The city budget could be a dominant theme in Scottsdale’s mayoral and council campaigns as the city grapples with major revenue shortfalls due to the pandemic.
Several council members, including mayoral candidates Virginia Korte and Suzanne Klapp, have already chastised city staff for being too optimistic with a spending plan featuring about $25 million in cuts.
A council majority have called for at least $50 million in cuts as the city loses millions of dollars in revenue from sales and other taxes.
Not all on the Council are calling for drastic cuts, though.
Councilman Guy Phillips, who is running for re-election, argued that years of conservative budgets have put the city in a better position to weather the storm without cuts on the level called for by his colleagues.
But it appears Phillips is in the minority among candidates with only one other candidate calling the proposed $25 million in cuts acceptable.
The progress last week asked candidates not on the council about the budget.
Are you comfortable with early drafts of the budget?
David Ortega, mayoral candidate: There was no sense of urgency! Worldwide, COVID-19 has crushed all sectors: autos, agriculture, light manufacturing, retail sales, construction, commercial real estate and toursim.
The tentative budget “savings” were: postponement of fleet purchases, hiring freeze, terminating vendors and miscellaneous. Not enough.
Seventy-four percent of the City Budget is direct payroll. Some essential services are 24/7 but others are nearly at a stand still. Scottsdale has a $ 105M cash cushion, but measured strategic cuts must be made. Budget discussions omitted level-of-service, what the city can deliver to residents and businesses, scaled to sustainable payroll… The budget must plan for a 2-3 year recovery, not a rebound.
Bob Littlefield, mayoral candidate: I am not comfortable with the budget as presented by city staff thus far. Clearly the staff is stonewalling the Council in the hope the economy will open up and miraculously recover, thus saving them the pain of making big cuts, especially in the area of personnel, which accounts for 74 percent of Scottsdale’s General Fund budget. That miracle is not going to happen.
Lisa Borowsky, mayoral candidate: I would like the budget process to include more citizen outreach and input. I strongly support reestablishing the Citizen Budget Commission as we work toward an economic recovery.
I would encourage the City to decrease dependency on development revenue which can be inconsistent and can dramatically decline, especially during economic downturns such as we are confronting now. We won’t know what reductions are necessary until we know revenue totals.
Kevin Maxwell, council candidate: Not at all. The budget, as presented at the May 5 City Council meeting, assumes a V or U-shaped return of the economy.
Because we are such a tourism-centric economy and there is no data to predict how our tourism guests will respond to the reopening of the economy, we need to prepare for a prolonged economic downturn.
Economic analysis from ASU, UA, and the number of nationally-recognized economists predict a recession that will last 9 to 18 months. This budget is reflective of a temporary downturn. I would like to see a budget that is more aligned with a revenue impact loss of 30-40 percent of tax receipts for a extended period of time.
John Little, council candidate: Comfortable? No. In a crisis you need leadership, reliable data, clear roles and policy direction all of which are in short supply. First of all, people by now must know that this is first and foremost a public health crisis that is having a devastating impact on our economy and our personal economic well being.
Economic recovery can’t be accurately forecast without understanding the trajectory of the disease through testing and ultimately the availability of a vaccine. While we can’t forecast revenues, we can take immediate steps to limit spending.
Accordingly, to be prudent I would propose the City Council direct the City Manager to cap expenditures for FY 20-21 at 50 percent of the General Fund operating budget from the preceding FY 19-20 and then make course corrections based on actual revenue through the balance of FY 20-21.
Becca Linnig, council candidate: I believe the cuts that have been made were prudent. I think we should focus on recovery and how we can inject revenue back into our city.
Betty Janik, council candidate: I am not comfortable with the sluggish response by city staff at either meeting (on April 7 and May 5). On April 7, staff made a few suggestions to reduce spending resulting in minimal savings while not addressing the depth of the shutdown.
Council members responded with several suggestions for action on the budget for the May 5 meeting including revising the budget to reflect decreased revenue and reduced expenses. Unfortunately, the staff presentation on May 5 was woefully inadequate.
After reviewing the numbers, I am convinced the receipts to General Fund will be reduced by approximately 30 percent ($98 million) to $230 million from projected income of $328 million. Total expenses of $286 million were anticipated. Spending reductions of approximate $56 million (income $230 million - expenses $286 million) should be considered.
Tom Durham, council candidate: No, I am not comfortable with the budget as currently proposed by staff. It does not reflect the reality of the downward spiral of tax revenue we are currently facing, which will continue for several months, at a minimum.
I am also opposed to across the board cuts, since we need to be thoughtful and tactical in budget reductions. I am reluctant to specify a certain amount, since it will need to reflect the reduction in revenue for future months.
Bill Crawford, council candidate: I’m not comfortable with it, simply because it’s too fluid to address at this time. Of course, we must make cuts, but temporary cuts will not be the long-term solution. We ultimately must figure out how to put everyone back to work and open up our businesses.
We do not want to hinder, even potentially destroy, the industries and businesses that support us; we want to help them succeed. As a city, our finances function like a household budget. We can’t print money like the federal government. We can only spend what we take in.
Tammy Caputi, council candidate: I’m deeply uncomfortable with the budget as presented. Reduce spending to realistically match decreased revenues. We are projecting a $25-million shortfall in annual revenues; that’s just speculation for now.
Scottsdale is heavily dependent on sales tax and tourism, a revenue model which has failed in past recessions.
Michael Auerbach, council candidate: The budget as presented has the good, the bad, and the ugly. The city has a surplus, good. The revenue from taxes will be about 40-50 percent less than that of last fiscal year, bad. Will the recovery be a V, U or a W shaped one? Will a static trend set in 3 months from now, 12 months, or 18 months from now, ugly?
The lack of data makes an already difficult decision that much harder. Staff needs to provide more revenue projection. The city has a Triple-A credit rating. Maintaining this is paramount. Sweeping funds to cover loses is not a good idea. Delaying cost cutting is even worse.
Not going through with already planned Capital Improvement Projects has proven unwise in the past. Changing service and program levels to bring them in line with revenue is the fiscally conservative approach I would take.
Next week: Where they would cut