The Payson Town Council will meet Thursday to consider a 20 percent increase in water rates and new taxes on hotel rooms and rental cars.
The steep hike in water rates was first proposed by the water department back in October of 2007, but the council has previously refused to consider the increase.
The town spends about $6 million on its water department, more than any other town function.
The water department has maintained substantial reserves, in addition to accumulating some $5 million for the Blue Ridge pipeline, financed by a $7,500-per-unit impact fee on new construction.
The hearing on Thursday is the first act in a long process that could result in the imposition of the rate increase in July.
Thursday’s council session will start at 5:30 p.m. in the town hall council chambers.
The proposed 2 to 5 percent hike in the room tax and a proposed new 5 percent tax on rental cars would also boost town revenues, but most of that money would come from out-of-town visitors.
A 2 percent rise in the bed tax would bring in an estimated $85,000, according to a memo written by Town Manager Debra Galbraith.
A 5 percent tax on rental cars would bring in another $15,000 to $20,000.
The town has struggled to fill its rooms in the past year, resulting in a decline in bed tax revenues of more than 15 percent. Overall, Gila County hotels in 2009 suffered from the second highest vacancy rate in the state — about 50 percent, according to the Arizona Department of Commerce.
Town officials say Payson’s water rates remain low compared to other towns in the region and other communities on the outskirts of Payson served by Brooke Utilities and other water companies.
They say the jump in rates is several years overdue and will help maintain the town’s water system.
The town borrowed $1 million from its own water department this year to get through the current fiscal year and cope with a roughly 15 percent drop in sales tax revenue and the near absence of building impact fees.
The town council at the start of the fiscal year passed up an increase in the property tax rate and has cut town expenses repeatedly in the past two years.
The town has had in place a hiring and pay raise freeze for nearly two years and canceled even routine street maintenance. In December, the council added a ban on overtime and a two-day a month furlough that resulted in an effective pay cut of 12 percent for most town workers and more like 16 to 20 percent for the overtime-dependent police and fire departments.
Sales tax and other revenue sources improved somewhat in February, easing the immediate fears of a big deficit in the current fiscal year. However, projections remain bleak for the fiscal year that starts in July. Town officials say they still see no signs of a recovery in the construction market, once a major source of town revenue.