Declining revenue causes budget problems for towns

By Curtis Riggs | April 15, 2009

Budget processes now beginning
CAVE CREEK/CAREFREE – Town officials in both Desert Foothills communities are bracing themselves for the worst as they begin to prepare fiscal year 2009-10 budgets.

Arizona League of Cities and Towns officials last week notified municipal leaders statewide that many Arizona communities are expecting sales tax revenue to be down 10 percent or more in the coming year.

Carefree Assistant Town Clerk/Accountant Jim Keen said sales-tax revenue has been down 15 percent on average in the last year. “The last four months has been right about that,” he said.

According to Keen, the budget for fiscal year 2009-10 will likely be reduced by 15 percent or more in preparation for the decline in sales tax and state shared revenue, which is paid back to Arizona communities.

Carefree will begin its budget process next week with a budget hearing at 5 p.m. on April 21 in the Carefree Town Council chambers.

While Carefree has avoided layoffs so far, it has placed a hold on all major capital projects this fiscal year.

Arizona cities must have preliminary fiscal year 2009-10 budgets approved in June. State law requires final budgets to be approved in August. The bottom line on the budgets cannot change after the preliminary budget is approved.

The virtual elimination of income from impact fees and building permits, which came with the economic downturn, has affected the revenue streams of both Desert Foothills communities. Town officials were then faced with trying to balance budgets with sales-tax revenue and money, which is paid back from the state.

Cave Creek has already responded to the current recession by laying-off nine employees. Capital projects are also on hold in Cave Creek.

Cave Creek Accountant Marian Groeneveld said sales-tax revenue in March of this year was down 11 percent from last year.

“It seems to be picking up a little, but we will have to wait until the end of April to see,” she said about developing sales-tax trends.

Cave Creek sales-tax revenue was down over 11.5 percent in December of 2008, nearly seven percent in January and 8.5 percent in February.

Cave Creek Town Manager Usama Abujbarah said if sales-tax revenue in Cave Creek is down less than 20 percent this fiscal year the town “will be in good shape.”

Groeneveld expects state shared revenue paid back to Cave Creek to be down 13 percent this fiscal year.

Cave Creek Mayor Vincent Francia uses Glendale, which recently instituted some lay-offs, as an example of how bad the recession is. Glendale has a couple of sports stadiums, which are major tourist attractions.

“It’s a shared suffering among all municipalities,” he said.