County Finances Strong Despite Assault From State

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Plummeting sales tax revenues have tested Gila County’s reserve, but officials say they’re positioned better than most to withstand cost shifting from the state.

The county will bear at least an extra $1.3 million in costs next year because of the state’s budget fiasco, including reduced revenue from sweeps in highway and lottery funds.

However, if the statewide 1 cent sales tax fails, the county will see an estimated additional $835,000 in expenses when state prisoners return to county jails and it shoulders an increased share of court-related salaries.

Meanwhile, January sales tax revenues saw the biggest year-over-year declines yet in fiscal year 2010. The $493,000 collected for the month marked a 6 percent decline from December and a 27 percent decrease from last January.

To compare, December’s sales tax amounted to $526,000 — a 3 percent drop from November and 14 percent decline over the year before.

However, the county’s wallet remains thicker than most.

“We had a pretty good year even with our sales tax down,” said interim county manager John Nelson. The county has not yet tapped into its $7 million in reserves this year, although it had planned to spend $2 million.

Nelson attributed the good fortune to the hiring freeze and conscientious elected officials and employees.

“I think we’ve got a pretty good management team in place,” he said. Also, the county’s 120-day hiring freeze has resulted in a 10 percent vacancy.

Nelson feels the vacancy rate firsthand. Normally a deputy county manager, he’s now acting county manager since Steve Besich died. Nelson has also served as finance manager since that person resigned. “I’ve had a lot of people helping me,” said Nelson.

However, local government agencies are nervously eyeing May’s statewide sales tax vote. Should it fail, both county government and school districts could see dramatic cuts and increased costs.

The latest Rasmussen poll reports 53 percent of Arizonans support the 1 cent sales tax measure, with 36 percent opposed and 11 percent undecided.

Gila County’s biggest financial threat should the measure fail amounts to the $632,000 it would cost for 170 state prisoners to return to county jail.

“We’re already at early release,” said Nelson. The county would be forced to find available beds in other counties, which costs anywhere from $60 to $70 per day per prisoner.

The county will likely seek its allowed 2 percent increase in property taxes, which would generate nearly $1.2 million. The current tax rate is $3.75 per $100,000 of assessed valuation, and the increase would push the rate to $4.19 per $100,000.

However, even if the levy stayed the same, the tax rate will still rise to $4.10 because of declining property values.

All told, counties will sacrifice nearly $27 million so the state can solve its $3 billion budget gap, according to figures from the County Supervisors Association of Arizona. If the sales tax fails, that figure will balloon nearly five times to $134 million.

If the sales tax fails, the state will demand a total of $34.6 million from Maricopa and Pima counties in a required “contribution.”

For other counties, the shift of adult prisoners back home represents the biggest financial burden at $63 million.

Next year’s cost shifting continues a trend began last year as the state’s deficit grew unmanageable.

This fiscal year, the county shouldered $586,000 in increased costs, including contributions to the state hospital and reduced highway funds.

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