Facilities -- How Do We Pay For Them? Part 1

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The bottom line on the financing of the proposed new Gila County Criminal Justice Centers is that it will take tax dollars to pay for them -- period. By the same token, it will be the taxpayers who will benefit from them. In the case of these new Criminal Justice Centers, the benefits are significant -- lower operating costs, greater efficiencies, better service, less travel expenses, better use of manpower and so on.

However, whether we build them ourselves, have a private concern build them, buy and retrofit existing, enter into a public-private partnership (P3), lease, lease to own, sell certificates of participation (COPS) -- whatever -- we pay the piper with tax dollars. That is the County's only reliable revenue source for this type of endeavor, and what this article attempts to explain.

Don't let anyone tell you any differently. If they do, they either do not understand the situation as well as they think or they have a hidden agenda.

It is because of their understanding of this that all the Gila County Facilities Planning Citizens Advisory Committee members, save one, made the recommendations they did. The committee believed, after exploring all the potential financing options, that a General Obligation Bond (G.O. Bond) and a Jail District were the most responsible options, and best assured Gila County residents that their monies would be used in their best interests.

Please bear with me. While very tedious, our understanding this information is very important to the decisions we need to make in November, regarding the future of Gila County and its ability to better provide essential services. We will be deciding upon the committee's recommendation of a half-cent sales tax to fund a Jail District with new, expanded and renovated facilities and a G.O. Bond (paid for by dedicated secondary property taxes) to fund new Judicial/Administrative facilities.

Here goes. I will start with a reminder that all funding opportunities for counties (as well as for cities, towns, and special districts) are determined by the Arizona Constitution and state law.

For the most part, cities and towns operate on local sales tax receipts and on something called "urban revenue sharing," which is a combination of state sales tax receipts and state income tax receipts. In addition, they are allowed a local property tax levy. They can also fund activities through grants, gifts, fines and fees.

Counties operate primarily on property tax receipts. Exceptions include grant-funded activities, such as dislocated worker programs and child support enforcement, highway user fund (HURF) projects, and state funded mandates like indigent health care and indigent legal defense. Revenues for funded state mandates come in the form of shared state sales tax. Counties are also allowed a half-cent sales tax for general operations, and can fund activities through gifts, fines and fees.

In addition, with county residents' approval, counties are allowed in 20-year increments a half-cent sales tax for the construction and maintenance of roads (which Gila County voters approved in the early 1990s) and a half-cent sales tax for the construction and operation of jails (which Gila County voters will decide in November).

Also funded mostly by property taxes are school districts and special districts (fire, sewer, sanitation, lighting, library, college, and flood).

OK -- we've talked revenues, now let's talk expenditures. In each of the above cases -- county, town, city or special district -- expenditures are made through a public-noticed, elected board-approved, budgeting process. In Gila County's case, our basic activities are mostly unchanged from year to year, although the level of those activities can and do vary. (i.e. -- the basic activities of the Sheriff's Office are fairly constant, but the level of activity is increasing.)

Our annual budgeting process aims to cover projected expenditures, and unexpected expenditures are covered through contingency funding. In addition, about 10 years ago, the Board of Supervisors began to build a $10 million reserve -- $3 million to be used annually for cash flow leveling and $7 million to be considered "free reserve." They knew that when it came time to build new facilities, this reserve would be used by bond rating agencies and bond buyers in determining the interest rate to be charged. Very simply, the reserve takes us out of the junk-bond category and places us in the rated-bond category. We realize that $10 million reserve goal with the 2007 budget.

Also in the 2007 budget, we are proposing a $4.11 property tax rate (down 24 cents from $4.35 in 2006) to offset the increased property valuations for 2007. (This equates to $411 on a $100,000 home). The average Gila County property owner will experience no property tax increase for 2007 in the Gila County operations portion of their property tax bill. If there is an increase, it will be in the town, school or special district portion of your tax bill.

In "How do we pay for them? Part 2," we'll look specifically at:

  • The "Jail District" measure and "Why a half-cent sales tax proposal?"
  • "What are luxury goods?"
  • "What is meant by ‘no net property tax increase'?"
  • "What do you mean by primary vs. secondary property taxes?" and more.

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