HomeMy WebLinkAbout2017.1010.TCSM.Minutes TOWN OF FOUNTAIN HILLS
MINUTES OF THE SPECIAL SESSION OF THE
FOUNTAIN HILLS TOWN COUNCIL
OCTOBER 10,2017
* CALL TO ORDER AND ROLL CALL
Mayor Kavanagh called the meeting to order at 5:30 p.m. in the Fountain Hills Town Council Chambers.
Present for roll call were the following members of the Town Council: Mayor Linda Kavanagh, Vice Mayor Alan
Magazine, Councilmember Nick DePorter, Councilmember Cecil Yates, Councilmember Dennis Brown,
Councilmember Art Tolis, Councilmember Henry Leger. Town Manager Grady E. Miller, Interim Town Attorney
Fredda Bisman,Dickinson Wright Law Firm,Finance Director Craig Rudolphy and Town Clerk Bevelyn Bender were
also present.
AGENDA ITEM #1 - DISCUSSION WITH POSSIBLE DIRECTION TO STAFF REGARDING THE
ADOPTION AND IMPLEMENTATION OF POTENTIAL REVENUE OPTIONS.
Town Manager Miller gave introductive remarks and provided background information on the Town's predicted
revenue shortfall within the next two to three years. Mr. Miller pointed out that Finance Director Craig Rudolphy had
indentified two revenue options and would be covering information included a PowerPoint presentation. Mr. Miller
stressed that decisions needed to be made this year to prevent revenue shortfalls in the future. Mr.Miller also outlined
the goals previously adopted by Council in the Strategic Plan and listed tasks to adequately fund the Town's Reserve
Fund and increase revenue to meet the community's needs. The plan also included addressing projected operating
shortfalls, which the Strategic Plan Committee identified and stressed that action should be a high priority. Mr. Miller
acknowledged those committee members in attendance at this meeting.
Mr. Miller requested Council make a decision tonight or no later than next month to give staff direction on this issue.
Mr. Miller introduced Finance Director Craig Rudolphy who covered information in a PowerPoint presentation
(available on-line or in the office of the Town Clerk).
Mr. Rudolphy pointed out that this would be the fourth time Council had met and discussed this issue and he decided
to highlight only the major issues of the Town's potential revenue shortfall. Mr. Rudolphy began by listing the major
expense drivers in the first slide and showed on a graph the annual cost of$13.9M for the Town's operations and noted
that in ten-years the cost was expected to reach an estimated $148M. Mr. Rudolphy explained that at the request of
Council he created a chart to explain the ten-year Finance Projection that showed the Town's future financial situation
and the total funds needed to maintain adequate resources and included those items deferred in the past.
Mr. Rudolphy recapped with a ten-year financial projection chart that showed an annual deficit of $6.4M and
explained with a five-year budget shortfall forecast chart that covered future fiscal years along with collected State
Shared Revenues and local revenues with totals. Mr. Rudolphy pointed out that all the totals identified in the ten-year
projection chart did not include additional items staff had requested and stressed that the shortfall was identified to
begin in 2018-19.
Mr. Rudolphy also included a slide used by the previous Town Manager in 2006-2007, that projected the Town's long
term financial picture and identified a deficit would be experienced in the future.
Mr. Rudolphy listed revenue options Council could consider and stated he could not present other options except for a
sales tax rate increase on some or all tax categories with an estimated one tenth of one percent increase in generated
revenue and totaling approximately$340K to address an average shortfall of$6.4M.
Mr.Rudolphy explained that a Public Safety Fee would generate approximately$1.2M in revenue per year.
Mr. Rudolphy discussed a slide listing the impact to property owners if a Primary Property Tax (PPT) was approved
using current assessed home valuations in Fountain Hills for different levels of taxed amounts that could be levied.
Mr.Rudolphy explained these three options must be voted on and approved by the Town's residents.
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Mr. Rudolphy added that information or findings on a possible "Special District" and options had not been received
from the previous Town Attorney.
Cot Mr. Rudolphy showed a slide offering other possible revenue options and stressed these options would not generate
large amounts of additional revenue into the Town.
• Franchise Fees.
• Continue TPT auditor to pursue residential rental taxes.
• Raise Town fees as in licenses and those permits not building related.
Mr. Rudolphy brought up other possible decreases in expenditure options involving the reduction of Town service
levels and finalized his presentation with a summary of choices in his last slide.
Mayor Kavanagh asked for Council discussion.
Councilmember Yates thanked Mr. Rudolphy for his excellent work and requested Mr. Rudolphy explain how the
Town seemed to always be able to balance their budget and why the Town's financial forecast could not be attainable
in the future and lastly how did the Town get to the point of having a $6.4M projected shortfall. Mr. Rudolphy
explained that many items listed and identified as being deferred previously and items that needed to be addressed in
the future had placed the Town in a deficit shortfall position. He pointed out that Town Manager Miller was
responsible for holding Town staff accountable for balancing their budgets and for finding ways to save money. Mr.
Rudolphy pointed out that in the last fiscal year's fourth quarter budget report, the amount of surplus was $1.1M in
2016-17, along with $100K of collected under-estimated tax revenue and $100K in under budgeted expenses,
expenditures or needed items,which explained historically the reason why the Town was showing any surplus at all.
Mr. Miller remarked that previous Councils believed the Town had more time to address the financial issues and
complimented the current Council for addressing these financial problems. Mr. Miller observed that many items the
Town was in need of had been deferred and currently those items increased in number and with additional costs.
(ageCouncilmember Yates said that the current street maintenance budget amounted to $1M - $2M, when a study showed
the Town needed at least $5M to just maintain the baseline of good streets, with $960K needed for the Replacement
and Reserve Fund. He stated that this year $2.5K was budgeted along with $1M funded from last year, and were
obtained mostly through budget transfers. Councilmember Yates stated these items were for unfunded needs in
addition to regular funded items.
Councilmember Leger said that historical information showed that when previous Councils addressed these issues, it
was a time of a down-turn in the economy, which had lasted for awhile. He added the Town had experienced a
difficult time managing the Town's finances due to tax revenue that dropped each year. Councilmember Leger pointed
out it was optimistic to believe the Town could grow-out of their financial situation.
Councilmember Leger and Mr. Rudolphy discussed increases in sales tax revenue and agreed the sales tax collected
exceeded levels seen in 2006-2007, by a small amount of approximately $200K. Mr. Rudolphy showed a slide that
listed the local sales tax collection amounts for fiscal year 2007 thru fiscal year 2017, and explained the collected
amounts.
Councilmember Leger commented on the enhancements currently in Economic Development and Tourism events and
stressed those needed to continue. Councilmember Leger discussed the property tax slide presented by Mr. Rudolphy
that showed what the affect a primary property tax (PPT) would have on property owners and their possible concerns
with the cost. He pointed out that the numbers used for calculation purposes were home value and not assessed value.
Mr.Rudolphy agreed with Councilmember Leger.
Vice Mayor Magazine asked if the Fountain Hills voters approved a PPT,would the amount of$6.4M allow the Town
to pay for items deferred. Mr. Rudolphy replied that the$6.4M did not include the deferred items and he did not know
the total amount needed at this time. Mr. Rudolphy pointed out the numbers also did not include inflation,because it
would only be a guesstimate. Vice Mayor Magazine stated that it was very important to know there could be an
iliew estimated 3% increase per year for inflation and within ten-years the buying power of$6.4 would be roughly$3.5M-
$4M and Mr. Rudolphy agreed. Vice Mayor Magazine felt this information was essential to know and if$6.4M was
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not sufficient then Council could possibly returned and increase the PPT. Mr. Rudolphy agreed with Vice Mayor
Magazine.
Councilmember Yates asked Mr. Rudolphy to elaborate on the Town's portion of the State Shared Revenue calculation
and if he projected any increases in the future. Mr. Rudolphy replied the Town's portion currently received totaled
approximately the same as in 2005, at the rate of.003 or maybe .004,but he was hoping the Town would grow in the
future and increase that amount. Mr. Rudolphy added that other municipalities could also grow reducing any possible
increase in this revenue.
Councilmember Leger discussed the Environmental Fee currently charged to the residents at $36.00 annually per
household, and asked for the total amount collected through this fee. Mr. Rudolphy answered $540K was projected
with roughly a 90%participation rate and with the final amount collected amount of$400K and administration costs of
approximately$50K and the Town netting$350K.
Mayor Kavanagh expressed concern that some Fountain Hills residents could not afford the additional taxation and
asked if there were provision to help those people. Mr. Rudolphy explained that exemptions were offered by Arizona
State Statute and was implemented by Maricopa County for seniors, Widowed Spouses, and the Elderly Assistance
Fund, for those 65 years or older. He commented that exemptions were determined by income level and those
exemptions were available to help pay primary and/or secondary property taxes through the County Assessor's Office.
Councilmember Yates asked when the Saguaro Boulevard road bond would be paid off and Mr. Rudolphy answered in
July 2020, and that would leave only one bond the Town was collecting from their residents for a variety of items,
which amounted to 5% of the property owners' tax bill. Mr. Rudolphy pointed out that unless a property owner lived
in the Eagle Mountain Community Facilities District(EMCFD), property owners were showing on their tax bill items
that covered education for County and State programs.
Councilmember Yates requested an update on the outstanding Community Center bond and Mr. Miller replied that the
bond would expire in 2019, but noted that Council had previously decided the money collected for the Community
Center bond, at the time of expiration,would be allocated to the streets program(roughly$400K) and would be added
to the approximate$2M currently funded into that program.
Councilmember DePorter said that over 18 months ago they had heard that the Town's Vision Plan regarding the level
of services created during the Town's incorporation process had been determined to be inadequate due to the reliance
on sales tax to cover Town expenses. Councilmember DePorter pointed out the ongoing increased costs for public
services continued upwards and suggested that Council and citizens consider their own Town Fire Department. He
found that a large portion of revenue acquired by Rural Metro Services was not from fire suppression, but medical
transfers within the community and felt there could be a possibility that Rural Metro would eliminate fire protection
from future contracts.
Councilmember DePorter also mentioned the deferred items Council had not addressed in the past and the increase in
their cost now and in the future. Councilmember DePorter added that he felt the citizens of Fountain Hills were open
to hear why the Town needed additional revenue sources and felt with current technology, those involved would have
easier time relaying information. Councilmember DePorter added it was especially important for the Town to have
and display a Council who were united while encouraging placement of a PPT on a ballot.
Councilmember Tolis thanked everyone who attended his recent Town Hall meeting to discuss options and provide
comments. He noted the meeting had a lively discussion and he appreciated receiving everyone's feedback.
Councilmember Tolis read a letter he submitted to the "Times" during his campaign to serve on Council that stated he
would be open to placing a PPT on a ballot, so residents could decide. He acknowledged over the last ten-months of
participation as a Councilmember he collectively worked with Council, staff, private citizens and business owners to
develop a strategy to address the Town's financial situation. Councilmember Tolis said he proposed engaging the
current residents in a venture to bring in visitors to help raise sales tax revenue, but found most citizens that attended
his Town Hall meeting supported a PPT instead and expressed how they wanted to continue to see the Town as it had
been without a large regional draw. Councilmember Tolis encouraged Council to give staff direction tonight on the
revenue issue and come to a consensus on a number and hopefully all would be supportive of their decision.
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Councilmember Yates acknowledged Councilmember Tolis efforts and his "no hidden agenda" idea involving the
Crystal Lagoon proposal and expressed his appreciation for his input that ultimately opened up the conversation for
everyone to express their opinions on revenue sources. Councilmember Yates suggested that Councilmember Tolis
remove the Crystal Lagoon project from Council consideration.
Councilmember Tolis stated his opinion on the issue and pointed out that originally the Crystal Lagoon was suggested
as a regional draw to bring in additional sales tax revenue,help developers promote Fountain Hills and add to the Park
Place Development. Councilmember Tolis said he that the project was not on the table, but felt the Feasibility Study
would be extremely valuable to the Town in the future.
Mayor Kavanagh thanked Councilmember Tolis for his hard work and acknowledged that the Town's citizens had
spoken in the last few months and wanted everyone to know that Councilmembers were listening and understood the
citizens did not want a regional draw due to the additional traffic from tourist in Town and that they liked the way
Fountain Hills was currently. She added that some people had stated they would not vote for a PPT,but those people
also understood more revenue must be created. Mayor Kavanagh pointed out that Fountain Hill's citizens were
currently more involved and supported removing the Crystal Lagoon project from consideration. She informed
everyone that events in Fountain Park would continue like the Oktoberfest,461 of July and other previously held events
enjoyed by all.
Vice-Mayor Magazine stated he was disturbed that the Town spent$38K on a Feasibility Study; Councilmember Tolis
restated how the information would be very valuable for the Town in the future.
Councilmember Brown noted his part in the passing of the Environmental Fee and explained that revenues collected
for this fee was approximately one-third of the costs of maintenance with other Town funding paying the larger portion
for Town dams, culvers and other maintenance items in Town. Councilmember Brown pointed out Council had
several options that could generate revenue for the Town, but he supported the only one that he saw would help grow
Fountain Hills and that was for all Councilmembers to vote on and encourage voters to pass a PPT to allow streets and
Town owned buildings to be addressed, since all were deteriorating. Councilmember Brown encouraged Council to
krir give direction to staff tonight to move ahead and support a ballot question to implement a property tax.
Mayor Kavanagh asked Town Clerk Bender if a property tax proposal was approved tonight by Council, would there
be time to place the PPT on the May ballot. Ms. Bender responded that the month of May was the only month the
Town could place a property tax on a ballot for voter's approval. Mr. Miller added that staff would return to Council
with a time-line schedule outlining the work necessary between staff and the County Office to proceed with the
implementation of the PPT on the May 2018 ballot.
Councilmember Leger complimented Mayor Kavanagh on her statements during this meeting and expressed his
support and Mayor Kavanagh expressed her appreciation for his compliment. Councilmember Leger stated he had
received the message from Fountain Hills citizens and understood they wanted a small Town atmosphere and he felt
Council had strayed away from that message,while attempting to solve a problem.
Councilmember Leger said he found that the Environmental Fee was not equitable and requested Council remove the
Environmental Fee and include the lost revenue amount with the PPT proposal. Councilmember Leger added that out
of the Environmental Fee collected,the Town paid out$50K in process collecting of the funds,with a 90%return rate,
while taking one-year to administer the program.
Councilmember Brown supported Councilmember Leger's comments and stated that four-years ago when the
Environmental Fee was established it was known by those in support that eventually the fee would be eliminated and
replaced with a PPT and he also suggested a possible reduction to the Town's sales tax rate along with other taxes
imposed within the Town if voters approved the PPT.
Mayor Kavanagh asked if there were any speaker cards and Ms. Bender answered three had been received.
Gary Yardwood, a 19 year resident of Fountain Hills and President of the ThunderRidge Homeowners' Association,
expressed that he was elated to hear Council's discussion that a PPT was the only solution to Fountain Hill's financial
problems and expressed his approval in the discussions of possible sale tax reduction and removal of the
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Environmental Fee. Mr. Yardwood said it was critical that Council agree on a number, so as to not find the Town in
the same position in the future underfunded. Mr. Yardwood added that he believed the State would allow the Council
to increase the PPT, if necessary in the future, without voter's approval and that should be considered in Council's
Cio, decision. Mr. Yardwood also stressed that Council must be united in their decision and noted that if not, it would be
difficult for voters to be supportive due to any division between Councilmembers.
Walter Maiwald, a one-year resident of Fountain Hills, expressed his support with Council's decision to remove the
Crystal Lagoon project discussion due to the possible proposal of a PPT and he noted feedback he had received from
his social circle regarding issues. Mr. Maiwald mentioned his participation along with others in the "Vision of
Fountain Hills" group discussions and all agreed that a PPT would not be enough if the Town did not show fiscal
responsibility with the additional funds and stressed Councilmembers and the Mayor needed to show that this was their
intent. Mr. Maiwald stated as an example as in the Park Place Development issue and that it was important to push for
collection of Development Fees. Mr. Maiwald felt that if these issues were addressed, the Council would see a lot of
support for the PPT approval.
Pam Trompeter Aguilu, a seven-year resident of Fountain Hills, thanked Councilmembers for their time and efforts on
behalf of Fountain Hills and expressed her thoughts on the importance for trust with the people and the Council's
fiduciary responsibility to their citizens. She also encouraged the Town to keep their experienced employees and how
that would be cost effective along with rewarding talented and hard working staff members. Ms. Aguilu suggested
creating a citizen panel for a "think tank" to help solve the financial shortfall by using talented and experienced local
citizens who live in Fountain Hills. Ms. Aguilu continued to encourage the Council to help existing businesses in
Town with a "Shop Local" campaign. Ms. Aguilu gave an oversight on how increasing sales tax would not work in
the long run. Ms. Aguilu stated support for a modest PPT with a solid number to get back on the right financial
footing.
Mayor Kavanagh suggested a separate vote on the items and Mr. Miller agreed on her breakdown, but informed
Council that the State Legislature was attempting to clamp down on future sales tax adjustments and suggested waiting
one-year after implementation of a successful PPT and then evaluate the Town's collection rate and make sure the
taserevenue collected was meeting Council's expectations. He also pointed out that would be a good gage on how the
Town was doing financially and the adjustment decisions could be made in the future.
Mayor Kavanagh asked about the timing of the elimination of the Environmental Fee and Mr. Miller replied only if
and when the voters approved the PPT on the May 2018 ballot. He continued to explain that budgets would have been
approved at that time, for the following year,and stressed it would be difficult to make-up the funds if the PPT was not
approved and would also hit Fountain Hills hard due to the time when Fountain Hills would see their first financial
deficient.
Mr. Miller suggested Council decided on a number during this meeting and allow the follow-up work necessary by
staff and he suggested making it part of the motion.
Vice Mayor Magazine MOVED to authorize staff to bring back information necessary to bring before the voters on a
Primary Property Tax (PPT) in the amount of$8M. Vice Mayor Magazine explained his motion by calculating the
elimination of the Environmental Fee along with a 2% inflation rate stressing a lower amount would not get the Town
to ten-years and calculated below the$6.4M projected necessary to fund the Town's needs and state he did not want to
return to the voters for an increase in the near future. He wanted to solve the problem completely.
Mayor Kavanagh asked Council for a second on Vice Mayor Magazine's motion. No second was received, so Mayor
Kavanagh announced the motion FAILED,due to the lack of a second.
Mayor Kavanagh asked for another motion.
Councilmember Tolis expressed his support for the PPT,which he promised the attendees at the Town Hall meeting he
would do and MOVED to authorize staff to draft language and take the necessary steps to have the ballot initiative
written to propose a $4M Primary Property Tax (PPT) for the May 2018 ballot, with sales tax remaining at the same
level.
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Councilmember Tolis wanted his statement on record that he proposed taking away the Crystal Lagoon project
indefinitely. Mayor Kavanagh asked Council for a second on Councilmember Toils motion. No second was received,
so Mayor Kavanagh announced the motion FAILED,due to the lack of a second.
Mr. Miller requested to review the five-year budget shortfall PowerPoint slide and pointed out that $4M would not be
sufficient to meet to Town's needs. Mr. Miller noted that currently the shortfall was proposed at$6.4M over ten-years
without enhancements or additional investment into streets, so$6M in a PPT would be a closer number.
Councilmember Brown said that $6.4M would not improve the streets and Town owned buildings, but would only
keep pace without going backwards. He believed$8M was a low amount to request due to the catch-up operations and
suggested$8.5M-$9M as a realistic number.
Councilmember Tolis asked if a long-term bond could be approved along with a smaller PPT and combined. Mr.
Miller believed that bonds could only be used for street reconstruction and staff would have to allow the streets to
deteriorate to that level before asking voters to approve a long-term bond. Mr. Miller explained that Council could
place a certain amount the first year in a fund authorized only for the use for streets and then bond the other streets that
required reconstruction with short term financing in the early years.
Councilmember Yates requested Mr. Rudolphy suggest a number using his professional experience and Mr. Rudolphy
answered that$6M was barely adequate and was underfunding, so he recommended larger than$6M. Councilmember
Yates suggested$7M and broke down his recommendation that$5M allocated to streets, $1 M for R&R, $500K taken
out of the EPA with$500K towards the shortfall and using the $2M-$2.5M already in the existing budget for streets to
cushion the Capital Improvement Projects (CIP), streets, cover deferred maintenance on Town buildings, personnel
and staffing issues and cost of living expenses. Councilmember Yates pointed out that Fountain Hills had the highest
tax rate in the east valley and he encouraged Economic Development, but stated that the sales tax rate needed to be
reduced and promised if voters supported the $7M proposed PPT along with fiscal responsibility on the Town's part,
the sales tax issue would be brought back for discussion and hopefully reduced.
Councilmember Leger supported the $7M proposed PPT along with a discussion regarding reducing the Town's sales
Niro tax and explained that recently he was informed that Fountain Hills was no longer the highest in sales tax rate due to
some municipalities who increased their sales tax. Councilmember Leger requested Town staff compile numbers, if
Council decided to address the sales tax rate issue, to allow adding an increase to the PPT to off-set the lost revenue.
Councilmember Leger could possibly support $7M PPT noting it would be adequate, but there was the option of
increasing the PPT by 2% annually, if necessary, and adjusting the number along with the elimination of the
Environmental Fee.
Councilmember DePorter remarked that any action Council took this evening, future Council's would be held
accountable and he asked citizens to express their opinions if they felt Council was not being fiscally responsible
through comments and elections. Councilmember DePorter stated his support for a proposed$7M, PPT and requested
the Environmental Fee eliminated.
Vice Mayor Magazine reiterated his position regarding the$7M that it did not include inflation and expressed concerns
that the amount would not be enough,but added he would support a consensus of the Council.
Councilmembers Yates MOVED to direct staff to move forward with planning for a $7M Primary Property Tax
question on the May 2018 ballot and bring back information for a formal action at a subsequent meeting and
Councilmember DePorter SECONDED the motion,which CARRIED UNANIMOUSLY(7-0).
Mr. Miller explained that staff would return at a future meeting with an outline of the process and noted a lot of public
information would be needed. Mr. Miller promised an informational package for Council's review and information
and pointed out that additional action may be needed by Council.
Councilmember Yates requested that Councilmember Tolis explain the Feasibility Study information requested by
LiCouncil and reiterated how important this information would be to Economic Development. Councilmember Tolis
explained that his focus was on a community and that it continues to be a quiet community. He stated that his previous
suggestions were only an attempt to solve the Town's financial challenges. Councilmember Tolis added that he
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understood the citizens did not want the traffic or regional draw and he respected their input and felt his action made it
possible for everyone to discuss how to address the Town's financial situation and the need for additional revenue.
Councilmember DePorter asked when the voters could begin a political action committee in support the PPT and
questioned if the Council could be involved. Mr. Miller explained that Town staff could not participate, but his
understanding was that Council could participate.
Mayor Kavanagh thanked everyone on behalf of Councilmembers for their input and participation and stressed
Council had listened and heard what the citizens in Fountain Hills said. Mayor Kavanagh also thanked
Councilmember Tolis for holding the Town Hall meeting on the Town's revenue shortfall.
AGENDA ITEM#2-ADJOURNMENT
Councilmember Yates made a MOTION to adjourn the meeting and Councilmember DePorter SECONDED the
motion,which CARRIED UNANIMOUSLY(7-0),by those present. The Special Session adjourned at 6:49 p.m.
TOWN OF FOUNTAIN HILLS
By
inda M.K anagh,Ma r
ATTEST AND
PREPARED BY:
Bevelyn Ben r, wn Clerk
CERTIFICATION
+ I hereby certify that the foregoing minutes are a true and correct copy of the minutes of the Special Session held by the
Town Council of Fountain Hills in the Town Hall Council Chambers on the 10th day of October,2017. I further certify
that the meeting was duly called and that a quorum was present.
DATED this 215t day of November 2017.
Bevelyn Bend ,T C erk
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