2018: financial prospectus unfolds at Paradise Valley Town Hall

Paradise Valley Town Hall is at 6401 E. Lincoln Drive. (photo by Melissa Fittro)

The start of a new year at the Town of Paradise Valley equates to evaluating the upcoming fiscal year budget, incoming revenue and potential downfalls in the economic landscape.

During a Thursday, Jan. 11 study session at Town Hall, 6401 E. Lincoln Drive, Town Manager Kevin Burke presented an outline of possible goals and projects to be accomplished by Paradise Valley Town Council.

Overall, Mr. Burke says he is optimistic on the economic outlook, but recommended remaining conservative on revenue projections.

The discussion also included a review of the Capital Improvement Program process, and an overview of the Doubletree Ranch Road beautification project in progress.

The 2018-19 fiscal year spans July 1 through June 30, 2019.

The municipal economic forecast is based on reviews provided by the Joint Legislative Budget Committee, private economist Elliot D. Pollack and data from the Smith Travel Accommodation Report.

Paradise Valley’s staff defines the town’s revenue as a three-legged stool made up of hospitality, construction and state-shared revenue.

“If you look at our three-legged revenue stool, hospitality is up solidly,” Mr. Burke explained to the town council.

“Construction is also up substantially, there is some concern about weakness on the horizon as it related to the housing market … the thing that might change this is if we get the change in MRRA (projects) on the construction sales tax. If alterations go away that could be a revenue boost, we’re looking at anywhere from $750,000 to $1 million in new revenue that would come in, so that’s important.”

The hospitality report shows that looking at straight revenue for the hotel industry is up almost 18 percent in Paradise Valley.

“Our occupancy is actually down about 5 percent when you look at the last 12 months, but that’s really a math function because we have so many new rooms. If you look at our supply of rooms we are up 19 percent this year, so as you can imagine, that can affect the occupancy,” he said.

“However our average daily rate is up 4.2 percent to $217.79 so the rooms are selling for a higher price.”

Mr. Burke explained that state-shared revenue is up solidly, and was encouraged by Gov. Doug Ducey’s recent State of the State Address that didn’t address tax cuts.

Kevin Burke

“He did not mention tax cuts in that, so that is important because I was really concerned that while we were seeing some state-shared revenue growth, it was just going to be redirected to pay for tax cuts,” Mr. Burke said. “That could still happen, but the fact that it didn’t make his State of the State speech I think is encouraging to say I think it should float through.”

Based on existing trends, the staff expects to keep construction and Highway User Revenue Funds in “one-time areas.”

“The other extrapolation is to keep using those construction dollars in one-time areas, that’s generally what we do,” he explained. “We have about half a million in construction dollars that goes to operations, everything over that goes to CIP. If we keep moving those one-time dollars related to construction to one-time expenses I think that’s the perfect correlation.”

The financial horizon

The municipality’s 10-year financial plan looks at pension pay down, a flat fire-protection fee, mill and overlay street improvements on Lincoln Drive and continuing to bankroll a vehicle replacement fund and a facility repair fund.

Mr. Burke noted now is the right time to pay down their pension. The town’s reserves are still at 122 percent after the $5 million pay down last year, he said.

Possible goals based on council initiatives include a longterm plan for alarm monitoring, possible cell service assistance, evaluate CIP priorities, and possible legal assistance for hillside goals.

“When you look at our 10-year financial plan, we have budgeted $4 million a year for CIP. Our actual project list tends to run along the $6 million-$7 million range,” Mr. Burke said, noting how local partnerships and grant money helps the municipality complete its projects.

“Our demands right now are outpacing our revenue on CIP.”

There are 43 total projects on the CIP list, totaling about $55 million. The CIP is a multi-year plan identifying and prioritizing capital needs. To be added to the CIP list, projects must carry a cost of greater than $100,000 and a useful life of at least two years.

Goals outlined by town staff include address staffing relative to service demand, addressing facility needs, determine flood control decisions around the new Ritz-Carlton campus and start planning for sewer CIP.

Based on prior experience, Councilman Paul Dembow cautioned his fellow councilmembers to be wise when it comes to the town’s money.

“The only thing I can caution all of us — if you look at the mistakes we made in 2006 when times were good, the dollars that we spent absolutely came back to bite us,” he explained.

“It seems you make your biggest mistakes when times are good and make your best decisions when times are bad. I’d just be very cautious about we spend what we have here because things can change overnight.”

Following little discussion from the council members, Mr. Burke says town staff will move forward with goals and details identified in the presentation.

News Services Editor Melissa Rosequist can be reached by e-mail at mrosequist@newszap.com or follow her on Twitter at www.twitter.com/Mrosequist_

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