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State-Shared Revenues: Coping with the Reductions

State-Shared Revenues: Coping with the Reductions. ACMA Luncheon February 19, 2003. The Role of State-Shared Revenues. Arizona has one of the most generous revenue sharing systems in the nation Cities rely heavily on state-shared revenues to provide on-going services

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State-Shared Revenues: Coping with the Reductions

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  1. State-Shared Revenues:Coping with the Reductions ACMA Luncheon February 19, 2003

  2. The Role of State-Shared Revenues • Arizona has one of the most generous revenue sharing systems in the nation • Cities rely heavily on state-shared revenues to provide on-going services • The laws that created shared revenues also pre-empt cities from certain revenues • Forces the state and cities into a partnership of necessity

  3. The Advantages of the System • Evens out tax base disparities among the cities • Lessens the need for competition among the cities • Can smooth out economic cycles somewhat • Historically has produced a stable revenue source for local jurisdictions

  4. Disadvantages of the System • Cities reliant on circumstances outside their control • State legislature controls our destiny year after year • Can produce a reluctance to raise required revenues locally • Lag in recognizing population growth

  5. The Extent of Local Reliance on Shared Revenues Percentage of Total General Fund Revenues • Avondale 27% • Glendale 40% • Phoenix 38% • Tempe 27% • Gilbert 33%

  6. Extent of the Problem • Income Tax Reductions for FY04 • Avondale - $626,259 • Peoria - $1,891,256 • Phoenix - $23,055,946 • Scottsdale - $3,537,772 • Mesa - $6,917,857

  7. Causes of the Problem • Economic Recession • Legislative Formula Changes • Income Tax Pool reduced from 15% to 14.8% for FY 02-03 and 03-04 • Follows a reduction from 15.8% • Legislative Tax Cutting

  8. Coping with the Problem • Short Term Fixes • Delay or defer equipment purchases • Slow down filling of vacant positions • Push purchases into the next fiscal period • Spend down contingency reserves • Use administratively designated funds • Spend locally campaigns • Hiring freezes

  9. Coping with the Problem • On-going Expenditure Reductions • Across the board cuts • Travel and training reductions • Eliminate programs and services • Seek efficiencies, reorganize services • Eliminate vacant positions • Reassess policies on vehicles, cell phones, etc. • Combine divisions or departments

  10. Coping with the Problem • Increase Local Revenues • Local sales taxes • Fines • Permit fees • User charges • Employee contributions for benefits • Property taxes • Non-resident taxes

  11. What’s Different this Time • Economy will eventually recover • Formula will return to 15% (MAYBE) • The tax cuts of the 1990’s probably won’t ever fully come back • Citizen service expectations will probably continue to grow

  12. The Solution • Long-term on-going expenditure reductions • Finding better ways to do business • Keep investing in technology – but capture the savings • Explore local revenue options • Maintain vigilance at the legislature • Keep faith in your ability to manage

  13. State-Shared Revenues:Coping with the Reductions ACMA Luncheon February 19, 2003

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