Rim Country’S Recovery Continues To Lag Behind State

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Payson’s economy continues to lag well behind the state and the nation, according to the May financial tracking report released by the town.

Payson has so far spent about $1 million more than it has collected in revenues across its many funds, with spending totaling about $23 million.

That total includes things like federal grants and improvement districts paid for by property owners for specific purposes.

The $13 million General Fund that operates most town departments has helped cushion the blow of the shrinking tax base with a tight rein on spending. The town’s various departments have spent about $1.6 million less than projected.

More than $1 million of that savings comes from the police and fire departments, the two most expensive departments in the General Fund. However, the town has since hired more officers and firefighters, shrinking the likely savings in the upcoming year. If you compare the budget proposed for next year to the actual spending this year for those two departments it would represent a 20 to 30 percent increase.

The bleak news for the local economy lies hidden in the local sales tax collections — down by $10,000 for the same 11-month period from the previous fiscal year. The sales tax accounts for about half of General Fund spending — about $4.6 million for the last 11 months.

Sales tax collections have remained essentially flat for the past three years in virtually every category.

For instance, the April figures by category showed a small increase in retail trade, offset by drops in construction, accommodations, restaurants, real estate and wholesale trade.

The building permit fees collected have also dipped below last year’s unimpressive total. The only bright spot on the local revenue scene remains a big increase in plan review fees — which indicates possible building projects in the pipeline. By contrast, various state-shared income sources have risen, based on the ongoing recovery in the rest of the state — mostly Maricopa, Pima and Pinal counties.

For instance, state-shared income taxes rose by 17 percent to $1.4 million.

The state-shared sales tax money rose 5 percent to $1 million.

The May report represents the final fiscal snapshot of the year before the Payson Town Council adopts a budget for fiscal 2013-14. The council is considering a budget that will give employees a small pay raise — the first in years. However, in a controversial decision the council also elected to eliminate the town fire marshal position.

Many major elements of the budget remain essentially beyond the council’s control. For instance, the town pays about $600,000 to provide health benefits for retired employees. The town also has to pay about 40 percent of the salary of each police and firefighter into the state retirement system for public safety workers.

The state recently sharply increased the town’s required contribution. Moreover, the town still doesn’t know what impact the adoption of the long-delayed state budget will have on its bottom line, particularly a proposal to overhaul sales tax formulas that could cost the town heavily.

The monthly tracking report provides the latest evidence that while the core urban areas of the state have staged a still modest but clear-cut recovery, rural areas continue to lag.

Arizona led the nation in the speed and depth of its fall, with the recession cutting the state’s sales-tax-dependent revenues by about one-third. The Legislature responded with the nation’s deepest cuts in education, plus budget shifts that cost local governments millions. Money for Payson’s street construction and maintenance all but dried up, for instance, when the Legislature diverted gas tax money to state departments.

However, in the past year Arizona ranked eighth nationwide in job growth and seventh nationally for population growth. Between 1960 and 2007, the state consistently ranked in the top five in both categories. However, since 2008, Arizona ranked 48th in job growth and 14th in population growth, according to Arizona State University W.P. Carey Business School’s annual economic outlook report.

The state added 49,000 jobs last year and should add 61,000 jobs this year. That means Arizona so far has gotten back about 40 percent of the 314,000 jobs that vanished during the recession. However, that’s still worse than the nation as a whole — which has recovered 67 percent of the 8.8 million lost jobs.

In the past several years, Arizona has maintained a sickly 1 percent population growth rate — compared to 3 percent before the crash. In 2012, the growth rate popped back up to 1.3 percent, said ASU research professor Lee McPheters, director of the JPMorgan Chase Economic Outlook Center at the business school.

Forecasts show a personal income growth rate of 3.7 percent in 2012, projected to increase to 5.1 percent this year and 6 percent by 2014.

“The bottom line is that Arizona is doing better than most states, but this is the seventh year in a row of lean, subpar growth for us,” said McPheters.

The Rim Country housing market remains virtually stalled. Although the number of foreclosures has dropped, sales remain sluggish and prices depressed.

However, the Valley’s housing market shows strong signs of recovery, with a big drop in foreclosures and a significant increase in prices.

Mike Orr, director of the Center for Real Estate Theory and Practice at the W. P. Carey School of Business, reports that the median Phoenix-area home price was up a whopping 58 percent from a low of $111,000 in May 2011 to $175,000 this March. Foreclosures were down 60 percent just over the last year from March 2012 to March 2013, and Orr expects foreclosure rates to dip below long-term averages by the end of next year. Also, fewer than 5 percent of Arizona home loans (not already in foreclosure) are delinquent now.

The elimination of the flood of foreclosures has actually created a shortage of homes on the market. “Higher prices would normally bring more ordinary home sellers into the market, but many are either locked into their homes because of negative equity, or they’re simply waiting for prices to go up more,” explained Orr. “As a result, some buyers are turning to new-home sales, but developers are reluctant to overbuild as much as they did at the market peak. Therefore, we may see about 50,000 to 60,000 new people being added to our local population this year, but only around 12,000 new single-family homes being built.”

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