Crowds have returned

Crowds have returned to the streets of downtown Scottsdale, further bolstering city revenues that already outperformed dire projections included in the city budget last year.

The City of Scottsdale’s revenues continue to outperform pared-down projections adopted last year, but the city is still taking in less money than it did prior to the pandemic.

But the return of major tourist attractions like Cactus League – and the roll back of statewide COVID-19 restrictions on restaurants – could further buoy its revenue picture in the coming months.

Through the end of February, the city’s General Fund revenues totaled $216.1 million – $21.9 million, or 11 percent, higher than projected in the budget adopted last June.

That budget included around $30 million to $40 million in cuts due to the anticipated impact COVID-19 would have on the local economy, which is heavily reliant on tourism.

Revenues are considerably higher than the city’s spending, which totaled $170.7 million through the end of February – about $500,000 less than projected.

Still, the city’s revenues this year were 4.5 percent lower than the $84.6 million it brought in during the last fiscal year through February 2020.

Revenue has outperformed budgeted projections throughout the fiscal year though the numbers through February are slightly lower than the $23.3 million positive variance the city recorded through December 2020.

At Council’s March 16 meeting, acting City Treasurer Judy Doyle said the same revenue streams have been driving those positive numbers for months.

The bulk of the city’s unexpected revenue – about $12.5 million – came from local sales taxes.

According to Doyle, the $11.9 million in taxes connected to auto sales was 22 percent above expectations and the $8 million in taxes on construction activity exceeded projections by 51 percent.

She said the bump in auto sales could be connected to sales and specials run by dealers to boost sales during the pandemic.

Retail sales taxes, driven in part by online shopping, were also up 25 percent to $17.5 million.

Even industries like restaurants, bars and hotels –  hit hardest by the pandemic – fared better than expected.

Restaurants and bars turned in $5.8 million in local sales tax, 44 percent higher than projected in the budget.

And hotels, a cornerstone of the city’s tourism industry, had sales tax receipts of $2.3 million, 38 percent higher than budgeted.

The city’s revenues could be further bolstered by the return of daily spring crowds – a far cry from the empty sidewalks that became a regular fixture in the early days of the pandemic.

It is unclear when the city will rollback a series of cuts to staffing and services made in the current budget.

A hiring freeze left over 100 positions unfilled and a rollback of some city services, included limited hours of operation at city libraries.

In January, City Manager Jim Thompson told Council the city had started to fill a small number of open positions but that 138 positions remained vacant.

Meanwhile, only the Civic Center and Mustang library buildings are open to the public with limited hours. The Arabian and Appaloosa branches are open for curbside pickup only.

A city spokesman did not respond to a request to comment on when the city plans to unfreeze positions or reopen closed services.

Residents should get a better idea of the city’s financial outlook heading into next year when city staff presents the first draft of budget for next fiscal year in April.

While higher than expected, revenue from restaurants, bars and hotels has not recovered to pre-pandemic levels.  

Through February, sales tax receipts from restaurants and bars were still down 25 percent compared to the same period in 2019-2020 and sales taxes from hotels were down over 50 percent.

Industry data shows more people are returning to area hotels, though occupancy has not reached pre-pandemic norms.

According to Experience Scottsdale, occupancy at Scottsdale-area hotels reached 47.5 percent in February, a vast improvement over the sub-10 percent occupancy the industry saw during the worst weeks early in the pandemic but still a 42 percent drop from February 2020.

The latest data shows that occupancy has continued to improve in the area as crowds arrive for Cactus League baseball.

From March 7 to 13, occupancy at Scottsdale-area hotels reached 59.4 percent, up from 53.4 percent the previous week.

Recent actions at the state level could further boost the local economy. 

On March 5, Gov. Doug Ducey lifted occupancy limits on restaurants.

The city has also seen the return of Cactus League baseball at Scottsdale Stadium with limited fans.

The city and San Francisco Giants announced last month that attendance at the 12,000-seat stadium would be limited to just over 1,000 fans. 

They then upped that capacity to around 1,500 and opened left field berm seating on March 12, according to the San Francisco Chronicle.

The Barrett-Jackson classic car auction, which typically takes place in January, also returned this month to host its annual auction at Westworld, providing another shot in the arm for the local economy.

An economic impact study commissioned by Barrett-Jackson and the city in 2016 found the auction contributed $1,640,400 in revenue to the city that year. That impact is sure to be smaller this year due to safety precautions that included limiting capacity to 25 percent a day during the eight-day event.

The city is also in line to receive a fresh infusion of cash from the federal government as part of the $1.9-trillion COVID-relief package passed by Congress and signed by President Joe Biden earlier this month.

According to estimates from Senator Kyrsten Sinema’s office, Scottsdale is in line to receive $30.05 million of the $2.6 billion in relief directed to Arizona’s cities, counties and tribal communities.

City officials did not respond to a request for comment on how it would prioritize the use of those new funds. 

The city previously received $29.6 million in federal relief last year and directed the money to a variety of uses, including public safety, improved air filtration in city facilities and support for local businesses and vulnerable populations.