Guest Editorial: John Traynor
Icebergs and Government

By John Traynor | May 6, 2009

What could they possibly have in common? In school we were taught that an iceberg’s mass is mostly hidden below the waterline; experts say two thirds or more. If you are like most folks, you are surely aware of the icebergs that have surfaced in the U.S. and World economies. Most of us, including the ‘experts,’ saw just the tip of the iceberg. A brief look at your retirement portfolio, bank account, or the current home values in your neighborhood, would be unhappily illuminating. The situation is not a Republican or a Democratic challenge; it is a people challenge that must be addressed at all levels of government. Neither Carefree nor Cave Creek are immune to the economic stress felt by millions of Americans.

The only Town Administrator in Carefree history leaves after 22 years. Not 20, 25, or 30. The mayor, vice mayor and senior councilman/financial advisor, withdrew from the election. The new Town Administrator received a comfortable, first ever, employment contract from the departing mayor and his council supporters. What’s going on? There are a few possible answers. Unfortunately, details are not readily available to enable those outside Town government to formulate definitive conclusions. There are some clues, and like the tip of an iceberg, they may portend greater danger.

It is not within the scope of this column to explore economic issues in great depth. Rather, I’d simply like to illuminate the tip of the iceberg to facilitate awareness and caution. This is not about fear, or pointing fingers. It is all about knowledge. Some residents may not be aware that Carefree is in the midst of budget planning for the next fiscal year. By Arizona statue, a target budget must be approved by mid-July. The bottom line numbers in the budget must be final, although individual details can be changed – money can move around, but not go up or down.

There is no specific secret. Town operating expenses have risen steadily in the past 10 years, and within that timeframe, acquisition of the Water Company and contracted fire protection services added significantly to the Town financial burden. Necessary expenses need not escape careful review. Operating efficiencies must be considered along with expenses. Frankly, I’m not sure that simple guideline has been seriously considered in past budget cycles. I hear this one is different; I certainly hope it is.

When you plan a budget for your own business or family, you probably begin by considering the basics. What can you expect for income? Have you carefully identified things that are true necessities, and have you received the expected value for the money spent? Are there new things you must consider, and are they discretionary or essential? How much should you allocate for emergencies, or put away for even rainier days? Most of us would agree these questions make sense. I’ll share some numbers with you along with clues how they relate to Carefree’s budget.

Let’s assume your primary income (Sales Tax revenue) will fall by 15 percent. You have been advised that secondary income (State Revenue Sharing) may decline by 14 percent or more. These two sources alone account for almost 80 percent of your total income – wow! Luckily your portfolio, savings, and a few side businesses (Water Company, Building & Development fees, Court Collections) also contribute to your overall income. But you have seen investment income and bank interest plunge (State funds holding our reserves pay well below one percent, and even friendly banks don’t give away money). Because of successful conservation efforts customers use less water, so there goes more income down the drain (pun intended). Your little construction deal can’t help because neighborhood development is down 60 percent. The one bright spot is Court Collections where you have some control. Unfortunately boosting that income could have a devastating effect on other businesses, upon which you depend more. What to do?

Space here prohibits complex answers, and I don’t have them all, but you intuitively know that expense reduction is a critical part of the solution. As a starting point, we must consider a 20 percent reduction. It won’t be easy. Departing councilmen have talked the talk; let’s see if the budget they leave us walks the walk. Some folks say we can’t ignore the future. Only a fool would ignore the future, and this resident is no fool. Keep your eye on the waterline, and please vote carefully.