Got To Admit ... It’S Getting Better

Payson’s sales tax revenues on the rise, but construction continues to struggle

Rim Country retailers like Radio Shack hope the rise in sales tax revenues noted through October holds up through the holidays.

Rim Country retailers like Radio Shack hope the rise in sales tax revenues noted through October holds up through the holidays. Photo by Keith Morris. |

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Hopeful numbers keep trickling in, as Rim Country struggles to regain the economic ground it lost in the real estate crash of 2007 and 2008.

Payson’s financial tracking report for October showed gains in almost every revenue category over last year, including an 11 percent gain in local sales tax revenues.

Sales still remain below the high water mark set in 2007. Back then, sales tax receipts were jumping 20 percent annually and the town was adding about 300 homes annually to its housing stock.

Rim Country’s economy still hasn’t recovered from the body blow of the recession, even after five years. Moreover, the construction sector that once sustained the local economy continues to struggle.

However, after four years with virtually no change in total sales, the uptick comes as a relief for many merchants.

Moreover, after several years of sharp decline in enrollments — this year both the Payson Unified School District and Gila Community College reported enrollment gains. The increase in the Payson schools amounted to about 100 students, which compares to the loss of about 100 students in the 2,400-student district in each of the past three years. GCC’s gains were much greater — a roughly 27 percent increase, but that may reflect the result of a cut in tuition rates as much as an economic rebound for the community.

Town advocates hope that a decent holiday sales season followed by the effort to finalize the plan to bring Arizona State University to town next year will fuel a more sustained economic recovery.

The town’s local sales tax collections remain the strongest indicator of the condition of the economy here. For the third of a fiscal year between July and October Payson collected $1.7 million in local sales taxes, an increase of 11 percent or $174,000 over last year.

State-shared income tax payments also rose, jumping 9 percent to $569,000. That’s one of the most hopeful economic indicators, since it points to a sustained recovery state­wide. The state collects the income tax and distributes it based on population, with a lag of about two years. The shared income tax payments therefore held up as the state slid into recession in 2008. However, that also means that the rise in shared income tax payments lags the actual recovery by a year or two as well.

The state-shared tax provides another indicator of the condition of the statewide economy. The state-shared sales tax payments rose 7 percent to $314,000 for the quarter. That’s a welcome indicator that Rim Country might finally be perking up faster than the rest of the state. For the past three years, local sales tax improvements have consistently been behind the statewide data.

The vehicle license tax payments from the sale of new cars rose as well, but not as sharply. The vehicle license tax payments for the quarter rose by about 3 percent to $257,000.

Almost the only drop in revenues came in building permits, down 6 percent to $57,000. The once booming housing sector has remained nearly comatose for the past five years, with permits for homes dropping from more than 250 annually to about 30 annually.

On the other hand, the actual sales tax from construction rose in September, the last month for which the report provides a breakdown by type of sale. Construction sales taxes rose 20 percent in September, reflecting actual construction rather than permits issued for construction in coming months.

In another hopeful sign, the plan review fees for the first quarter of the fiscal year rose by a healthy 13 percent — representing new projects about to enter the development pipeline.

Town officials say they’ve had discussions with a number of builders in town in recent months, urging them to dust off and resume projects approved several years ago, but stalled by the building collapse.

That includes discussion with the owners of a large, proposed subdivision out by Doll Baby Ranch, which was caught in the housing collapse. Owners have had discussions with both Gila County and Payson about infrastructure costs and requirements. Developers have reportedly reconsidered their previous ranchette, luxury home model, given the profound changes in the housing markets.

Town officials say that the region could shift quickly from a building slump to a housing shortage if the Rim Country Educa­tional Alliance concludes a deal with ASU and some of the spin-off projects like a research center, an incubation center to produce products from university re­search, a convention hotel and other hoped-for businesses come through.

The construction sales tax numbers and the permit review fee numbers both suggest that the long-yearned-for shift in the housing market may finally be taking shape.

On the other hand, dwindling state support for road construction remains a drain on the town’s prospects. The amount of gas tax money coming from the state declined just slightly to $344,000 for the quarter. The state Legislature several years ago diverted a portion of the gas tax money that used to go to cities to other purposes, including support for the Department of Public Safety. As a result, Payson abandoned most new road projects — and has even skimped on routine maintenance of roads, despite evidence that neglecting maintenance runs up the bills in the long run.

The town’s budget for the current fiscal year does include $369,000 to upgrade the potholed and deteriorating East Bonita Street, which would include sidewalks and perhaps a bike lane. However, the town has started spending money on the project, which it will eventually get back from the state.

Despite the increases in most tax categories so far in the fiscal year, the town is still spending more than it’s taking in — partly because budget planners hoped for larger increases than we’ve seen so far. In addition, several departments have paid up front for goods and services, creating a temporary deficit, Town Finance Manager Hope Cribb reported.

She noted “this month we billed the Rim Country Educational Alliance $282,000 for the water line reimbursement.” That project will provide irrigation water for the proposed playing fields on a university campus on 260 acres of Forest Service land. The line will also deliver untreated Blue Ridge pipeline water to the two private golf courses. The courses need more water than they’ve been able to buy from the Northern Gila County Sanitary District, which sells treated wastewater for irrigation. The Blue Ridge pipeline will more than double Payson’s water supply. So now instead of having the toughest water conservation restrictions in the state, the town has been scrambling to figure out how to sell enough water to make the payments on the bonds needed to make the pipeline affordable.

The town’s water department has its own $8.6 million budget account. The operating costs amount to about $5.4 million annually, which mostly comes from the payments of water users. The account retains a sizeable reserve to cover repairs. However, the amount of money in the account to pay for the Blue Ridge pipeline has steadily dwindled, as the town spends years worth of accumulated $7,500-per-house water impact fees. The town two years ago raised its water rates by about 25 percent to make sure it has enough to pay bonds needed to pay for the pipeline, for which the total costs may ultimately exceed $50 million.

In the town’s $13 million general fund, revenues have lagged behind projections. When the council adopted the budget back in June, it expected to have collected about $4.3 million by now in taxes, fees, fines, permits and payments from the state and federal governments. In fact, the town has collected only $3.7 million.

Fortunately, spending has also come in below projections. The town budget envisioned spending $4.4 million at this point. In fact, the town’s departments have spent just $3.6 million.

The police department’s budget for the first quarter was $1.5 million, but so far the department has spent about $1.2 million.

The department operated about five officers short of the authorized total for almost all of last year, resulting in a big savings. The department has now filled all those slots — and is also advertising for perhaps four additional dispatchers.

The fire department’s budget for the quarter was $1.1 million, but the department has so far spent about $800,000. The town council this year cut the fire marshal’s position. The town also held off hiring a fire chief when Chief Marty de Masi retired.

The fire department’s budget jumped last year when the town decided to open up its third fire station. Putting three full-time firefighters on a fire truck requires actually hiring nine firefighters to provide around-the-clock staffing. The town landed a federal SAFER grant to cover the salaries of those added firefighters initially. Cribb, in the budget report, said the town is submitting an $82,000 reimbursement request for the first installment of this fiscal year’s SAFER grant.

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