Rim Country Sales Slow, But Construction Stirring

Report suggests region’s economy lagging behind state, but still encouraging

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Payson continued its slow economic recovery in October, with sales tax numbers virtually unchanged from the same month last year.

However, the once-crucial building sector showed encouraging signs of life, with big increases in permits and sales.

Rim Country’s economy appears to be climbing out of the crater of the recession more slowly than the rest of the state’s economy, judging by contrasting sales tax figures.

For instance, Payson collected $1.6 million in sales tax revenue in the four months since the start of the fiscal year — a decline of $850 from the same period last year. Sales spiked in August, raising hopes briefly, but then subsided to match last year’s tally month by month.

However, the sales tax collected statewide and distributed based on population actually rose almost 8 percent to $284,000. That suggests Maricopa County has bounced back more quickly than rural areas of the state, reproducing a pattern that has held for years.

Although local sales tax collections mostly held steady, the town continued to struggle with declines in other categories. For instance, the state’s share of state income taxes fell $70,000 to $430,000 for the year. Because of a lag in the state’s distribution of shared income taxes, the decline still reflects what was happening two years ago — unlike sales tax receipts.

The town’s share of gas tax money it once used for road construction and repair also dropped — down 21 percent to $312,000 for the year. But that decline reflects the Legislature’s decision last year to divert gas tax money to the Department of Public Safety and other state agencies.

Car sales continued to stagnate, with the vehicle license tax for the year dropping $12,000 to $218,000.

However, other tidbits in the report offered the first glimmers of a turnaround in a tourist and second-home dependent town that took a body blow in the recession.

Building permit fees offered some hope for the future. The permit fees rose nearly $7,000 — a heartening 16 percent increase over the year before. Fees paid to review building plans rose even more sharply as a percentage —up 42 percent from the year before. The figures represent the first solid signs of life for the long-dormant construction industry, once one of the anchors for the region’s economy.

Other encouraging news looms on the horizon for the construction sector. Payson is now moving quickly toward the start of construction on the Blue Ridge pipeline. The $30 million project will provide a couple hundred jobs for the next two years. In addition, the Rim Country Educational Alliance is reportedly poised to sign a deal with Arizona State University, in hopes of opening a campus big enough for 1,000 students in the fall of 2013. That would provide several hundred additional jobs at the start of the construction season next spring.

The report provides a glimpse of the state of different sectors of the economy, most of which have been floundering through the deep mud wallow of the recession for two years, trying desperately to get up some speed. The breakdown by category reflects sales in September, not October.

Overall, sales rose 5 percent from the same July-September period last year. However, that still put the figures 18 percent below 2008/09.

Retail sales rose 8 percent to $287,000, which accounts for more than half of the total.

Construction rose an impressive 36 percent from last year, but still stood at only 27 percent of the activity at this point in 2008.

Taxes collected from hotels rose 23 percent, but much of that stemmed from an increase in the room tax, which the town had promised to devote to promoting tourism. By contrast, sales in restaurants and bars remained virtually unchanged from last year.

The town’s tourism department has a budget of $110,000, but so far this year has spent $31,000 — which puts it 14 percent under budget with the season already in the rear view mirror.

The bell weather real estate sector continued to struggle, with an 8 percent decline from last year. Taxes from real estate, rental and leasing are down by 30 percent when compared to the same period in 2008.

The town’s budget reflects the stagnant revenues.

The water department with 33 percent of the year gone has spent just 24 percent of its budget — or about $1.1 million. The fund for the C.C. Cragin pipeline has dwindled to $7,000, but the town expects money from its $10 million federal grant to begin flowing in to replace the water impact fees collected during the boom years and used to pay the substantial early costs of the pipeline. That includes some $5 million the town contributed to repair the aging Salt River Project pipeline atop the Rim. The town has also paid study and engineering costs for the extension of that pipeline along Houston Mesa Road and buying the pipe for that additional line.

The $14 million general fund that finances most of the town’s day-to-day operations has so far spent $560,000 more than the town has taken in, gobbling up two-thirds of the wafer-thin reserve fund on hand at the start of the fiscal year. The report says the shortfall reflects a timing issue more than a real problem.

In fact, the town’s various departments remain mostly under budget a third of the way through the fiscal year. The budget adopted by the council in June envisioned the town’s general fund departments spending $4.5 million at this point in the year. Instead, they’ve spent only $3.2 million.

Almost every department remains under budget, with a few exceptions, including information technology, engineering and streets and magistrate court.

But reduced spending elsewhere more than made up for those totals, including the two big departments — police and fire.

The police department’s $4.8 million budget accounts for about a third of the general fund. So far this year, the police department has spent about $94,000 less than projected — a 23 percent shortfall. That reflects the impact of the town not filling two or three vacancies.

The fire department’s $3.3 million budget accounts for about 23 percent of general fund spending. So far this year, the department has spent $70,000 less than it had budgeted — a 26 percent shortfall. Payson uses sales tax money to pay the bulk of the cost for police and fire, unlike neighboring communities that pay a steep property tax assessment to provide fire protection.

Parks and Recreation remains perhaps the biggest loser among departments when it comes to the impact of the recession — although part of the dramatic shrinkage reflects the shift of the money for the maintenance staff out of the parks budget and into the engineering department several years ago. The parks department spent $80,000 for the first four months of the fiscal year, which put it 23 percent under budget.

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