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Property Tax Series: Budget shortfall is nothing new

March 5, 2018 12:25 pm

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The Fountain Hills budget shortfall is actually old news and a topic of much discussion over the last decade. It should be no surprise to anyone with the slightest interest in the Fountain Hills Town Council as it’s discussed frequently.

As shown by the Town’s budget director, in 2006 the budget deficit was predicted to occur in 2018. Town Councils since that time, along with the help of Town staff, have worked tirelessly to lessen the impending financial crisis. 

fountain hills budget

Many budget options have been considered. Over the past two years, the Town Council has studied the revenue shortfall issue and evaluated the following possibilities to address the problem:

  • Raise local sales tax rate (8.9% total with 2.6% to the Town and balance to State of Arizona)

  • Impose a public safety fee ($36 fee started in January 2016)

  • Levy a primary property tax

  • Create a special district, such as a fire district or a community facilities district

  • Implement a franchise fee

  • Increase Town fees

  • Expenditures – Reduce service levels or staff

 

The options above are strategies that were researched for viability, long-term impact and voter acceptance. The $36 environmental fee, imposed in January of 2016, was helpful to offset the costs of federal- and state-mandated clean water regulations. Read more here.

Revenue sources are limited. To understand the Town’s revenue options, it’s important to remember when Fountain Hills was growing briskly during the 1980’s and 1990’s, the Town was collecting millions of dollars each year in building fees. During the early 2000’s the building fees dropped off, budget started to decline and the economic crash in 2007 had a catastrophic impact on the Town’s revenue as nearly all building stopped in Fountain Hills. To stave off financial disaster, the Town staff and council acted to reduce the number of employees from 115 (2002) to 77 (2004) and further reductions to 61 people (2011) while sitting today at 54 total employees to operate the entire Town.

Raising sales tax is not a big win. While all purchases in Fountain Hills are subject to the 8.9% sales tax rate, only 2.6% comes back to the Town. The sales tax ending fiscal year 2017 was only $9,185,854 (which is nearly 30% of the $33M annual budget.) The balance goes to the State of Arizona. Let’s do some math. For example, if we want to raise $7M, we would need to sell an additional $269M in taxable items. Even raising the tax rate would only result in marginal increases and put this community at the top of the east valley sales tax scale with Queen Creek (3%), Guadalupe (3%) and Paradise Valley (4%).

A primary property tax is the only long-term stable option. By voting YES on the May 15, 2018 special election ballot, you give the Town of Fountain Hills permissions to levy a $7M annual primary property tax. The impact on your residential property can be estimated here. Join the Fountain Hills Chamber and help Save Our Town.

 

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