Scottsdale to spend $350M on staffers, expects economic downturn
Scottsdale is investing tens of millions of dollars to beef up its workforce this year, even as the city braces for fiscal headwinds that could sap a tenth of its tax revenue over the next few years, according to Scottsdale's 2024 budget.
The $2.5 billion all-funds financial plan took effect last month and will remain in place until next June. It dwarfs last year's budget by nearly $430 million, but it's far more bare bones than it may seem at first glance.
More than half of it — or about $1.4 billion — won't be spent this year because it's made up of future project funding and reserve cash that won't be touched unless there's an emergency. The city only plans to use the other $1.1 billion, which includes $723 million for day-to-day operations and $362 million for infrastructure projects.
"I want to emphasize that … even though the budget is $2.5 billion, it's not that we're spending $2.5 billion," Scottsdale City Treasurer Sonia Andrews said about the massive budget total, which prompted concerns about overspending from some residents.
Scottsdale leaders prioritized saving money, padding city coffers and catching up on underfunded projects, in what City Manager Jim Thompson called a "cautious approach to the future" because of economic uncertainty.
Here are the highlights:
Property taxes and utility costs will increase by about $100 for most homeowners this year.
Scottsdale expects to rake-in $53 million less in taxes by June 2026. That's because of new state laws and a slowdown in consumer spending.
Officials are saving more. They put $425 million into a variety of emergency and backup funding pots this year, which is about $69 million more than last year.
The city is spending $350 million on its staff this year. That's a 10% increase that will fund 50 new full-time positions and raises for existing staffers.
City officials pulled $68 million out of the general fund to help cover funding gaps for construction projects that have increased in price by at least 24% since July 2021, according to the Producer Price Index.
The general fund is like the city's checking account. It pays for discretionary spending on the city's day-to-day operations, maintenance and services.
Taxes and fees: residents pay $100 more, city generates extra $18M
Scottsdale increased both its primary property tax rate and utility fees this year, which includes water, sewer and solid waste. City staffers said the price changes were necessary because of ballooning staff and system costs, which have increased by millions since 2021.
The average resident will pay about $1,046 for utilities this year, which is an increase of less than five dollars each month.
In regard to city property taxes, owners of median-valued homes will pay about $372 this year. That's a $47 increase and only a small portion of that is because of the primary tax rate. Here's what's driving up the cost:
The voter-approved secondary property tax increased. That added $30, or nearly two-thirds of the cost hike.
Median home values grew by $38,000 this past year. That added $10, or a fifth of the tax increase.
The primary property tax drove just $7.
Altogether, the typical resident will pay about $1,417 for city services this year, which is about $100 more than last year. Those payments, along with utility charges for commercial users, will create $18 million in new city revenue.
Scottsdale tax revenue to plummet, but city has big money set aside
That extra revenue is a drop in the bucket when compared to the 11% dip in tax revenue that the city is expecting in the near future, however.
Scottsdale is taking in about $489 million from a variety of city taxes this year. But by mid-2026, that's slated to drop by $53 million — which is equal to about 80% of the fire department's operating budget — mainly because of cuts in two areas:
State shared revenues will decrease by $20 million, or 15%. An economic slowdown is partly to blame, but Arizona's new flat tax will also be a driver since it reduces the amount of cash that the state can dole out to cities.
Sales taxes will plummet by $32 million, an 11% decrease. About $18 million of that loss is because the post-COVID-19 spending surge will end. The Arizona Legislature's recent rental tax ban will sap the other $14 million.
In a written statement, Scottsdale wrote that the rental sales tax ban "may force reassessment of what services the city provides and at what level," but officials hope to avoid that with the $425 million they set aside for unexpected costs this year.
That level of savings is 20% greater than the year before and includes $189 million in emergency backup funding to keep normal city operations running.
Scottsdale spends $350M on staff, opens 50 new positions
Scottsdale's $350 million worth of employee spending represents a $26 million increase. A large chunk of that is going towards retaining employees after the city has struggled for years to keep staffers. That, a city memo suggests, is especially problematic in the police department.
In 2022, Scottsdale lost 19 officers before they had even spent four years on the force. The city memo says one of the main drivers is "officers leaving to neighboring police departments (for) increased pay and benefits."
City officials are spending $145 million this year on citywide raises and benefits, as well as new pay scale study. That's a $32 million increase from last year, and it includes $800,000 for special police department raises.
Another $6 million in this year's budget is going towards workforce expansion. The city is opening up 50 new positions, which include:
Seven police department staffers, including three sworn officers, and one new firefighter.
Five new workers each for parks and recreation, streets, information technology and solid waste management.
Two water department employees.
Officials spend $68M to cover project inflation, supply shortages persist
Sky-high construction prices and material shortages have been the bane of nearly every Valley city for the past two years, including Scottsdale, where officials were forecasting $115 million in cost overrides for certain projects as of March.
But this year's budget contains relief on that front. City leaders took $68 million worth of general fund money — some of which came from the proceeds of a city land sale along Bell Road — and used it to bridge some of the funding gaps. A few of the projects covered by the general fund this year include:
A new $4 million facility at McCormick-Stillman Railroad Park Roundhouse. It will be 8,000 square feet and include a train-themed play structure, event space, a shaded outdoor area and an event lawn.
Eight new pickleball courts at Pima Park for just over $2.1 million. City staffers say they have been "inundated with requests" for such projects.
$2.4 million to help complete the $13 million construction of a new fire station near Hayden Road and Loop 101. Officials say it's needed to bring emergency response times into the target range of four minutes or less.
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The general fund investment might be enough to spare Scottsdale from a massive backlog of unfunded projects. It will give staffers another year to refine their long-term plans, and Scottsdale's Public Works Director Dan Worth said inflation is starting to wane.
"The (construction inflation rate) just went under double digits for the first time in 19 months," he told The Arizona Republic in June. "It's good. We're starting to see it slow down a little bit."
This article originally appeared on Arizona Republic: Scottsdale saving hundreds of millions as it braces for economic dip
