Cottonwood balances need for more revenue vs. cutting costs on 2018 budget
COTTONWOOD – After a presentation Tuesday evening at a work session, Cottonwood City Council gave staff direction on which revenue opportunities and cost-cutting measures they wanted to get more information on as the budget gets hammered out.
Council agreed to explore a sales tax increase; fees; consolidating services; getting outside agencies to be more competitive when asking for financial support; and merit levels for employees.
Off the table is privatizing the Cottonwood Recreation Center. Closing the softball facility and the library were also frowned upon.
Council Member Tosca Henry asked during the work session if there was a clear goal for the budget.
“[Tuesday] night, council was asked to give direction to staff regarding increasing revenue streams and cutting costs, after being advised that we needed to make ‘drastic’ cuts or revenue increases to address a budget deficit,” responded Henry to an email sent by the Verde Independent.
“However, no information was provided as to the amount of the budget deficit, in order for council to provide guidance on how to address it. Do we need to cut costs or increase revenue to meet a $200,000 shortfall or a $2 million shortfall? If there is no shortfall, and we have a balanced budget, adequate reserves, and are addressing debt service appropriately, as council was informed by staff last year, then I am not interested in increasing costs and fees merely for the sake of increasing them,” said Henry.
“City Manager [Doug] Bartosh summed it up nicely when he said ‘it is incumbent on staff to say ‘here is the budget, here is the shortfall, how do we address it.’ That information was not provided last night, causing council to give direction without information of the amount of the anticipated shortfall,” she added.
When asked if it is typically known what the financial need is before suggestions are made, Bartosh told the Verde Independent, “Yes, the staff has a good idea of what the needs are because we live it day to day and our role is to be able to justify those needs to the city council. The council is then equipped to provide direction. The council had good questions last night and their need for further information is an important part of their role in protecting the public’s investment.”
Below are highlights of the presentation given at the work session.
Possible revenue opportunities
Transaction Privilege Tax (TPT)
Cottonwood’s Transaction Privilege Tax is 3 percent. The city does not have a property tax.
As a point of comparison, Camp Verde (special district property tax and sanitary district debt retirement) is 3.65 percent; Sedona is 3.5 percent; Clarkdale (general property tax and fire district tax) is 3 percent; and Jerome (general property tax) is 3.5 percent.
Cottonwood’s FY 2017 taxable sales were $485,619,633; and FY 2017 collections were $14,658,589.
Sales tax revenue opportunities
Possible TPT revenue opportunities include instituting a use tax (item is currently tabled) and instituting a transient tax (bed tax).
Reviewing current fees
Revenue opportunities can come from reviewing current fees, such as community development; right of way permit; grading permits; plan review; airport rents and leases; recreation center; water/waste water rates; dog licenses; and business registration.
Develop new fees
New fees that can be developed to increase revenue include storm water fees for storm water costs; fees for developers to meet with staff; and capacity fees for water/waste water.
Another option for revenue would be property tax. It is not favored by the council.
Possible cost-cutting measures
Possible cost-cutting measures highlighted in the presentation include: reduce building and park maintenance services (such as closing the softball facility; $9,000 budgeted for annual cleanup; eliminate city sponsored events; privatize recreation center (not for consideration); Verde Santa Fe and Village Water; close outdoor pool; consolidate Services; contractual Services instead of in-house; reduce pavement preservation and sidewalk budgets to pre-FY2018 amounts; reduce hours or close services at public facilities (such as library and youth center- not favored by council); reduce or eliminate outside agency support; and develop leasing program with Enterprise for fleet management.
Insurance, merit, longevity, and cost of living adjustment could be reviewed for cost-cutting measures.
If there is a reduction in force, the newest employees will be cut first. It would cause issues with the ability for the City to provide essential services. FY 2019 staffing requests include 11 full-time employees, three part-time employees, and 15 job reclassifications effecting 26 employees. State mandated minimum wage increases also effects this area.