Action Position Statement on Primary Property Tax

Do not misconstrue my vote against a 16% reduction in the Surprise primary property tax revenue as being favorable to a primary property tax increase.  For cities and towns, it is an antiquated notion that primary property tax is an indispensable source of revenue.  Becoming dependant on any single source of revenue is unsustainable.  I moved away from a community that taxed homes to a degree with which made them unaffordable to many of the average working families.  However, in such a cash poor environment, my opinion remains, slashing revenues are not in the best interest of the community. 

To better explain my position we look at how property taxes are established.  We look at the variables: assessed property value, levy rate, and the revenue.  The city establishes the revenue, and based on assessed property values, the rate is flushed out in the equation.  Council’s question posed on June 14th and vetted on June 16th, was to decide whether the city should bring in the same amount of revenue from 2011, or decrease that revenue by 1.2 million dollars.  To better explain this, as Vice Mayor clearly outlined in the meeting,  if 50,000 homes paid 7.2 million in property taxes last year, the proposal from staff was to ensure that collectively those homes paid the SAME amount for next fiscal year.  However, the math to calculate this revenue fogs the question.  As assessed values decrease, the levy will need to increase in order to maintain this revenue stream.  By focusing on the levy rate itself, by maintaining this rate from 2011, the city cut its primary property tax revenue by 16%. 

Staff, in an assumption of what has been voted on in the past,  has not properly provided council with background on budgetary assumptions.   This year the process has been convoluted by politics and agendas, clouded by the mistrust that has come about due to the financial decisions of previous administrations.  Clearly a process needs to be laid out in terms of budgetary assumptions, establishing revenue streams, then a discussion of expenses, followed by prioritization of one-time expenditures as guided by the strategic plan.  Mayor and Council are ultimately responsible for the final decisions, but the process is the responsibility of management, and council must hold their feet to the fire to get this right!

The irony of all this, even at the agreed upon rate which Council approved and I rejected, if your assessed value went up, you are going to pay higher property taxes.  To climb even further into my logic you must recognize state law in regards to primary property tax revenue.  State law says no city can increase the revenue stream from this source by more than 2% annually.  Therefore, if you decrease this revenue source by 16%, then in future years raise it incrementally by the maximum allowable amount, based on market assumptions and predictions of stagnant growth, it would take Surprise nearly 8 years to get this revenue stream back to where it was originally budgeted for FY 2012.  A giant step backward for a cash poor city with so many needs.  This is obviously a simplified explanation, however if you cannot increase taxes by more than 2%, I would argue it is equally as irresponsible to decrease it by more than 2%.

Finally, I will not approve a budget that takes the cut in revenues, in the 11th hour,  out of our capacity to move forward.  The city, prior to this move to cut revenue, had 3 million in capacity to work on the strategic plan, prioritize for the future, and progress the city forward.  This MUST stay intact! Would a cash poor business cut their revenue streams and not expenses?  What family would voluntarily replace their revenue with money out of a child’s savings account?  If we pull that money away from the capacity, that is preciously what the city will be doing, forgoing the future in favor of today.

Amateur hour is over!  It’s time to become a more professional organization and display some fiscal stewardship.  By definition, stewardship means appropriate and sustainable, not synonymous with decrease or eliminate!  Politically unpopular, certainly, but quite often in politics you have to navigate through the loudest voice in the crowd to do the right thing.