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Home My WebLink About2019.0418.TCSM.Packet TIME: 6:00 P.M. – SPECIAL MEETING WHEN: THURSDAY, APRIL 18, 2019 WHERE: FOUNTAIN HILLS TOWN HALL – COUNCIL CHAMBERS 16705 E. AVENUE OF THE FOUNTAINS, FOUNTAIN HILLS, AZ Councilmembers of the Town of Fountain Hills will attend either in person or by telephone conference call; a quorum of the Town’s various commission, committee or board members may be in attendance at the Council meeting. Notice is hereby given that pursuant to A.R.S. §1-602.A.9, subject to certain specified statutory exceptions, parents have a right to consent before the State or any of its political subdivisions makes a video or audio recording of a minor child. Meetings of the Town Council are audio and/or video recorded and, as a result, proceedings in which children are present may be subject to such recording. Parents, in order to exercise their rights may either file written consent with the Town Clerk to such recording, or take personal action to ensure that their child or children are not present when a recording may be made. If a child is present at the time a recording is made, the Town will assume that the rights afforded parents pursuan t to A.R.S. §1-602.A.9 have been waived. 1. CALL TO ORDER – Mayor Ginny Dickey 2. ROLL CALL – Mayor Ginny Dickey 3. Discussion and direction to staff regarding the following proposed revenue options and user fees: A. Sales Tax Rate Adjustment B. Public Safety Fee C. Environmental Fee D. Public Safety, Streets and Infrastructure Fee E. Other Possible Revenues 4. ADJOURNMENT DATED this 11th day of April, 2019. ____________________________________ Elizabeth A. Burke, MMC, Town Clerk Mayor Ginny Dickey Vice Mayor Art Tolis Councilmember Alan Magazine Councilmember Dennis Brown Councilmember Mike Scharnow Councilmember Sherry Leckrone Councilmember David Spelich NOTICE OF MEETING SPECIAL MEETING FOUNTAIN HILLS TOWN COUNCIL TOWN OF FOUNTAIN HILLS Revenue Options -Revisited April 18, 2019 Financial Challenges 2 Summary of Financial Challenges •Fountain Hills is projecting a $4.6 million cumulative revenue shortfall over the next 5 years –assuming the status quo •In the past, the Town has made significant cuts in staffing and has contracted out numerous services (62% of General Fund expenditures are contracted out) •Any future cuts will be drastic and will involve reductions in services that will negatively impact residents •The structural issue is a revenue problem, not an expenditure problem •Council had taken action to refer a ballot question to voters in May of 2018 regarding a primary property tax to address the revenue shortfall issue 3 Five Year Financial Forecast – assuming status quo 4 General Fund Projections 5 $0.0 $5.0 $10.0 $15.0 $20.0 $25.0 FY19-20 FY20-21 FY21-22 FY22-23 FY23-24MillionsFY20-24 Projected General Fund Revenues and Expenditures OPERATING EXPENDITURES OPERATING REVENUES General Fund Projections -continued 6 FISCAL YEAR (July to June) STATE SHARED REVENUES LOCAL REVENUES TOTAL GF EXPEND. SURPLUS/ (SHORTFALL) 2019-20 6,220,134 10,664,296 16,884,430 - 2020-21 6,251,977 10,972,228 17,517,485 (293,280) 2021-22 6,290,174 11,286,317 18,383,723 (807,232) 2022-23 6,329,033 11,636,713 19,365,602 (1,399,856) 2023-24 6,368,936 11,860,365 20,369,674 (2,140,373) (4,640,741) Five Year Financial Forecast – including deferred items 7 General Fund Projections –major deferred items –5 year totals •Additional Staffing -$5.2 million •Contractual Services -$11.5 million •Capital Expenditures -$8.7 million 8 General Fund Projections -continued 9 $- $5 $10 $15 $20 $25 $30 FY19-20 FY20-21 FY21-22 FY22-23 FY23-24Millions5 Year Projection Operating Expenditures - 5 Year Projected expenditures - 5 Years Operating Revenues - 5 Years General Fund Projections -continued 10 FY19-20 FY20-21 FY21-22 FY22-23 FY23-24 Total Revenues 16,884,430 17,224,205 17,576,491 17,965,746 18,229,301 Total Expenditures $21,946,976 $22,690,451 $23,622,753 $25,278,781 $24,858,676 - 5,000,000 10,000,000 15,000,000 20,000,000 25,000,000 30,000,000 5 Year Projection General Fund Projections -continued 11 FISCAL YEAR (July to June) STATE SHARED REVENUES LOCAL REVENUES TOTAL GF EXPEND. SURPLUS/ (SHORTFALL) 2019-20 6,220,134 10,664,296 21,946,976 (5,062,546) 2020-21 6,251,977 10,972,228 22,690,451 (5,466,246) 2021-22 6,290,174 11,286,317 23,622,753 (6,046,262) 2022-23 6,329,033 11,636,713 25,278,781 (7,313,035) 2023-24 6,368,936 11,860,365 24,858,676 (6,629,375) (30,517,464) Comments •Accepted practice for general obligation bonds is to only issue bonds as tax exempt. If tax exempt, bonds cannot be used for maintenance. •All bonds require interest payments in addition to the cost of the projects, resulting in a higher cost to residents over time. 12 Possible Revenue Options to Address Financial Challenges 13 Sales Tax •Increase sales tax rate (on some or all tax categories) •Estimate that each one tenth of one percent (0.1%) increase in rates (all categories) would generate approximately $340,000 in additional revenue –Current rate for Town is 2.6% –Total State tax rate is 8.9% •Unclear if Proposition 126 will have any impact on the Council’s authority, now or in the future •A 0.3% increase to 2.9% would generate $1,020,000 •A 0.4% increase to 3.0% would generate $1,360,000 14 Sales Tax -continued •Actual FY17-18 sales tax revenue was $10,311,582 •$10,311,582 in revenue translates to $396,599,308 in gross sales •To generate an additional $1,000,000 in sales tax revenue would require an additional $38,461,538 in gross sales 15 16 TPT (Sales) Tax Rates - effective February 1, 2019 City/Town Name Location E-East Valley W-West Valley Retail Tax Rate Total Rate P-Primary S-Secondary Guadalupe E 4.0%10.3%- Gila Bend W 3.5%9.8%P - S Buckeye W 3.0%9.3%P - S Carefree E 3.0%9.3%- Cave Creek E 3.0%9.3%- El Mirage W 3.0%9.3%P - S Youngtown W 3.0%9.3%- Glendale W 2.9%9.2%P - S Litchfield Park W 2.8%9.1%- Fountain Hills E 2.6%8.9%S Avondale W 2.5%8.8%P - S Goodyear W 2.5%8.8%P - S Retail Rate 17 TPT (Sales) Tax Rates - effective February 1, 2019 City/Town Name Location E-East Valley W-West Valley Retail Tax Rate Total Rate P-Primary S-Secondary Paradise Valley E 2.5%8.8%- Tolleson W 2.5%8.8%P - S Apache Junction E 2.4%9.1%- Phoenix E/W 2.3%8.6%P - S Queen Creek E 2.25%8.55%P Surprise W 2.2%8.5%P Wickenburg W 2.2%8.5%P Peoria W 1.8%8.1%P - S Tempe E 1.8%8.1%P - S Mesa E 1.75%8.05%S Scottsdale E 1.75%8.05%P - S Chandler E 1.5%7.8%P - S Gilbert E 1.5%7.8%S Retail Rate Public Safety Fee •Implement public safety fee to recover increasing costs of MCSO and Rural Metro •Town businesses –600 (not including 557 home-based businesses •Town households –11,699 (per Sites USA data) •Town parcels –approximately 15,600 18 Public Safety Fee -continued •A fee of $150 (per household, not parcel) would generate $1,844,850 in revenue assuming 100% collection; $1,660,365 at 90% collection 19 Increases in Contract Costs FY20-21 FY21-22 FY22-23 FY23-24 TOTAL Fire 120,639$ 244,897$ 372,883$ 504,708$ 1,243,128$ Police 478,592$ 1,005,043$ 1,584,140$ 2,221,145$ 5,288,920$ 599,231$ 1,249,940$ 1,957,023$ 2,725,854$ 6,532,048$ Environmental Fee •15,192 invoices mailed -$3.00 per month per parcel •Approximately 90% collection on the invoices equals 13,673 payments received or $492,228 •$854,145 Environmental Fund costs for FY19- 20 (see next slide) 20 Stormwater/Environmental Fee Costs 21 Annual Program Administration $24,415 New Employee (salary & benefits)$60,000 Environmental Program Material $2,000 Billing Company $50,000 Maricopa County Dust Control Block Permit $2,000 Golden Eagle & Fountain Park Reclaimed Water Discharge Permits $715 ADEQ Storm Water Permit $5,000 STORM (Storm Water Outreach for Municipalities) Annual Dues $1,500 Water Use It Wisely Annual Dues $2,000 Illegal Dumping Cleanup $5,000 ADWR Dam Inspection & Maintenance $20,400 Wash Maintenance $210,000 Electronics Recycling Event $1,000 On-Call Storm Debris Cleanup & Repairs $30,000 Storn Damage and Repairs $170,000 Internal Service Fund charges $115 Drainage Parcel Inspection and Cleaning $90,000 Storm Drain & Culvert Inspection & Cleaning $90,000 Street Sweeping $90,000 Total = $854,145 Environmental Fee -continued •$62.50 fee required to cover costs in FY19-20; current fee is $36.00 •If fee were doubled to $6.00 per month per parcel, assuming 90% collection rate, revenue would received would be $984,456 (FY19-20 estimated costs are $854,145) 22 Public Safety/Maintenance and Infrastructure Fee •Implement a public safety/maintenance and infrastructure fee to provide for increasing public safety/maintenance and infrastructure costs •Town businesses –600 (not including 557 home-based businesses •Town households –11,699 (per Sites USA data) •Town parcels –approximately 15,600 23 Public Safety/Maintenance and Infrastructure Fee -continued •Residential -$350 per year for four years •Commercial -$400 per year for four years •Using households (not parcels) residential would generate $4,094,650 per year or $16,378,600 for the four years •Commercial would generate $240,000 per year or $960,000 for the four years 24 Category FY19-20 FY20-21 FY21-22 FY22-23 Total Households $4,094,650 $4,094,650 $4,094,650 $4,094,650 $16,378,600 Businesses 240,000 240,000 240,000 240,000 960,000 TOTAL $4,334,650 $4,334,650 $4,334,650 $4,334,650 $17,338,600 25 Collection rate for current $36 environmental fee is approximately 90%. Without an effective collection enforcement mechanism, collection rate probably will be less. Public Safety/Maintenance and Infrastructure Fee -continued Other Possible Revenues •Currently undertaking a comprehensive user fee study as well as a development impact fee study •Sell cell towers on Town-owned property (one-time revenue) –the Town has been approached by two different firms •Franchise Fees for EPCOR and Southwest Gas would generate about $200,000 annually (requires a ballot measure) •Consider another primary property tax levy •Hire a financial advisor to assess Town’s finances and recommend strategies to address future shortfalls 26 Summary of Revenue Options •Raise local sales tax rate •Implement a public safety fee •Raise environmental fee •Implement a public safety/maintenance and infrastructure fee •Sell Town property or leases for cell towers •Adopt franchise fees for water and gas •Approve another primary property tax election 27 Recommended Revenue Adjustments for FY 19-20 •Raise local sales tax rate to 3.0 percent from current 2.6 percent –will generate approximately $1,360,000 in additional revenue annually •Implement a public safety fee of $150. Revenue generated is dependent upon collection of fee – could range from $1.6 million to $1.8 million per year •Increase the environment fee from $36 to $72 which will generate an additional $492,228 and reduce General Fund contributions to Environmental Fund each year 28 Recommended Revenue Adjustments for FY 19-20 -continued •Early next fiscal year, take Council action on user fee adjustments after the completion of the cost of service study •Any new fees will not be included in the FY19-20 Final Budget amounts since the Tentative Budget will be adopted on May 7 which establishes the maximum budget amount. •Collectability of any new fees is unknown, except for transaction privilege tax (sales tax) 29 Recommended Revenue Adjustments for FY 19-20 -continued •Due to the timing of any fee implementation, monies will be collected from the fees. Excess revenues collected will be transferred to the Capital Improvement Fund at the end of FY19-20, thereby increasing the amount available for projects. •Any adjustments to sales tax (TPT) rates will become effective September 1, 2019. 30 Next Steps •Any action to implement new fees or raise existing fees requires, per statute, a 60 day notice/posting period before a public hearing and Council action •Council needs to direct staff tonight to prepare for any possible fee changes •June 18 Council meeting will be a public hearing before voting on any proposed fee changes 31