Bleak revenue projections and the decline of the town’s reserves to zero just three months into the year prompted the Payson Town Council Thursday night to delay almost all new spending and schedule a November budget study session.
Finance Manager Doug Hill presented a sobering but sometimes confusing succession of charts showing sales taxes lagging some 8 to 10 percent behind projections, offset somewhat by a rise in permit fees, income taxes and other revenue. However, Hill warned some of those other increases may represent misleading, one-time windfalls.
A lag in payments from the state has added to the cash flow problem. Overall, the spending had exceeded revenues by $700,000 in the general fund and $227,000 in the mostly state-funded street building fund.
“We’ve spent all our reserves and we don’t have much of a cash situation,” said Hill. “It’s about zero.”
Much of the discussion focused on lagging sales tax receipts. In fiscal year 2007-08, the town had projected $7.6 million in local sales tax, but ended up collecting just $6.7 million. This year, budget planners predicted sales taxes would bounce back up to $7 million. Instead, for the first three months of the year sales tax revenues have lagged nearly some $300,000 behind the same period last year.
“Sales tax is a little down,” observed Hill.
“A little down?” said Mayor Kenny Evans, staring at the bar chart projected on the screen.
“From the last year,” said Hill.
“A lot down,” corrected Evans.
“That would probably be a better way to put it,” said Hill.
The presentation represented a sharp change from last year, when the council didn’t get any public financial briefings as revenues lagged well behind projections month after month. By the time the topic came up in public meetings, the town had nearly consumed its accumulated financial reserves.
The council peppered Hill with questions, struggling to understand the charts and determine whether to make new cuts in the current budget, which already had eliminated raises, some overtime, empty positions and most capital improvement projects.
Councilor Mike Vogel asked for more budget detail, especially when the figures show individual departments coming in over budget. For instance, the council is already $10,000 over budget — but that mostly reflects the one-time cost of dues paid to the League of Arizona Cities and Towns.
“We’re looking at this, saying, what in the world is going on here,” said Vogel. “If we’re in the hole, tell me why — otherwise we’re thinking we’re going to have to start hacking and slashing.”
The council scheduled a work study session on the budget in late November to consider updated projections and a list of optional cuts if the numbers continue to look bleak.
Then as a sign of the gathering problem, the council rejected a request for about $6,600 to buy up a right of way for an expansion of Bonita Street.
A million-dollar plan to rebuild, widen and add bike paths and sidewalks to Bonita Street dropped out of the budget this year as a result of the revenue slowdown, but the council had previously told the town staff to continue buying up about $70,000 worth of rights of way.
The council has already approved about $16,000 in purchases, but last night balked at the next, $6,600 installment.
Councilor Michael Hughes first insisted the requests for the money come off the consent agenda, then moved that any new spending on rights of way be postponed indefinitely.
“We’re spending a substantial amount of money without a time frame and we may need that money,” said Hughes.
The council agreed on a 6-0 vote, with Councilor Richard Croy absent.