Payson likely can’t afford to open its new, third fire station, maintain streets or make payments on a loan from the water department the town council tentatively decided at a budget study session on Tuesday.
“Something has to be done, because these numbers don’t work,” said Town Manager Debra Galbraith, after a review of the town’s deteriorating finances.
The council left the door ajar to opening the third fire station in the event the town receives a federal grant to cover salary and benefit costs for six new firefighters, but officials said the chance of getting such a grant appears to be dwindling rapidly.
The decision means Payson will likely seek to extend its $160,000 annual mutual aid contract with neighboring Hellsgate Fire Department to help handle calls along the town’s eastern boundary.
The news should come as a welcome relief to Hellsgate, which this year faced major financial problems partly as a result of Payson’s previous plan to end its contract as soon as the third fire station opened.
In addition, Payson will slash the long-shorted road maintenance budget from $300,000 to $50,000 and hold off on $234,000 in payments on last year’s loan of $1 million from the water department to the general fund.
That flurry of reductions comes as a result of cuts in state payments to towns and a rise in employee benefit costs, which have combined to shove Payson back down into the fiscal deficit pit from which its been trying in to escape for three years.
As a result, the Payson council Tuesday directed the town’s staff to build a series of possible cutbacks into planning for the budget the town must adopt in June.
Galbraith offered a series of painful reductions to ensure the town has some reserves. “We don’t have anywhere to get the money,” if the revenue deteriorates further, she said.
“In each of the past two years, we’ve ended the year looking for $300,000 — and we’ve been very, very lucky up until now.”
The budget projections took a big hit with the passage of the state budget, she said.
The town will collect about $500,000 less than it had expected from its share of the state gas tax funds, known as HURF — which includes a $184,000 reduction in the state formulas included in the just-adopted budget. State budget cuts will trim another $217,000 from the town’s general fund.
The state also imposed an increase in the workman’s compensation fund that will cost the town an extra $83,000 and banned certain impact fees, which will mean the town will have to spend $67,000 from the general fund to pay off debt incurred to build park facilities.
The biggest hit came in the form of a 7 percent increase in employee benefit and retirement costs raising it to $1.2 million. In addition, the town must pay an extra $107,000 in to the state retirement system.
Payson Mayor Kenny Evans said the employee benefit costs would have come in closer to $3 million if the town last year hadn’t switched to a different self-insurance benefit pool with other public agencies and had not offered buyouts and independent contracts to half a dozen top employees.
The deteriorating budget picture confronted the council with a series of no-win choices starting with whether to actually use the just-completed fire station at Highway 260 and Tyler Parkway.
The town has applied for a $353,000 annual federal grant, which would cover salaries for six firefighters for about three years. The town would still have to spend about $160,000 to hire three more firefighters to provide an around-the-clock, three-man crew for one engine. Federal budget cuts have made it unlikely Payson will get that federal grant.
“Depending on who you talk to,” said Fire Chief Marty deMasi, “our chances are rapidly diminishing.”
Galbraith said that it would cost the town about $429,000 annually to operate the third fire station, two-thirds of which the SAFER grant would cover.
She said the town has already cut the budgets of most departments repeatedly and that most department heads had already asked for less money next year than they spent this year.
The fundamental problem lies in the stalled economy that drove down sales tax revenue even as the Legislature diverted more and more money that used to go to the towns.
For instance, state shared revenue has dropped from $4.6 million in 2008 to a projected $3.3 million in fiscal year 2011-12. Gas tax payments on which the town has historically relied to maintain and build streets have dropped from $1.7 million in 2008 to a projected $1.3 in 2011-12.
The town will likely finish the year with nearly $1 million in reserves — mostly from the internal loan from the water department, which had accumulated reserves to make future improvements in water mains and wells.
“The water department’s not going to sink or swim based on whether we make these payments,” said Councilor Fred Carpenter, the former town manager.
If the town got the SAFER grant and opened the third fire station, the reserves would dwindle to a razor-thin $115,000. If the town didn’t open the third fire station, reserves would stand at $192,000.
However, with the council’s tentative decision to slash the road maintenance budget and quit making payments on the water department loan, the reserves will rise to about $600,000, said Galbraith.
The councilors agree to that approach, although nothing is final until the council actually approves the budget in June.
However, the council can’t actually spend any money not included in that June budget. So the council will have to budget the SAFER grant and the extra firefighters, even if the grant doesn’t come through and the town doesn’t actually spend the money.
“I like the idea of ‘damn the torpedoes, full speed ahead,’” said Carpenter of the plan to put the SAFER grant in the budget anyway.
The town council rejected another option on the list — requiring all the employees to take one day a month off without pay. The furloughs would have saved $330,000 and amounted to a 4 percent pay cut.
Galbraith appealed to the council not to seize on that option — especially since it remains a last-ditch response if revenues plunge once the fiscal year begins.
“We have to leave that as the very last option,” agreed Evans.
“If we were to budget that and things turned rosy, then we couldn’t take it back and pay them.”
She said a hiring freeze remains in effect for most positions and employees have not had merit or cost of living increases in three years — on top of furloughs last year.
The council also suggested the fire chief resume negotiations with Hellsgate, which had already offered to cut the cost of the mutual aid contract from $200,000 to $160,000. Hellsgate had also offered to extend it month-by-month at a cost of $50,000 per quarter.
Galbraith said Payson could put $160,000 into the budget for three firefighters, but use it for the Hellsgate contract in the event the SAFER grant didn’t come through. However, if the SAFER grant popped up in January, the town wouldn’t have enough money left to hire the extra firefighters. That would likely mean running two-man instead of three-man crews at all three fire stations for a portion of the year.
“Even if we get the SAFER grant and only have enough money left to hire one more firefighter, then seven firefighters are better than none,” said Galbraith.
Councilor Michael Hughes noted “I don’t think we should go back and beat up on Hellsgate (to get a low cost contract) because we’re all in the same boat.”
Galbraith concluded, “I want to thank you for your help and for not considering furloughs.”