Paradise Valley brings FY 2015-16 budget issues in focus

Paradise Valley Town Council (File photo)

Paradise Valley Town Council (File photo)

Paradise Valley Town Council met in a study session April 9 to discuss fiscal year 2015-16 budget issues.

Town Manager Kevin Burke outlined four budget policy issues for the town council to address in a presentation during the meeting — including the state expenditure limitation rule, capital improvement programs, sewer fund and employee health insurance.

The Town of Paradise Valley operates under an expenditure limitations rule, which affects the way the city budget is designed, Mr. Burke explained. The town may only spend up to the expenditure limit, a number decided based on spending amounts in 1979.

This creates greater reserves of unspent budget money, but also necessitates budget cuts since the reserve cannot be spent.

The addition of several information technology programs, the expense of sewer funding, police pension obligations and other town programs make budget cuts particularly difficult to manage, Mr. Burke said.

“In short, 2015 is not 1979 and yet that’s the year we’re working under,” Mr. Burke told town councilmembers.

Mr. Burke offered a number of options to reconcile the town budget, including temporary spending adjustments and postponing elections. The possibility of borrowing was questioned by Paradise Valley Councilman David Sherf.

Town council also discussed long-range funding for the capital improvement program.
Capital projects are projects costing more than $100,000 and that are depreciable, Mr. Burke defined. They include new assets, such as new facilities, and the repair or replacement of existing assets, such as repaving roadways.

There is one dedicated revenue source for CIP projects, Mr. Burke said, recommending town council gradually utilize reserve money, evaluate dedicated resort-in-lieu fees, and consider a dedicated sales tax.

“To me, using the reserves in the next couple years makes sense,” Councilman Sherf said.

Mayor Michael Collins agreed, saying using the reserve money and increasing in-lieu fees seems “reasonable and prudent.” As far as a dedicated sales tax, Mayor Collins continued, tax increases are hard for the council and hard on the town.

The third topic, shortfalls in the sewer fund, took everyone by surprise, according to Mr. Burke.

Inaccurate reporting to town council several years ago resulted in a $2.2 million debt to the General Fund, and town council discussed how best to pay off those debts.

Mr. Burke recommended transferring money from the General Fund — borrowing money to pay for the sewer fund and then transferring the money back in as it becomes available — and at a rate increase.

The last rate increase was years ago, Mr. Burke told council.

“It was always the expectation that we would offset this with a rate increase. The problem is, we never did,” he said.

While he says he could understand a rate increase due to increased operating costs, Mayor Collins said he would rather not raise rates because of a shortfall created by a policy decision.

Town council moved on to discuss town employee health insurance.

The town’s self-insured, high deductible health plan combined with a health savings account is “unheard of,” many councilmembers agreed.

Town employees have a $2,500 deductible per year, or $5,000 for families. After the deductible is met, the town pays 100 percent of the premium, or 75 percent for employee dependents.

Each year, the town places $2,600 per employee into a health savings account, or $4,420 per family, which the employee may keep to spend on health-related costs even after they are no longer employed by the town.

“(This type of plan) is unheard of in the public sector,” Councilwoman Maria Syms told council. “I have to say, I think it was a mistake to start this. The result is the creation of an expectation, and to take that away is hard.”

Councilwoman Syms explained to council she has worked with companies that participate in a health savings account, but those programs functioned in a different way than the town’s.

“We have a lot of long-term employees,” Councilman Jerry Bien-Willner said. “It doesn’t bother me to pay for an expectation.”

Town council agreed to compare its health insurance plan to other municipalities with comparable salaries before making a decision as to whether changes should be made.

Editor’s Note: Ms. Walker is an editorial intern at the North Valley office of Independent Newsmedia Inc. USA.

Ms. Walker is a freelance journalist under contract with the North Valley Office of Independent Newsmedia Inc. USA

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