Janik: Navigating tough times as Scottsdale looks to regain its footing

By Betty Janik
Posted 4/30/20

By now many of us are tired of the stay at home order and wishing for life to return to normal.

The lock-down began March 31, tightened April 4, and continued to April 30 and has now been …

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Janik: Navigating tough times as Scottsdale looks to regain its footing

Posted

By now many of us are tired of the stay at home order and wishing for life to return to normal.

The lock-down began March 31, tightened April 4, and continued to April 30 and has now been extended to May 15.

The good news is the thaw is about to begin. Restrictions on elective surgeries will be lifted effective May 1. People who have been waiting in pain for hip replacement surgery, repair of a torn ACL, or routine screening tests can begin to exhale.

Hospitals are upbeat too. Half the intensive care and emergency room beds have been sitting empty in Arizona according to the Institute of Health Metrics waiting for COVID patients.

ER visits and outpatient surgeries, which balance budgets and generate hospital profits, are down as much as 70%. While funds have been sent out from Washington, they are insufficient to cover expenses for COVID patient care.

As our hospitals begin a measured return to a pre-COVID environment, let’s hope layoffs and furloughs of hospital staff will be avoided. Healthcare will be a bright spot as we return to the new normal.

The rest of the Arizona economy also appears to be on the verge of an awakening.

According to Governor Ducey, the stay-at-home order will remain in place until May 15. However, a limited number of businesses deemed non-essential, namely retail, are allowed to open on May 4 with strict safety guidelines and for limited services with deliver/pickup of orders.

More restrictions will be lifted over time with a systematic phase-in process while keeping a careful watch that public health is not compromised.

The post-COVID world will be different. Social distancing and wearing facemasks out in public will be in vogue. Restaurants will need to have fewer tables, more people will work from home and telecommute. The need for office space will be reduced and demand for state-of-the-art telecommunications will be increased. Businesses will need to be reinvented.

According to the experts, returning to full capacity is expected to take about two years and is ultimately dependent on developing effective therapies to treat COVID-19 and producing a vaccine against it.

How will municipalities like Scottsdale cope with the realities of living on less for the next few years? A cursory overview of the revenue sources shows that projected General Fund income from the 2019-20 budget is $326 million.

Major sources of these funds are the Scottsdale transaction privilege tax (sales tax) at 47% and the shared revenue from the state (state sales tax and income tax) at 22% for a total of 69% of the General Fund revenue.

Both of these sources will be reduced substantially from the estimates. The city is expected to make projections on the new budget in early May, but current studies estimate a 25%–30% reduction in income for the current fiscal year as sales have plummeted to record setting lows.

Taking a look at expenses will assist in making wise decisions on where budget cuts can be made. The expenses can be divided into two categories --- fixed and discretionary.

Fixed expenses are for public safety and must not be diminished. The cost of fire and police protection from the 19/20 budget represents 14% and 34% respectively or 49% of expenses to General Fund. This cost may be higher due to the need for PPE as protection from COVID-19.

Water, sewer and waste are also essential services. Their support comes from enterprise funds which are paid for with user fees, the monthly bill from the City of Scottsdale. There are a few other fixed items in areas such as road work or certain community services, but their budgets have elements that go in the discretionary basket.

That leaves about 50% of the budget available for review/reduction. These discretionary funds pay for mayor, charter officers, City Council, administrative services, community services, public works, community and economic development.

City Hall has started the process of reducing expenses by curtaining salary increases, letting open staff positions go unfilled, reassigning workers, and eliminating part timers, contract employees, consultants for some savings with much more to go. Many more cutbacks will be necessary to achieve balance in the budget.

There will be cuts in services, programs, and salaries. The projects on the recently passed bond vote also need to be reviewed and possibly delayed.

There are no sacred cows.

With careful evaluation of all discretionary funds and appropriate reductions of expenses, Scottsdale will balance the budget and remain a strong, vibrant community. Similarly, our citizens will be innovative in reinventing their businesses and stimulating the economy.

After all, if a man can become a millionaire by making pillows, just imagine what we can accomplish.

Editor’s Note: Betty Janik is a resident of Scottsdale and candidate for City Council at the upcoming Aug. 4 primary election.

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