Burke offers fiscal year 2016-17 Paradise Valley municipal budget

Paradise Valley Town Manager Kevin Burke has presented town council his recommended budget for fiscal year 2016-17.

The local governing board got its first glance at the financial document Thursday, March 10 during a 4-hour work session discussion at Town Hall, 6401 E. Lincoln Drive.

Kevin Burke

Kevin Burke

Mr. Burke’s recommended budget includes a total amount spent to be no more than $44.2 million next fiscal year while the municipality’s expenditure limitation is set to not exceed $25.7 million.

The town’s General Fund, which is used for the day-to-day operations of the municipality, is expected to not exceed $25.7 million, according to Mr. Burke’s recommended budget.

“As we complete fiscal year 2016 and prepare for fiscal year 2017, there is good reason to be optimistic about the Paradise Valley economic condition,” Mr. Burke’s March 4 memo to council states. “All resorts in Paradise Valley reinvested in their properties in some capacity this year improving the financial health of the town now and for years to come.”

There are seven pieces to the Paradise Valley revenue pie, which are:

  • Franchise fees — $1.1 million or 3.5 percent
  • Miscellaneous revenue — $1 million or 3.6 percent
  • Local sales and bed tax — $10.9 million or 42.4 percent
  • State-shared revenues — $4.2 million or 16.3 percent
  • Construction sales tax — $3.5 million or 13.6 percent
  • Fines — $3.3 million or 13 percent
  • Licenses and permit fees — $1.7 million or 6.7 percent

While construction activity is seeing a noticeable up-tick within Paradise Valley boarders, the lodging industry has remained flat year to year, Mr. Burke points out.

“This is consistent with flat occupancy rates and only slightly higher average daily rates,” he said. “Perhaps the largest, but as of yet unrealized, financial impact will be attributed to the Ritz-Carlton. While much of fiscal year 2016 was spent reviewing the plans, any financial benefit is only realized once they start construction and eventually start operations.”

Outside of resort development, the construction business is booming.

“Building permits in calendar year 2015 were up 15 percent over calendar year 2014. And, values were up more than 36 percent,” Mr. Burke said.

The third financial foot on which the Town of Paradise Valley stands is built through ticket fees and numbers indicate a strong return on red light technology investments made during the last few years.

“The purpose of the enforcement is to change behavior not to generate revenue,” he said. “However, that learning curve does appear to be fully realized by motorists and town’s gross fine revenue has increased $800,000. Overall, these economic conditions set the stage for the a projected revenue growth of 10 percent in the General Fund and 4.3 percent across all funds.”

Paradise Valley Mayor Michael Collins says at first plush town council and town manager appear to be in-tune.

Michael Collins

Michael Collins

“Mr. Burke’s proposed budget appears at initial review to accommodate progress on a majority of the goals and objectives articulated by the town council earlier this year,” he said in a March 16 statement. “Our primary commitment to public safety and infrastructure is reflected in the proposed budget, as is our intent to remain limited in government services and not grow local government.”

Mayor Collins says the town council is committed to keeping public safety its No. 1 priority.

“The town council’s commitment to public safety remains evident in this proposed budget,” he said. “Not only are we implementing technology and hiring new officers, this budget reflects the council’s continued intent to accelerate the pay down of the town’s public safety pension liabilities.”

Mayor Collins is confident in both the short- and long-term financial health of the Town of Paradise Valley.

“Our annual projected revenues exceed our projected expenses by over $10 million dollars and we have more than a full year of operating costs tucked away in cash reserves,” he said.

“Over the long run we are increasing revenues by stimulating resort development, we are reducing pension liabilities, and we are investing in public safety and infrastructure. All while keeping government small and accountable. Mr. Burke’s proposed budget does appear to reflect the values of the Town Council and residents while continuing our important legacy of fiscal responsibility and conservatism.”

The fear of limitations

Paradise Valley Town Council may pursue a permanent base adjustment to its expenditure limitation, which would increase the municipality’s General Fund expenditure limitation every fiscal year. It appears Paradise Valley town government is preparing an expenditure limitation ballot measure for the town’s General Election slated for November of this year.

Expenditure limits pertain to how much a municipality can spend each year on its day-to-day operations.

An Arizona municipality’s expenditure limitation is defined by adjusting the municipality’s base-year to actual expenditures of local revenues to account for any voter-approved permanent base adjustments, changes in population or in inflation, according to the Office of the Auditor General.

The original conception of a defined expenditure limitation was originally defined with a 1979-80 base year.

“When we talk about the budget we are not just talking about the plan we are also talking about the legal authority to spend it,” said Paradise Valley Administration and Government Affairs Director Dawn Marie Buckland in a March 15 phone interview.

“Paradise Valley is unique that our growth is not being driven by population. We have more residents here even though they don’t consider themselves residents for Census purposes. The real thing pushing growth is our resorts.”

Because of previous accounting exclusions the Town of Paradise Valley is able to spend, in reality, $37.7 million, which is beyond its defined expenditure limitation of $25.7 million. This upcoming fiscal year the municipality is using $3.9 million in previously unused exclusions to fit its spending under the limitation line.

According to Ms. Buckland, if the limitation is not increased town leaders could be looking at cutting almost $4 million from its day-to-day bottom line.

“Most importantly this is a town that is committed to a limited government model and that is what we are going to provide,” she said. “The expenditure limitation is not meant to counter that in any way, shape or form. We are trying to account for the growth that is occurring. While we will be provided those revenues, we have to establish the legal authority to spend it.”

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