Mesa's spenders dial 9-1-1 for a fiscal emergency But raising public-safety concerns is a false alarm

Robert

Robb Republic columnist May. 3, 2006 12:00 AM

There's an honest case to be made for the sales- and property-tax increases that are before Mesa voters May 16. Too bad proponents aren't making it.

Whenever municipal spenders try to work their wiles, they put the police and firefighters on the front lines. And, indeed, tax-increase proponents in Mesa are saying that without the additional revenue, the police and firefighters might not be there when Mesa residents need them.

Public safety does currently absorb about two-thirds of Mesa's general fund budget. There is, however, nothing in the city's financial situation that ought to jeopardize its funding, if the City Council gives it proper priority.

In fact, the city's financial problems are generally being overstated in the campaign. The "yes" campaign claims that the city budget has been "cut" by $51 million over the last five years. But that's the old game of saying that a reduction in an increase is a cut.

In reality, city general fund spending has increased by 26 percent over the last five years. That's not a huge increase, basically keeping pace with population growth and inflation. But it's not a decrease.

Since the recovery from the recession, however, the pace of city spending and revenue growth has become much more brisk. Over the last three years, Mesa's general-fund spending has increased by an average of more than 7 percent a year. Sales-tax collections are up nearly 12 percent this year, after two consecutive years of over 6 percent growth.

Mesa does have a lighter taxload than other East Valley cities. Its retail sales-tax rate is below that of Scottsdale and Tempe and will also drop below that of Chandler and Gilbert when part of its quality-of-life sales tax expires this year. Mesa famously does not levy a property tax.

According to tax proponents, Mesa collects about $40 million a year less than it would collect if it taxed its citizens as heavily as neighboring cities. Mesa, however, also has a lower per capita income than its neighbors. Equal collections would represent a heavier burden on Mesa residents.

None of this is to say that Mesa does not face a financial problem. It does. Its debt repayment burden begins to increase in a few years. Of course, at the time the debt was approved, city voters were told that they could add it without raising taxes. Now they are being told that if taxes aren't increased to pay for the bonds, the police and firefighters might not show up.

Mesa also needs to raise some $170 million as matching funds to draw down its share of the transportation sales-tax extension recently approved by county voters.

To manage these future burdens, Mesa voters are being asked to approve a half-cent sales tax, with 60 percent of the money earmarked for transportation, and a city primary property tax for operational purposes with an estimated initial rate of $1 per $100 of assessed value.

This would represent a hefty increase in the city general fund revenues of nearly 20 percent. So, it's far from a modest request.

Moreover, the $1 primary-tax rate would be considerably above that of neighboring cities. Tempe has a primary-tax rate of 53 cents, Scottsdale 44 cents and Chandler 38 cents. Gilbert does not levy a primary property tax.

All of these cities also levy a secondary property tax to service bonded indebtedness, so initially Mesa's property-tax rate would be below their combined rates. But city officials propose that Mesa also service future bonded indebtedness with the property tax.

If the sales-tax increase were approved, Mesa would have a higher retail rate than Chandler, Gilbert and Scottsdale.

The projections used to justify the size of these tax increases appear to be slightly low-balled. Future general-fund revenues without the tax increases are projected to grow just 4 percent a year, when the actual growth has been stronger than that recently.

But even right-sizing the future projections wouldn't avoid the fiscal challenge. Accommodating the coming debt service and drawing down county transportation funds will create pressure on existing programs.

There are bolder things the city could be contemplating. Mesa owns a water farm in Pinal County. It projects about $10 million a year from land sales, but a faster disposition strategy could probably generate more money quicker.

Similarly, the city is in the electricity and gas business and has quite a bit of property accumulated for which it doesn't have plans. These could fetch some money as well.

But even if the city only wants to play the tax card, rejection doesn't have to mean cuts in core services, such as police and fire. It probably would mean, however, a squeeze on softer, quality-of-life city services, such as libraries, museums, recreational programs and enrichment education classes.

The city has adopted a standby set of about $25 million in "cuts" to be enacted in case voters turn down the tax increases. About $1.5 million is in the police and fire departments, or less than 1 percent of the city's public-safety spending. Councilman Tom Rawles has an alternative set of "cuts" that avoid police and fire entirely.

So, the question for Mesa voters isn't whether the police and firefighters are going to show up. It's whether voters want to give the city the easy way out of imprudent fiscal preparation, particularly in servicing its debt, to avoid reductions in soft city services.

Reach Robb at robert.robb@arizonarepublic.com or (602) 444-8472. His column appears Sundays, Wednesdays and Fridays. Read his blog at robbblog.azcentral.com.