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HomeMy WebLinkAboutCouncil Presentation 06/07/2022 - Permanent Base Adjustment DiscussionPermanent Base Adjustment Discussion Yiannis Kalaitzidis, Finance Director 6/7/2022 Background •Arizona Constitution and Arizona Revised Statutes impose an expenditure limitation on every City and Town in the State. •Baseline expenditures from FY 1979-80 •FY 79/80 base -$202,239 •State Economic Estimates Commission adjusts limitation each year •Standard inflation rate (3.31000) •Population growth (38.7186) •FY 22/23 expenditure Limitation $25,918,356 2 Background •Expenditures from certain revenue sources are excluded from the expenditure limitation •Bond proceeds •Interest income •Grants •Intergovernmental revenues •CFDs & Improvement Districts 3 Without Home Rule Fiscal Year Estimated Expenditures Projected State- Imposed Expenditure Limitation (Including Estimated Exclusions)Shortfall 2022-2023 $233.5M $75.9M $157.7M 4 State Imposed Limitation not adequate for current service levels •Assumes the 1979/80 budget provided equivalent service levels to today •Utility Service not provided by Town in 1979/80 •Increased expectation for services above 1980 levels (Parks & Rec, Streets, etc.) •Does not account for new revenue sources •Impact fees for new growth •Increases in sales taxes and rates •Additional utility revenues •Does not account for increases in commercial activity •Growth factor covers population and average inflation •Growth of regional shopping •Growth of Tourism 5 Impact of Growth -Examples Fiscal Year State Imposed Limit Increase from prior year General Fund Revenue increase Amount of General Fund Revenue in Excess of Limit Increase FY 2020-2021 1,316,034 6,021,123 4,705,089 FY 2019-2020 1,272,510 2,602,494 1,329,984 FY 2018-2019 1,014,961 3,732,426 2,717,465 FY 2017-2018 1,106,520 4,008,877 2,902,357 6 Options other than the State Imposed Limitation Home Rule Permanent Base Adjustment Capital Projects acquisition One-time Override All require voter approval 7 Comparison Home Rule option •Voters required to approve every 4 years •Sets limit at adopted budget •Reduces reporting requirements •Election costs and staff time preparing for election •Risk of not obtaining voter approval 8 Permanent Adjustment option •Fewer Elections –reduced costs •Risk of not obtaining voter approval •Increased reporting requirements for audit* •Might limit unanticipated growth* * Risk may be minimized Base Adjustment Options –FY 2022-2023 *Population @ 55,174, GDP @ 3.3100, Population Factor @ 38.7186 9 Base Limit Amount State Imposed Limit* Current Budget FY 1979/80 Base Limit -current $202,239 $25,918,356 $233,493,137 FY 1979/80 Base Limit –scenario 1 $2,000,000 $256,317,132 $233,493,137 FY 1979/80 Base Limit –scenario 2 $1,800,000 $230,685,419 $233,493,137 Scenario 1 –Projected to last 18-22 years Scenario 2 –Projected to last 15-18 years DISCUSSION 10 11 Permanent Base Adjustment = $2 million Fiscal Year Projected adjusted expenditure limitation Total Projected budget Additional capacity % of Capacity FY 2022-23 $ 256,317,132 $ 233,493,137 $ 22,823,995 10% FY 2023-24 $ 278,755,365 $ 230,683,022 $ 48,072,342 21% FY 2024-25 $ 292,562,315 $ 233,700,206 $ 58,862,109 25% FY 2025-26 $ 307,143,682 $ 212,298,104 $ 94,845,578 45% FY 2026-27 $ 321,787,053 $ 225,518,780 $ 96,268,273 43% FY 2027-28 $ 331,513,067 $ 241,107,344 $ 90,405,723 37% FY 2028-29 $ 341,533,049 $ 256,122,174 $ 85,410,876 33% FY 2029-30 $ 351,855,886 $ 272,125,650 $ 79,730,235 29% FY 2030-31 $ 362,490,730 $ 289,184,439 $ 73,306,291 25% FY 2031-32 $ 373,447,012 $ 307,369,786 $ 66,077,226 21% FY 2032-33 $ 382,839,204 $ 328,257,839 $ 54,581,366 17% FY 2033-34 $ 392,467,610 $ 348,929,987 $ 43,537,624 12% FY 2034-35 $ 396,392,287 $ 370,973,229 $ 25,419,057 7% FY 2035-36 $ 406,361,553 $ 391,998,442 $ 14,363,111 4% FY 2036-37 $ 410,425,168 $ 414,388,600 $ (3,963,432) -1% FY 2037-38 $ 418,664,453 $ 440,237,832 $ (21,573,379) -5% FY 2038-39 $ 420,757,776 $ 465,646,943 $ (44,889,168)-10% FY 2039-40 $ 429,204,488 $ 492,723,892 $ (63,519,404)-13% FY 2040-41 $ 431,350,510 $ 521,584,308 $ (90,233,797)-17% FY 2041-42 $ 440,009,872 $ 552,352,038 $ (112,342,167)-20% 12 Permanent Base Adjustment = $1.8 million Fiscal Year Projected adjusted expenditure limitation Total Projected budget Additional capacity % of Capacity FY 2022-23 $ 230,685,419 $ 233,493,137 $ (2,807,718) -1% FY 2023-24 $ 250,879,828 $ 230,683,022 $ 20,196,806 9% FY 2024-25 $ 263,306,083 $ 233,700,206 $ 29,605,877 13% FY 2025-26 $ 276,429,314 $ 212,298,104 $ 64,131,210 30% FY 2026-27 $ 289,608,348 $ 225,518,780 $ 64,089,567 28% FY 2027-28 $ 298,361,760 $ 241,107,344 $ 57,254,416 24% FY 2028-29 $ 307,379,744 $ 256,122,174 $ 51,257,571 20% FY 2029-30 $ 316,670,297 $ 272,125,650 $ 44,544,647 16% FY 2030-31 $ 326,241,657 $ 289,184,439 $ 37,057,218 13% FY 2031-32 $ 336,102,311 $ 307,369,786 $ 28,732,525 9% FY 2032-33 $ 344,555,284 $ 328,257,839 $ 16,297,445 5% FY 2033-34 $ 353,220,849 $ 348,929,987 $ 4,290,863 1% FY 2034-35 $ 356,753,058 $ 370,973,229 $ (14,220,172) -4% FY 2035-36 $ 365,725,397 $ 391,998,442 $ (26,273,045) -7% FY 2036-37 $ 369,382,651 $ 414,388,600 $ (45,005,949) -11% FY 2037-38 $ 376,798,008 $ 440,237,832 $ (63,439,824) -14% FY 2038-39 $ 378,681,998 $ 465,646,943 $ (86,964,945)-19% FY 2039-40 $ 386,284,039 $ 492,723,892 $ (106,439,853)-22% FY 2040-41 $ 388,215,459 $ 521,584,308 $ (133,368,848)-26% FY 2041-42 $ 396,008,885 $ 552,352,038 $ (156,343,154)-28% 13 State Imposed Limitation not adequate for current service Levels •FY 1979/80 Base Limit $202,239 •Inflation adjustment 3.3100 •Population adjustment 38.7186 •FY 22/23 State-imposed limit $25,918,356 •FY 21/22 State-imposed limit $23,110,050 •FY20/21 State-imposed limit $21,968,789 •FY19/20 State-imposed limit $20,652,755 14 Home Rule option –followed by Marana Approval required by voters every four years Current option is in effect through FY2024-25 Home Rule option elections must take place at the same time as your regular election Local control –sets limitation at adopted budget amount 15 Permanent Base Adjustment option Permanent base adjustment modifies the expenditure base from 1979/80 Approval by the voters Reduction in election costs and staff time every 4 years Provides stability to service levels 16