Scottsdale eyes whopping $2.5B budget

Apr. 23—While it is likely to draw debate over the next few months, the city of Scottsdale unveiled a draft budget for the fiscal year beginning July 1.

Highlights include a $44 million increase in the city's General Fund — an eyebrow-raising 13% jump from $331 million in the current fiscal year to $375 million next year — and a whopping $1.4 billion for capital improvements projects, up 27% from the current fiscal year's $1.1 billion.

The total proposed city budget is $2.54 billion, up 20% from the current $2.11 billion.

The coming fiscal year's budget is nearly double the $1.36 billion from four years ago.

According to a city release, the proposed budget "balances strong local economy with a cautious approach to the future."

Scottsdale City Manager Jim Thompson will present his $2.5-plus budget to City Council in May.

"It's large," Councilwoman Kathy Littlefield said.

"It's a lot of money," she continued. "I think we have a lot of work to do on that ... The proposed budget has a lot of moving parts in it."

Littlefield anticipates "a long and detailed conversation" on the spending plan.

Compared to Littlefield's reserve, Councilwoman Tammy Caputi seemed gung-ho about the proposed budget, which she said "stands out for being balanced not just in numbers but in outlook.

"It recognizes that while we've seen strong revenue growth coming off the pandemic and a busy special events season, we are anticipating an economic downturn and are taking a careful approach to the future," Caputi said.

Councilwoman Solange Whitehead said, "It is shaping up and important programs are fully funded."

A chunk of the cost increases are driven by labor.

"High quality staff are the engine that drives our organization," Thompson said, justifying the rising costs.

His proposed budget includes an increase of approximately $38 million for existing employees, including:

—A 5% "step program" (incremental increase) for police sworn personnel of $0.8 million.

—$6.5 million for the citywide pay for performance program, through which employees may receive up to 5% salary increases based on performance.

—A 2% "market adjustment" employee salary increase totaling $5.7 million.

—$8.5 million for the costs anticipated in implementing a comprehensive classification and compensation study.

—$1.3 million for the vacation buyback program for eligible employees.

—$4.4 million for retirement cost increases.

—$1.1 million for health and dental cost increases.

—$10 million in additional public safety retirement contributions to paydown unfunded liability.

The primary rate is 3.6% increase and secondary is rising 13.7%, according to the proposed budget.

"This balanced budget is possible due to the continuing strength of the local and state economy as the Valley comes off one of the busiest special events seasons in our history — much of that centered in Scottsdale," Thompson said.

After a pandemic-powered surge in sales tax revenue, Thompson said he expects a decline in local tax revenues "in anticipation of an economic downturn and a slowdown in consumer spending."

Regarding the $44 million boost in the general fund, the city said: "Most expenses are related to funding the city's high-performance workforce and providing pay and benefit packages that allow the city to retain and recruit employees.

"Hiring and retaining a skilled workforce is crucial to providing quality service to citizens and visitors."

Thompson plans to hire 50 new employees; the city currently has a workforce of 2,589.

The new total of 2,639 employees will earn a projected $238 million, an average annual salary of $90,185. Adding in health care, retirement and other benefits, total employee compensation is $343 million.

Leading the way is Thompson, who last year was making $375,000 per year.

But after an unusual agreement, he retired and was rehired at a salary of $347,000 "as acting city manager effective Oct. 12, 2022, until the earlier of a new city manager or acting city manager being appointed or Oct. 13, 2023."

Among the lower paid city employees are the seven elected officials.

In 2019, City Council approved a pay increase for members from $18,000 to $31,020 and the mayor's salary from $36,000 to $51,000.

Though the proposed budget includes staffing increases for cybersecurity, crime prevention, traffic enforcement, maintenance and repair and other areas, the city noted that it is "still below pre-Great Recession (2009/10) staffing levels."

Thompson said he feels comfortable with new hiring, based on sales tax collection.

General Fund revenues are estimated to increase by $47.3 million from the current budget, which ends June 30.

Increases are being seen "in the city's proportionate slices of state shared income tax, sales tax, and vehicle license fees; additional primary property tax collections; and from building permit fees and charges."

The city's proposed primary property tax rate, which funds the police and fire departments as well as parks, is $0.5150 per $100 of a property's assessed value. The proposed secondary tax rate, which helps pay down city debt, is $0.4664 per $100.

"Scottsdale's combined property tax rate is generally among the lowest among major Valley cities," according to the city.

Scottsdale's sales tax rate is 1.75% for most "business activities." The city uses sales-tax revenues to finance police, fire, parks, libraries and streets.

Items purchased in the city include a 5.6% state sales tax and 0.7% Maricopa County sales tax for a combined sales tax of 8.05%. No change to this rate is proposed.

City "community investment" spending plans include public art restoration, replacing library technology infrastructure, completing the Indian School Park Master Plan, funding a comprehensive Shade and Tree Master Plan and "modernizing cooling towers at city buildings to improve efficiency and save water."

Also in this category is a "Scottsdale Promise" program that would provide two years of free Scottsdale Community College tuition and fees for "all eligible Scottsdale residents."

The proposed Capital Improvement Plan (CIP) budget is $1.4 billion.

Many projects in this category have skyrocketed over their original budgets, due to inflation and supply-chain shortages.

In-progress and new projects include street repaving (including so-called "road diets"), increasing the city's cybersecurity capabilities and expanding the solid waste transfer station to add household hazardous materials and green waste disposal facilities. City Councilman Barry Graham said he is "still going through and digesting the 400 page" proposed budget.