Scottsdale Cultural Council seeks $1.6M bump in city council subsidy

The Scottsdale Cultural Council, 7380 E 2nd St., is seeking an additional $1.6 million dollars in funding this fiscal year from the city of Scottsdale. (photo by Terrance Thornton)

The Scottsdale Cultural Council, 7380 E 2nd St., is seeking an additional $1.6 million dollars in funding this fiscal year from the city of Scottsdale. (photo by Terrance Thornton)

Scottsdale City Council is expected next week to hear an additional funding request from the Scottsdale Cultural Council as the nonprofit entity seeks a $1.6 million shot in the arm to pay for, among other things, management, administration and repair of established facilities.

Scottsdale City Council this fiscal year provided $4.3 million to the Cultural Council through a “financial participation agreement to be allocated for activities consistent with the agreement,” a city staff report states.

The council will consider the request next Tuesday, Nov. 10.

If approved, Scottsdale City Council will have provided the Cultural Council with $5.9 million this fiscal year for, as records show, the management of the city’s arts and cultural facilities including the Scottsdale Center for the Performing Arts, Scottsdale Public Art and Scottsdale Museum of Contemporary Art.

The Scottsdale Cultural Council was established in 1987 as a 501(c)3 nonprofit management company that has now evolved into a “unique umbrella organization with three dynamic operating divisions” charged with promoting and cultivating local visual and performing arts, officials say.

City staff is recommending the local governing board approve the Cultural Council’s new funding request. The funds would come from the city’s unreserved fund balance, which currently stands at nearly $24 million.

“At the Oct. 20 city council meeting, City Treasurer Jeff Nichols reported the final unreserved fund balance is $23.8 million, about $2 million more favorable than at the time of budget adoption,” a city staff report states.

“This is an addition to the General Fund reserve of about $24.6 million that provides long-term stability to the General Fund, and an operating contingency of $3 million that provides short-term flexibility for unanticipated expenses within the current fiscal year.”

Scottsdale City Council adopted a General Fund budget of about $250 million for this fiscal year, according to Scottsdale Councilman Guy Phillips. There are differences between reserved and unreserved funds — how they can be spent and for what purposes.

“The General Fund reserve balance is 10 percent reserved from total operating expenses — our rainy day fund,” Councilman Phillips said Nov. 3.

“So you take 10 percent of what it cost to run the city — $250 million — and you have a reserve of $25 million. The unreserved fund balance is what is left over after that, carried over year after year unless assigned to an expense as appropriated by council.

“Currently, we have accumulated $22.6 million. I have requested council every budget season to make a policy that a certain percentage of the yearly unreserved fund balance go directly to capital improvement fund but to no avail.”

Councilman Phillips questions the logic behind funding the Cultural Center at the same time the city is requesting general obligation bonds to pay for public infrastructure projects ranging from the paving of roads to the creation of expanded and new public safety facilities.

Unofficial results show Scottsdale voters on Nov. 3 rejected four of the six proposed bond measures included in the $95.8 package. Street improvements and fire department upgrades were approved for a total cost of $28.9 million. The election cost the city of Scottsdale $500,000, records show.

Including both unrestricted and reserve dollars, the city of Scottsdale has just over $48 million beyond its General Fund allocation this fiscal year, says Councilman Phillips.

“Although you don’t want to have to delete it completely, the money is there,” he said. He intends to ask his council colleagues why they are entertaining this request. “That’s the $100 million-dollar question I will pose to them at the council meeting.”

To be reserved or unreserved?

Scottsdale Treasurer Jeff Nichols says the General Fund reserve blance is critical in maintaining the city’s AAA bond rating.

“The General Fund Reserve is a stabilization reserve that continues the city’s adopted financial policy of setting aside a reserve to protect Scottsdale in times of unforeseen emergencies or catastrophic impacts to the city,” he said in a Nov. 3 written response to e-mailed questions.

“It is considered financially prudent to have a minimum General Fund Reserve of 10 percent of the General Fund total annual operating costs. Maintaining the General Fund Reserve is very important to the municipal credit rating agencies and in retaining the City’s AAA bond ratings.”

Mr. Nichols contends the unreserved General Fund balance is what is left over after contigency and reserve dollars are identified.

“This balance represents an accumulation of one-time revenues and is most appropriately used for one-time expenditures,” he said of the $23.8 million of current unreserved dollars.

“Under prudent fiscal management practices, this amount should not be used to fund new or expanded programs with ongoing operating expenses. Per adopted financial policy No. 17, any year-end General Fund operating surpluses (unreserved fund balance) not needed to restore contingency reserves or cover unforeseen shortfalls in the budget, but in no case less than 25 percent of construction privilege tax revenues plus 100 percent of net interest income in excess of $1 million, will be transferred to the General Fund capital improvement program in the following fiscal year unless otherwise directed by city council.”

Mr. Nichols explains reserve dollars do not necessarily mean liquid cash.

“Contingency reserves may also be used for unanticipated and/or inadequately budgeted events threatening the public health or safety,” he explained.

“The General Fund unreserved fund balance is not ‘accessible for general City business’ in the current fiscal year as no appropriation was adopted by city council authorizing the spending of the funds. Municipal budgeting requires funds to be appropriated prior to spending — meaning just because we have the ‘cash’ doesn’t mean we can spend it. City Council must adopt an appropriation for the ‘cash.’ This is done annually through the budget adoption process.”

Unreserved or reserved, Councilman Phillips says Scottsdale City Council is not good a good steward of taxpayer dollars.

“The council spends your tax dollars for special interest groups and routinely ignores everyday expenses — this is why I opposed the bonds in the first place. We give the cultural council $4.3 million of your tax dollars every year. If they are short of funds we should be auditing their books, not giving them more money. Does the Cultural Council operate at a loss each year? I don’t know, but we should be scrutinizing their records before handing them another $3 million of your tax dollars.”

Northeast Valley Managing Editor Terrance Thornton can be contacted at tthornton@newszap.com

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