Report Shows Payson’S Economy Still Stalled

The Rim Country economy is still limping along at last year’s discouraging levels — but at least nothing’s getting worse

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Payson’s economic glass hit half full in December.

Which is great, except for the part that’s half empty.

December’s sales tax figures show that the Rim Country’s retail economy is doing ever so slightly better than last year.

Then again — last year was the pits and the construction sector that once propped up the local economy remains in ruins.

Still, the renewed slump that many feared for 2010 never materialized and the figures offer grounds for hope that the Rim Country economy has bottomed out.

As of Dec. 31, Payson’s sales tax revenues rose a tiny $18,000 over the same period in 2009. By contrast, December figures reflected a nearly $400,000 drop over 2008, when the regional economy was booming.

Most other sources of town revenue remained slightly worse than last year, signs that the town’s budget woes haven’t yet eased. Moreover, many local officials are bracing for fresh fiscal challenges as the state Legislature grabs up money that has traditionally gone to local government.

For instance, state-shared sales tax distributed based on population fell just $488 for the June-December period to $458,576. By contrast, state-shared sales tax revenue fell $72,000 from 2008 to 2009.

Money from vehicle license taxes on new cars sales fell about $5,000 to $363,000 for the June-December period. That’s discouraging, but only a fraction of the $46,000 plunge from the year before.

The town took the big hit on a $245,000 drop in urban revenue sharing, which comes from the town’s share of state-collected income taxes. The town collected $750,000 in that category for the first six months of the fiscal year. Typically, the state distributes the local share of the income tax two years after it collects the money from taxpayers. As a result, income tax receipts remained high for the first two years of the downturn, but now reflect the plunge in income tax payments that took hold in 2008.

Revenue from building permits remains just as non-existent as last year, with no sign yet that the construction industry has recovered in Rim Country. Building permit revenue dropped about $782 for the first six months to about $61,000. By contrast, building permit revenue dropped $48,000 for the same period between 2009 and 2008.

Plan review fees followed the same pattern — down nearly $5,000 this year to $24,000. Between 2008 and 2009, plan review fees fell $13,000.

The town has trimmed expenses every year for the past three years and so managed to keep just barely ahead of the relentless constriction of its revenues.

On paper, the town’s $12.4 million general fund operating budget seemed to have slipped into a worrisome deficit — with hardly any reserves to make up for any miscalculations as the town labors to repay last year’s $1 million loan from the water department.

On paper, the town has spent $470,000 more than it has collected in taxes. If that trend continued, the town would not only use up its $771,000 reserve fund — but wind up with a $225,000 deficit.

However, Finance Manager Hope Cribb took pains in the December financial report to point out that the spending picture isn’t as bad as it looks.

Cribb listed a variety of upfront payments that boosted spending in the first half of the year, creating the appearance of a deficit that should actually melt away in the second half of the year.

That included $143,000 in upfront rental for the court room, a $72,000 lease payment on the town maintenance yard, a $139,000 annual payment for computer maintenance programs, an extra pay period in December, a $24,000 payment to Arizona State Parks to keep Tonto Natural Bridge open and assorted other costs.

The town’s shift to a new insurance pool to provide employee benefits has also contributed to the on-paper deficit, Cribb concluded. The town shifted from its own self-insurance fund to a new fund that many towns and schools operate. That resulted in higher upfront costs as the town bought into the new pool that will be eased by smaller monthly payments in the second half of the fiscal year.

Several departments continue to run a little ahead of projections — most notably the police department, whose $4.3 million budget accounts for 35 percent of the general fund.

The two departments running the biggest imbalance so far are parks and recreation and financial services, which have both spent about 61 percent of their budgets with half of the year still to go. Parks suffered bigger budget cuts than almost any other town department in the past two years and its $358,000 budget now accounts for 3 percent of general fund spending. The $258,000 financial services budget accounts for less than 2 percent of the general fund.

The town council is also ahead of projections for its $41,000 budget, but that mostly reflects dues and other upfront costs that should even out in the second half of the year. The town’s $102,000 tourism department is also over budget so far for the year.

The fire department remains right on budget and its $2.6 million budget accounts for 21 percent of general fund spending.

Many of the key town departments continue to run slightly behind budgeted expenditures. Departments behind their spending tallies so far include the town manager, town clerk, information technology, human resources, town attorney, magistrate court, central services, engineering and community development.

Most of the big capital improvement projects included in the budget in hopes of landing state and federal grants remain in limbo. The town has already given up on getting a hoped-for $21 million in new federal stimulus money to rebuild some streets and put a shade structure over the event center. But other big projects like airport safety improvements ($800,000), rebuilding Bonita Street ($800,000), putting in streets, sewers and utilities for the 220-acre Airport Land Exchange project ($6.2 million) and various improvements to the town’s water system ($1.8 million) also remain unfunded.

Meanwhile, a breakdown of sales tax collections by category that reflects November sales, documents the continued struggle in real estate and construction, the mainstay of the economy during the pre-2008 boom.

For instance, construction taxes totaled just $33,000 in November 2010, compared to $53,000 in 2009 and $93,000 in 2008.

Real estate taxes in November totaled $23,000, compared to $50,000 in 2008.

On the other hand, the tourism industry has largely held its own.

The taxes collected for hotel and motel rentals totaled $27,000 in November, about the same as in 2008 — and up about 27 percent from last year’s low point.

Taxes on restaurant and bar spending stood at $43,000 in November, down from $49,000 in 2008 and $47,000 in 2009.

Fortunately, retail trade has largely held its own. The November total tax collections in that category stood at $259,000 — about the same as last year and down by a modest 19 percent from 2008.

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