Chandler's $1.7 billion budget is largest in its history. Here's where the money is going
Chandler's new budget shows it will continue to be among the state's most fiscally secure cities this year, with coffers full enough to set aside nearly $150 million for emergencies and pay off tens of millions in debt, all while funding things such as more than a dozen new public safety jobs and $33 million worth of street repaving.
The $1.7 billion financial plan is the biggest in Chandler's history. It took effect last month and will remain in place until the current fiscal year ends next June.
Overall, the budget paints a picture of a city that prioritizes paying its bills and bolstering its financial footing over adding extra services or additional capital projects.
Paying the bills: How this East Valley city became Arizona's first to clear its public safety pension gap
Still, Chandler plans to spend nearly $30 million more on staffers this year to fund new positions and boost salaries amid the nationwide workforce shortage. The city has also budgeted $857 million for projects that range from downtown parking to new police vehicles.
For residents, the property tax rate is decreasing and Chandler's utilities will remain the cheapest in the Valley, despite an uptick in water and solid waste rates. In total, the average homeowner will pay only $37 more in city fees this year than last, even though the median home value spiked by $60,000 in that same timeframe.
"It's the eighth straight year of lowering our primary property tax rate. We've had no increases in other tax rates in Chandler. ... So, we are one of the lowest in the state. Chandler has the lowest average annual cost of service," said the city's Chief Financial Officer Dawn Lang. "We have strong financial policies and our council continues to maintain those policies."
Lang credited "strong revenues" for the record high spending plan. The city's general fund budget totals $611 million, an increase of about 23% compared to last year, and is broken down into two categories:
$236 million that isn't really "new" cash, or at least isn't money officials can spend on anything they want. It's either transferred from other city funds, carried over from previous years or has to be used for debt payments.
The other $375 million represents the newly generated money that's free to be used however city leaders choose. It's the best measure of actual city income and is up by about 20% when compared with last year.
The uptick in the second category is thanks to tax revenue generated by population growth in both Chandler and across Arizona, increased consumer spending and Intel's expansion within the city, according to Chandler's budget director Matt Dunbar.
But looking forward, those driving factors don't have staying power. Consumer spending is expected to slow down, state lawmakers recently banned city rental sales taxes, and the thousands of builders at Intel are soon going to return home. As a result, Chandler expects to rake in $32 million less in "one-time revenues" by 2026.
Plus, the all-time high $1.7 billion total budget isn't really the result of more income.
Nearly 60% of the $857 million capital improvement program — a separate budget area that uses revenue sources such as grants to fund construction work — is left over from last year because material shortages delayed planned projects, a historic first for Chandler that shows just how hard it's been to roll out projects in this economy.
Not just a Chandler problem: Scottsdale bond projects face 'staggering' cash shortfalls, $115M over budget
But Dunbar said Chandler prepared for the upcoming revenue drop, has "seen some easing" on the material shortages and has a plan to fund all of the planned projects even if they run over budget. The budget director contends Chandler is in a solid position to keep its footing even if the economy plummets in the near future.
"We would weather (a recession) better than others because of the investment that's going on in the city of Chandler," he told The Arizona Republic. "We have a conservative budget and we plan for those (events) should they come up."
Property taxes down, utilities up: how much will residents pay?
Chandler's property tax rate this year will be about $1.09 for every $100 a resident's home is worth, which is about a one-cent reduction compared to last year. But most residents will still pay more this year because of the rise in median home values, which skyrocketed from $387,500 to $447,500 over the past year.
That means most homeowners' annual property tax bills will increase from about $248 to roughly $258.
On the utilities front, rates will increase thanks to inflation-driven cost hikes for the city that need to be covered by user fees because water utility services are part of an "enterprise fund," meaning they have to generate their own funding to function.
"Just like with all the other Valley cities, this is one of the areas where inflation has really impacted all the utility infrastructure chemicals that goes into treating water," Lang said. "Those are some of the highest increases in inflation."
For the average homeowner, the total annual bill for water, wastewater and solid waste will total about $938, which is a $26.88 increase annually. But that's still lower than Peoria, Phoenix, Glendale and every other city in the East Valley by a significant margin.
Combined with the increase in the median property tax cost, most Chandler residents will pay $1,196.51 for city property taxes and utilities this year. That’s a $36.95 increase from last year in combined city fees for homeowners.
A conservative budget: setting aside millions and paying off debt
Dunbar consistently described Chandler's budget practices as "conservative" because they require officials to reserve an unusually large amount of cash in case of emergency.
City leaders had to set aside at least $92 million this year because "at least four months of budgeted general fund ongoing operating revenues" have to be available, per Chandler's policy. The Government Finance Officers Association, which sets national standards for saving, only recommends two months of revenues be reserved.
But Chandler even outdid its own saving mandate. In total, the city has about $150 million set aside this year to cover "emergencies, or unforeseen expenditures not otherwise budgeted," which staffers expect will be more than enough to combat any economic issues if they crop up.
On top of that, Chandler has made massive headway in clearing its debts using the one-time revenue from increased consumer spending and Intel's expansion, which has brought roughly 8,000 construction workers to town.
Chandler became the first sizable city in Arizona to fully fund its public safety pension system this year when it made a $73 million payment. That's expected to save the city as much as $10 million each year, further reinforcing Chandler's ability to overcome future economic challenges.
“We’ve made concerted efforts over several years to pay off our largest unfunded debt,” said Chandler Mayor Kevin Hartke. “Doing so has stabilized the pension system that is a critical benefit for first responders who have served our community and generated ongoing savings that we can apply toward needs in other areas.”
Spending: staffing, salaries, water and roadwork
Aside from saving, staffing is one of Chandler's biggest priorities this year. The city is spending roughly $28 million on 28 new positions and a slew of raises intended to keep Chandler competitive as Valley communities struggle to find enough staffers. Specifically, the new positions include:
Two new staffers in the city manager's office, including one who will focus on recruiting more employees to fill vacancies citywide.
Someone to maintain the Diamond Sport Complex.
Two new IT staffers, one of whom will prioritize securing city data.
Five new community resource employees, including two "navigators" who will help mitigate homelessness in the city and one code inspector to crack down on blighted properties.
Eight new firefighters and six police department positions, which includes a school resource police officer.
"We are adding some community service folks to help with the field conditions ... at Tumbleweed Rec Center for a softball complex," Dunbar said. He also explained that the new staff navigators will "help those who are vulnerable find services and be able to connect them with the services that they need."
On the capital project side, Chandler is shelling out more than $165 million on water system upgrades and another $98 million on street projects. Both are among the largest spending areas this year.
On streets, Chandler is using about $33 million worth of federal grant money to revamp roughly 30 miles of city alleys.
One of the biggest water projects is the $24 million renovation of the four-decades-old Pecos Surface Water Treatment Plant, which needs several upgrades to keep up with federal standards.
"We're really working hard to make sure we're taking care of our infrastructure," said Lang, who added that keeping up with maintenance is particularly important because of the presence of companies like Intel. "We're continually reviewing our infrastructure needs (and) our impact on consumption because of our large industrial users."
Looking forward: Chandler expects lower revenue, fiscal resilience
The $498 million worth of capital project funding that Chandler carried over from last year was driven by shortages across a long list of critical materials that made completing certain projects impossible.
Dunbar said that some of those supply shortages are easing up, but he acknowledged that many still persist. That could mean even more project delays this year if something doesn't change.
"Anything with lights, either streetlights or stoplights, those poles have been delayed," he said. "We've had issues with concrete. When you put a concrete order in Valley-wide right now is taking a number of months versus a number of days, which is still an issue."
Inflation has also been an issue that's driven a $299 million bump in Chandler's 10-year capital project plan, which is an increase of nearly 20%.
Among the projects being hit hard by inflation are those approved by voters in 2021. That program involved Chandler issuing $273 million in bond debt to fund projects ranging from park improvements to street light upgrades, and the funding was supposed to cover ten year's worth of work.
But now, city staffers expect that money to dry up within just five years because when the program was first planned in 2020, they couldn't have anticipated the historic inflation rates that would upend the funding breakdown just two years later.
They remain confident that they won't have to cut any projects, however. Their plan is to ask voters for permission to take on more bond debt to complete the program, and Lang said Chandler has never lost a bond election.
"It looks like it's not going to last that long because it's being eaten up by some of those increased costs on the capital side." Dunbar explained. "So, we may have to go to the voters (five or six years) sooner than we anticipated to get additional authorizations."
As for the general fund, the loss of Chandler's rental sales tax will cost it about $11 million each year, or about 5% of its sales tax revenue.
The 8,000 construction workers building Intel's new facilities are also expected to leave at some point over the next five years.
Together, those drains will hit Chandler hardest in 2026 when its revenue will drop by $32 million.
But staffers remain unconcerned. The cash saved each year as a result of Chandler paying off its pension debt will make up for a third of the upcoming revenue loss. And the minimum $92 million in reserves officials have to set aside each year is enough to make up for the rest of it four times over.
"We've built-in some of those known reductions in our revenues," Dunbar said. "Other than that, we've planned a conservative budget that we think will be able to weather any downturn or a slowdown that we may see here. It might not be as impactful as it might be in other municipalities."
This article originally appeared on Arizona Republic: Chandler's $1.7 billion budget is largest in its history
