Weak revenue forecasts have the Tucson City Council discussing the possible need for tax increases over the next few years, but not likely in the next fiscal year.
At a council retreat Friday, some of the discussions about how to bring in more revenue included plans that would require voter approval, such as the creation of special taxing districts.
City Manager Mike Ortega explained that year-over-year revenue projections are rather anemic and while they continue to grow, they no longer are keeping up with the rising costs of running the government, including increasing health-care and pension costs.
No direction was given at the retreat, as Ortega outlined that projections had the city about $6 million in the black for the next fiscal year, which starts July 1.
This largely takes the pressure off any immediate discussions about tax hikes, but Ortega said he wanted the council to at least consider them in the future.
The city manager outlined a number of issues that could add to the city’s budget in the coming year, including required increases in the city’s contribution to the Public Safety Personnel Retirement System, health-care costs, staffing and recruitment issues, and unmet capital needs in city departments other than fire and police.
Proposition 101, which was passed by voters in May, is to put $150 million in new capital for the Police and Fire departments over the next several years.
One area of concern is increased staffing at the Police Department, with a council-backed goal of hiring 20 additional officers over the current size of the force.
Police Chief Chris Magnus said that if the average of eight officers leaving the department monthly continues, it will have the effect of requiring the hiring of a total of 120 officers in the next fiscal cycle.
The council discussed several possible bonuses for employees over the next few years and whether that supplemental pay should be offered to all employees or focus on specific groups .
The use of bonuses rather than small, incremental raises was related to pension costs, Ortega said.
A one-time $1,000 bonus, for example, would translate into about $700 after taxes, while the same amount would be less than $600 it was offered as a raise, he said. One-time bonuses are not factored into pensions, allowing more money to be paid directly to city employees.
One of the biggest issues discussed Friday was the city’s annual contribution to the state pension system.
In 1999, the city’s contribution was $2 million, but this year the figure is $83 million. At the same time, fewer employees pay into the system than 20 years ago — adding costs to the overall city budget.
As far as declining revenue, Ortega put some of the blame on the increasing popularity of online sales, noting the city is powerless to ask online retailers to pay local sales taxes.
Ortega suggested the council consider moving away from its heavy reliance on sales taxes, suggesting the city pursue other forms of taxation, including the creation of taxing districts for some services.
Suggestions included creating a fire district and a parks district, which would have the city collect revenue for those specific districts through a dedicated property tax that is separate from the city property tax.
Creation of any taxing district would require voter approval.
The only suggestion that wouldn’t require consent from voters offered by staff at the retreat would be a surcharge added to city utility bills.
At the retreat, Ortega said he is simultaneously looking to cut costs inside the city’s $544 million general fund budget by further reorganization of departments and services, consolidation of the City Court with the county and changes in the city’s transportation department.
Mayor Jonathan Rothschild said after the retreat that the city’s budget has improved from the days when it would start out with large deficits.
“If we are going to offer the best service, we are going to have to have employees that are appropriately compensated to feel valued,” Rothschild said. “I think the manager is on the right track, but there are still some hard decisions to make moving forward.”
