MC Core Tax Cmte 7-7-10

8/9/2019 MC Core Tax Cmte 7-7-10

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Framing Discussion of theCore Tax and Permanent

Override Review Committee’sRecommendations

Mayor and Council

July 7, 2010





3

FY 2011 General FundBALANCED Budget

$443 million

7%

32%61%

Stable - $139.7

Million

Non-recurring

$34.1 Million

Volatile - $269

Million

City sales tax,

state-shared taxes



4

Recession = Revenue Declines

$202.3

$196.1

$169.7

$159.0 $159.0

2007 2008 2009 2010

(estimated)

2011

(projected)

Fiscal Year

CITY BUSINESS PRIVILEGE TAX

(millions)

$43.3 million, 21% reduction

(Sales tax)



5

Recession = Revenue Declines

State Shared Revenues

(millions)

$ 62.5

$ 74.6$ 77.5

$ 68.4

$ 51.6

$ 37.3$ 36.3$ 41.6

$ 48.3$ 50.3

$ 21.1$ 23.4 $ 23.4 $ 22.1 $ 21.5

2007 2008 2009 2010

(estimated)

2011

(projected)Fiscal Year

State Income Tax State Sales Tax Auto Lieu Tax



6

Projected Fiscal Year 2012Structural Deficit ($ millions)

The future cost of supporting our currentservices is projected to exceed current

recurring revenues by at least $40 million peryear for the next several years. Revenueshortfalls caused by the economic recession

have been covered in the recent fiscal yearsby the use of one-time fixes to fill the gap.Existing deferred maintenance needs onlywiden the gap.



7

Projected Fiscal Year 2012Structural Deficit ($ millions)

One-time actions used to balance FY 2011 budget:$ 9.4 debt restructuring

24.7 land sales/asset leaseback

Starting Shortfall $ 34.1Increased benefit costs ?

Retiree payouts (VL/SL) ?

Elimination of furloughs ?Increased debt costs ?

Decrease in state-shared income tax ?

Critical deferred infrastructure needs ?

Projected Structural Deficit $ 40 and counting…..

(OUT OF BALANCE)



8

Aging Infrastructure Needs Contributeto the City’s Structural Deficit

No long-term plan or fiscal reserves to replace,maintain, or address infrastructure needs

Continuous “deferral” in making decisions, settingpriorities, and investing in critical components

Reduced investment to balance the budget or shiftfunds to other priorities (e.g. elimination of vehicle

replacement fund)

Critical needs should be addressed prior toincreasing City services or staffing levels



9

The Structural Deficit Remains Despite ExpenditureReductions Already Made During Fiscal Years 2009-11

Employee Layoffs and Reduced Compensation (furlough days; increasedpublic safety pension contribution; increased medical premium costs)

Suspension of street paving; Reduced roadway maintenance (i.e.potholes)

Debt restructuring

Suspension of Back to Basics and Youth funding

Closure of 17 Swimming Pools in Summer; Decrease in Leisure Classesand Elimination of Teens Program and Most Adult Sports Programs

Reduction in neighborhood center hours; Closure of OrmsbyNeighborhood Center

Reduced Prosecution of Graffiti, Prostitution, Criminal Nuisance

Deferred Infrastructure Replacement and Maintenance: Streets, Facilities,

Vehicles, Equipment, and Technology Reduction in Outside Agencies Funding

Reduced Neighborhood Mailings and Support



10

4154

3862

3675

3000

3500

4000

4500

FY 2009

Adopted

FY 2010

Adopted

FY 2011

Recommended

F u l l T i m e

E q u i v a l e n t s ( F T E s

479 FTEs, 11.5% Reduction

FY 2011 includes 82 vacant police department staff positions that arenot funded: 72 commissioned officers and 10 civilians

General Fund Positions

The Structural Deficit Remains DespiteSignificant Staffing Cuts



11

Not Enough “Permanent Solutions” Have BeenImplemented to Address the Structural Deficit

Non-Permanent Solutions

• Use of reserves; non-recurringrevenues

• Debt restructuring (3 years inrow)

• Employee furloughs (2 years inrow)

• Deferred and reducedmaintenance and investment

• Service suspension (e.g., streetpaving, pool closures, reduced

operating hours)• Land sales and asset leasebackfinancing

Permanent Solutions

• Increased fees and taxes

• Service cutbacks and elimination

• Efficiencies, consolidations, andcost saving improvements

• Higher benefit costs passed on to

employees

• Layoff of 51 existing employees

• Elimination of vacant positions



12

Committee Scope

Whether, and if so, how best to take a sales tax increase to voters

Potential ballot language and tax increase amount

How sales tax revenues would be programmed

“Plan B” alternative options

Consideration of placing a permanent expenditure base adjustment

on the ballot

Appointed by the Mayor and Council May 25, 2010 todevelop recommendations for addressing the GeneralFund structural deficit



13

Committee Process andRecommendations

6 meetings held (20 hours) between June 2–June 28

Reviewed, identified, and discussed potential revenue

increases and expenditure reductions; maderecommendations on specific options to pursue now

independently of sales tax

At its 6/24/10 meeting, the Committee voted (11-3) insupport of placing a increased sales tax measure on

the November 2010 ballot

Voted (14-0) to not recommend placing a permanentexpenditure base adjustment on the ballot



14

Core Services Tax

Draft Charter Amendment Language presented to Mayor and Council on 4/6/10:- operation of the police department and provision of its services,- operation of the fire department and provision of its services;- care and improvement of city streets

Mayor and Council motion on 4/6/10 defined “core services” as:- Public Safety- Transportation, and- Parks and Recreation

Draft Charter Amendment Language presented to Committee on 6/28/10:- Public Safety including police, fire, and court services- Maintenance of city streets, and

- Parks and recreation programs and facilities



15

Proposed Ballot Language thatAmends the Tucson City Charter

Increases sales tax from 2% to 2.5% for five years

Dedicates the portion over 2% to maintaining and

preserving staffing and programs for: public safety including police, fire, and court

services;

maintenance of city streets; and parks and recreation facilities and programs



16

City Charter vs. Policies/City Code

Charter – Proposed voter-approved amendment toChapter IV “Powers of the City” that addressesimposition of business privilege tax; proposed

language indicates increased amount with sunsetprovision

Implementation Policies/Tucson Code - Used toprovide further specificity and direction regardingCore Services Tax (e.g. citizen oversight)



17

Charter Amendment

Sales tax rate increased from 2 to 2.5%; increased portion is CoreServices Tax.

Core Services Tax funds appropriated annually for specificpurposes

Finance Director prepares annual accounting of Tax.

Included in annual independent financial audit.

Sunsets after 5 years.



18

Next Steps

Date Task

July 7 Mayor and Council consideration of placinga sales tax increase on ballot

July and August Committee will continue meeting to discuss“Plan B” alternative options

- If a sales tax increase is not placed onthe ballot

- If a sales tax increase is not approved byvoters

- To be pursued in addition to a sales taxincrease

September “Plan B” recommendations presented toMayor and Council

Documents

MC Core Tax Cmte 7-7-10