The Payson Town Council has approved the sale of $1.5 million in bonds to build a third fire station, but hopes residents won’t see an increase in their sales tax.
The town’s “A+” credit rating enabled it to pay just 3.3 percent interest on the 7.6-year bonds, according to Grant Hamill, the town’s Phoenix-based bond counsel.
The background report prepared as part of the bond-sale process provided a mostly encouraging statistical portrait of the town, despite concerns about a decline in sales tax and shrinking home values.
Back in 2003, voters approved a 12-cent surcharge on local sales taxes to pay for $3.5 million in police and fire projects. The campaign for that bond issue promised three fire stations, but the town ran out of money before it could build the third station.
That sales tax surcharge has been generating about $350,000 annually and has funded some $2 million in fire and police infrastructure infrastructure since 2004.
That tax would have expired in several years, but the most recent bond sale will extend it until 2019 to pay off the bonds for the third fire station, located on Highway 260 at the eastern edge of town. The station should cut one or more minutes off the response time for a portion of Payson for which the Hellsgate facility in Star Valley is now the closest station.
Payson has for some years paid Hellsgate to provide backup and often first response in the area that will be served by the new fire station. Town officials say that the town might not need to make those extra payments once the new fire station comes into operation toward the end of next year.
The new station will likely have the most impact when it comes to medical calls in places like Chaparral Pines. Staffing the station could cost the town and taxpayers a million dollars annually.
The town took advantage of a strong credit rating and a down economy to come back with an extremely low interest rate, which will save local taxpayers money.
Jim Hippel, an accountant and member of the town’s Traffic Advisory Committee, raised questions about whether a continued decline in sales tax might make it necessary for the town to use general fund money to repay the bonds.
However, Hamill said the town still has money on hand from the earlier bond sale and that even with the 9 percent drop in sales tax revenues this year, the surcharge has brought in enough money to service the bond debt.
The background material prepared for the bond sale provided a striking statistical profile of Payson’s economic strengths and weaknesses.
The town, with a population of 17,281, has grown an average of 2.75 percent each year since 2004.
However, the median home price this year has dropped by 16 percent to $211,563.
Still, the retirement, tourism and construction industries have fueled the economy and provided a diverse tax base, with the 10 leading taxpayers accounting for just 9 percent of the assessed value.
The town’s assessed value has increased by an average of 9 percent annually since 2005 and is projected to hit $262 million next year. That reflects a market value estimated at $2.2 billion.
The market value of property in town “is what we consider an extremely strong $125,302 per capita,” the bond report concluded. “Payson’s income levels have trended higher, indicating a diversifying population. Median household and per capita effective buying income are, in our opinion, a good 91 percent and 98 percent respectively of the national average.”
The report did raise some questions about recent financial trends reflected in the town’s budget, including the consumption of reserves built up between 1999 to 2006.
The town has spent more than it brought in for each of the past three years as the reserve fund shrank from 26 percent of expenditures to just 8 percent in the current budget year.
The report called the town’s management practices “standard” and the net debt level “low,” at $1,794 per capita or about 1.5 percent of market value.
“The stable outlook reflects our expectation that Payson’s population growth and diverse economic base, coupled with limited capital needs, should continue to support its sound financial position,” concluded the report. “Standard and Poor’s also expects management to maintain at least 5 percent in (budget) reserves, per the town’s recently adopted policy. We believe flexibility in a number of areas contributes to the stability of the town’s credit.”