By Josh Martinez
Twitter: @jmartinez064

Budget planning for the coming fiscal year is in the works for the City of Scottsdale, but the COVID-19 pandemic has made setting one more difficult.

The Scottsdale City Council met virtually April 7 to discuss the city’s proposed operating budget and capital improvement plan. Budget Director Judy Doyle, City Engineer Dave Lipinski and City Manager Jim Thompson each presented on different aspects of the budget and CIP, clarifying the presented budget came about prior to the shutdowns.

“We were faced with the challenge of no data available to make any meaningful forecast adjustments,” Ms. Doyle said.

“Yet, we have Charter obligations to adopt a budget in May and June so we felt it was necessary to get in front of you what we had prepared again, knowing full well adjustments will need to be made.”

The Scottsdale City Charter is a local constitution establishing precedents in which the organization is governed.

Council took no official action but did direct staff to make revisions on the budget with plans of decreased revenue and spending. Staff plans to return with another review in late April or early May. Plans to adopt a tentative budget were slated for May 5. The 2020-21 fiscal year begins on July 1.

Gov. Doug Ducey started ordering the closure of bars, movie theaters and gyms in counties with confirmed cases, further defining essential services with a March 23 executive order. Seven days later, he issued a stay-at-home order for the entire state.

In Scottsdale, these measures hit during what Ms. Doyle called peak tourist season, thus negatively impacting the city’s revenue. Initially, Ms. Doyle presented a budget of close to $1.6 billion, an amount set prior to any COVID-19 implications.

Ms. Doyle explained budget adjustments can occur throughout the coming fiscal year but the city needs to set a maximum expenditure limit and cannot go above that amount.

Initial estimates had General Fund sources contributing $338.3 million with the majority of that coming from the 1.1% sales tax and state shared revenue. Ms. Doyle did anticipate these numbers to see negative effects once the pandemic impacts are more clear.

Mr. Lipinski presented the CIP budget and the city’s goals for the next fiscal year prior to the COVID-19 pandemic. Overall, Mr. Lipinski shared a list of projects receiving money from the General Fund, two different transportation sales tax, stormwater fees, the 2019 bond and other smaller sources.

Mr. Thompson’s presentation centered on efforts the city is doing amid the pandemic and its potential impact on the next fiscal year’s budget.

Some of those efforts include:

• Immediately cut preliminary budget;
• Holding 194 vacant positions (about $6.8 million per year) with plans for more positions will be held as vacancies occur, but filling critical public safety/health positions;
• Deferring the third year of 3-year market catch-up and any performance increases;
• Redeploying staff into emergency assignments;
• Reducing expenses, including contract expenses, reviewing carefully by upper level management;
• Suspended trolley due to low ridership, COVID-19 risk, saving $1.4 million through end of June; and
• Creating several contingency plans and updated forecasts prior to budget adoption.

Mr. Thompson said without any kind of concrete forecasts, he believes the city is feeling significant effects economically from the coronavirus shutdowns since the city’s largest revenue sources during the spring is shutdown. Moving forward, he said the coronavirus’s impact on the city’s economics could fluctuate.

“But we’ve already made significant cuts as well as we were running a little bit ahead of our budget for this fiscal year,” he said. “The true impact will be the last month and a half of this fiscal year where we see that.”

Marching orders

After hearing the presentation, the City Council provided staff with a list of 10 suggestions in crafting the next version of the budget:

• Revise the budget to reflect decreased revenues and expenses;
• Provide scenarios if revenues are down 10%, 15%, 20% and 25%;
• Decrease the budget by 10% to decrease maximum spending authority;
• Postpone some of the bond projects;
• Postpone the Palmeraie Undergrounding Project;
• Postpone or defer any salary increases;
• Maintain last year’s budget for this fiscal year;
• Do not include any rate or fee increases, especially a stormwater fee or the 2% increase in the primary tax rate, in the proposed budget;
• Review contracts and contract workers for possible elimination from the budget; and
• Schedule a meeting in late April or early May to review a revised budget.

Vice Mayor Kathy Littlefield spoke of the need to be mindful of revenue and anticipate losses in revenue not only from taxes, but from state and county sources. She also pointed to the city’s lack of tourists and an uncertainty of how no tourists might affect the city in the future.

“I’m not a doom-and-gloomer but my rather conservative philosophy says plan for the worst, hope for the best and be ready for either one,” she said.

“I would go slow on issuing nonessential checks and there can be no sacred cows as we go through this budget and look for funding sources we may need to pay our employees and meet our bills. I do think nothing should be off the table at this point.”

She also called for city staff to consider crafting a roadmap for potential future hardships and funding sources the city may encounter.

Councilmember Virginia Korte wanted to see a hard 10% decrease in maximum spending allowance before staff brought back a revised budget. Mayor Jim Lane said he wanted to see a decrease in spending but wanted to allow staff to recommend a decrease rather than use a hard reduction.

“I would rather that staff, the city manager and the city treasurer work out, as best they can, a program to try to put out a number to this that’s going to keep us from burning off whatever reserves we may have and putting ourselves in a much more dangerous situation in the upcoming months,” he said.

Ms. Korte said the 10% reduction would’ve been an in-good-faith move with the understanding the city would further have to make spending cuts.

“Our citizens are experiencing a lot of pain whether they’ve lost their jobs or furloughed, staying at home, kids aren’t going to school and for us to present a budget that doesn’t show any kind of decrease, I think, is not in good faith,” she said.

Ultimately, the council only provided direction to staff and did not make any official motion on the presented budget.

Councilmember Guy Phillips said he didn’t think the city should be making an already-difficult financial situation harder for the residents by increasing rates or fees. He also suggested postponing some projects as contracts allow and only ones that wouldn’t post safety risks.

“I would just like to say I fully expect staff will do their best,” he said. “In fact, they already are. I think they are doing an amazing job right now. I believe we will get through this as a city government and as a community. If we have to tighten our belts at this time, that’s what we have to do and I think we’ll be fine.”

Mr. Lane concluded the discussion expressing his confidence in Mr. Thompson and the rest of staff to make the necessary changes to best guide the city through the economic trials.

“I don’t know if you’ve ever seen the kind of thing we’re dealing with right now but the basic premise of what we have to get accomplished as a city I think you know very, very well,” he said.

“Whether things are prime or perfect as to how we move forward, we do have that obligation and we’re going to have to adjust to that so we don’t get ourselves into some kind of further problem.”