 31, 2021, which are reserves comprising restricted, committed, restricted and unrestricted funds. The total for the four categories at the end of last calendar year was nearly $29 million.

Pock indicated where staff will focus at the start of budget planning for the 2022/2023 financial year. In addition to accounting for the “headwinds” and “tailwinds” mentioned above, budget assumptions also include maintaining existing service levels across all departments, a slight increase in sales tax as the activity returns to pre-pandemic levels, a 3% increase in the rural/metro contract for fire and emergency medical services and a 6% increase in the contract with the Maricopa County Sheriff’s Office for law enforcement.

The General Fund revenue forecast for FY23 is $23 million, including $17.3 million from TPT. Planned spending for the year is $19 million.

Pock also announced during the retreat session that the City will be working on an update to its facilities reserve fund program. Willdan Financial will review and assist in updating the current facility pool. They will focus on revising estimates related to replacement costs, include a more aggressive future value rate for estimating future costs, and provide a suggested funding strategy to ensure adequate resources are available when needed.

In his report to the board, Pock also reviewed potential uses of general fund savings resulting from the US bailout (ARPA).

The city received $4.2 million in July 2021 and an additional $4.2 million expected in July 2022. This funding was confirmed by the Treasury’s final rule in January.

Pock said the funding can be used for any government service; however, the city will remain consistent with how previous federal stimulus funds have been used for public safety. For the current fiscal year, 80% of the money will be used for the rural/metro contract due to pandemic-related costs for emergency medical services. The remaining 20% ​​will be used for the MCSO contract.

Staff recommends that the same ventilation be used for Exercise 23.

The resulting savings from the general fund will be used as directed by the board. These savings could potentially be used for community support grants ($300,000 for the current fiscal year and $100,000 for future pandemic-related expenses).

Additionally, remaining funds can be added to the Streets Fund budget.

The City assembled a committee of 13 volunteers to assess and discuss the long-term needs of city streets. The committee has been meeting since September and expects to present a report and recommendations to the board later this spring.

About Jefferey G. Cannon

Check Also

Annual Bob Dylan Birthday Celebration at the Old Town Center for the Arts

The Old Town Arts Center hosts the annual Bob Dylan Birthday Concert on Saturday, May …