Paradise Valley may seek $10M increase to expenditure limitation

Paradise Valley Town Hall is at 6401 E. Lincoln Drive in the Town of Paradise Valley. (File photo)

Paradise Valley Town Hall is at 6401 E. Lincoln Drive in the Town of Paradise Valley. (File photo)

The Town of Paradise Valley has more money than it can spend but elected leaders appear poised to ask voters later this year if they can have a $10 million taxpayer credit increase.

Paradise Valley Town Council held a work study discussion last week on possible actions the local governing body can take to increase its expenditure limitation set by the Arizona Constitution.

Michael Collins

Michael Collins

Paradise Valley Mayor Michael Collins says he is comfortable pursuing a $10 million permanent base adjustment, which would increase the municipality’s General Fund expenditure limitation to about $35 million 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. The town has needs — general maintenance and repairs — that over time have surpassed the expenditure limitation.

State law says the town cannot use general funds to pay for those needs. So, even though the town is flush with cash and has money available, it is forced to pursue loans to pay for those projects. If the town is able to increase its expenditure limitations, it would be able to use its available cash to pay for needed services.

However, those limitations can only be increased through voter approval.
An Arizona municipality’s expenditure limitation is defined by adjusting the municipality’s base-year — fiscal year 1986 — 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, according to town officials.

Town staff says Paradise Valley has four options to address the need to expand its expenditure limitation. They are:

  • A permanent base adjustment that allows a local government to set its own expenditure limitation based on existing revenues;
  • A Home Rule option that allows local government to set its own expenditure limitation over a four-year period;
  • A capital projects option that allows local government to accumulate dollars over time for a specific project or set of projects;
  • A one-time override of the expenditure limitation that lasts for one fiscal year.

Town officials last December reported municipal revenues exceeded uses by $4.3 million. The town, however, is not able to use those funds for day-to-day operations or capital projects.

Expenditure constraints

While the municipality is expected to spend up to $40.8 million this fiscal year, the General Fund — what is used for day-to-day operations — stands at $24.7 million, which is in line with the expenditure limitation set by the Arizona Legislature.

Kevin Burke

Kevin Burke

Paradise Valley has a reserve balance of $23.4 million, which is 138 percent of the current year operating expense allocation, town officials say.

Paradise Valley Town Manager Kevin Burke says services desired and revenue obtained exceed the amount the Arizona Legislature allows the municipality to spend, which is becoming problematic year to year to year.

“Not only have the amount of services increased but also the level of service has increased since fiscal year 1979,” he said at the Feb. 11 discussion.

“Our housing stock increased 2.2 percent from 200 to 2010 but our population actually decreased by 6.2 percent from 2000 to 2010. Council said they wanted to look at a permanent base adjustment — that was the direction we had coming out of our fall retreat.”

Mr. Burke says the town has been forced to issue debt for items it could have afforded if not for the current General Fund expenditure limitation level.

“It is not asking for a new tax, it is not asking for new revenue, it is asking to increase the expenditure limit,” Mr. Burke said.

“Today’s General Fund balance is about $25 million but our revenues we are taking in are about $30 (million). We are taking in more than we are allowed to spend. Because of that we are doing a few different things like issuing debt.”

Mr. Burke contends the limited government model enjoyed at Town Hall could change if revenues can’t be used for desired services — and new services and costs on the horizon.

“We are starting to change our operations around our expenditure limit,” he said. “We have a level of service that everyone in this room agrees to provide and we have the revenue to do those things but we don’t have the expenditure limitation.”

Maria Syms

Maria Syms

Paradise Valley Councilwoman Maria Syms asked, “Why now?”

Dawn Marie Buckland, the town’s administration and government affairs director, says the matter needs to get in front of voters this November.

“To that question you asked, ‘why now?’ I would respond why not two years ago?” she said pointing out the town has been using carryover funds to meet revenue needs over the last few fiscal years.

“This is the level of government we want for the community,” she said. “Our current operations right now are above our expenditure limitation. Right now we are looking at using $5 million of carryover and after this fiscal year that is done.

We are out of time — either we reduce our services or we increase our expenditure limitation.”

Mayor Collins says 10 years and $10 million, at first blush, seems to be the appropriate permanent base adjustment for the town to pursue.

“It seems that the six- to 10-year point seems a reasonable point to consider,” he said. “When we see the (capital improvement project) proposal we will be able to see if there are costs down the road that we don’t end up with a deficit.”

Councilwoman Mary Hamway echoed that same sentiment.

“I do think we are playing games and to be more transparent I would like to see a clean slate,” she said of the town issuing debt for street improvements when revenue is available beyond reserves.

“We have had to issue debt for some of these things we have done. I am in support of raising the expenditure limitation.”

The matter is expected to be before town council again sometime in April, according to Mr. Burke.

North Valley News Editor Terrance Thornton can be contacted at 623-445-2774 or at tthornton@newszap.com

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