http://www.azcentral.com/community/tempe/articles/0208tr-taxes0208Z10.html

Tax cut 'promise' ignites firestorm Video of meeting lends evidence to each side of issue

Jahna Berry The Arizona Republic Feb. 8, 2006 12:00 AM

A brief 2005 discussion on city taxes has spawned a thorny political controversy that has touched the City Council race, strained relations between some city leaders and stirred questions about trust.

At issue is an April council meeting where the city leaders agreed to raise taxes to help pay for updated communications equipment for Police and Fire department workers. At the time the city was bracing for dark financial times: The city expected to lose millions in state funding, and there wasn't enough money in the city capital budget to pay for the expected $15.5 millionprice tag for the equipment.

Ultimately, the City Council decided to raise the secondary property tax from $1.35 per $100 in assessed valuation to $1.40 per $100.During the discussion the mayor lobbied for city leaders to lower the tax back down in the future.

At the time, other council members didn't object to the idea; they also didn't go out of their way to agree.

Now with the city budget in the black, Mayor Hugh Hallman, who says the 2005 discussion amounts to a promise to voters, wants to roll back taxes to $1.35.

He faces stiff opposition from several City Council members, though, who say no explicit promise was made. The nickel tax increase -- it costs homeowners between $12 and $20 annually, they say -- could generate millions for badly-needed projects including updating aging neighborhood parks, the library and the museum.

Secondary property taxes can only be used for capital, or infrastructure, needs such as roads, buildings and equipment. It can't be used for salaries or operating costs.

The problem is, the footage of the council meeting shows a talk with plenty of nuances that gives ammunition to both sides. Adding fuel to the fire, there's at least one discrepancy between the footage and the council-approved meeting minutes. The right thing to do is to cut taxes, Hallman said.

"People like to play word games when they are boxed in," the mayor said. "I'm not going to play those games. If (the rest of the council) wants to raise taxes, own up to it."

The minutes and footage make it clear that the law enforcement equipment was the main reason for the tax increase, Hallman said. Now the city doesn't need a tax increase to pay for that. If the council wants to step up the parks renovation program, it can use money from the anticipated $40 million sale of lakefront property, he added.

Council members say a tax cut promise was never explicitly made, and the meeting footage indicates that the council would merely consider it.

"The 'p-word' was never used," Councilwoman Barbara Carter said of any promise. "Me, as a politician, would never use the 'p-word' because things change."

Other pressing financial needs have come up, namely the city's aging parks, library and museum, Carter and other council members argue. At the very least the city should weigh all of its options during spring budget talks, not make a hasty decision in the winter, they say.

"There needs to be a full discussion of the capital needs. I'm not sure the community knows what our secondary property tax is used for," said Councilwoman Pam Goronkin, who says that she would be willing to propose a survey to find out whether taxpayers want the nickel cut. Many may forgo a small tax break to fund parks and the library, she said.

The mayor's tax proposal has echoes of another tax cut that later haunted the city, Goronkin said. Hallman successfully pushed for a tax cut in 1999 and Tempe later plummeted into the post-Sept. 11 economic downturn. The nickel tax cut ultimately hurt the city's bonding capacity, which impacted Tempe's access to funding, she maintains.

"Our property tax should not float up and down, we need a steady source of income," Goronkin said.

Hallman argues that the 1999 tax cut wasn't harmful. At the time, the city tabled some capital projects, such as a police substation, because the city lacked money to operate them, not because it needed capital funding to build them. And if then-Mayor Neil Giuliano wanted more bond money, all he had to do was ask voters, Hallman said.

The tax issue has been complicated by the race for City Hall. Council candidate Onnie Shekerjian, a former Hallman campaign worker, has vocally argued for the tax cut. While the mayor has not officially endorsed Shekerjian, his wife is the co-chair of her campaign.

The incumbents running for re-election, councilmen Ben Arredondo and Len Copple, have argued that the meeting footage does not promise a tax cut.