Myers: Scottsdale budget issues illustrate poor approach to economic sustainability

The city is having budget problems?

Vacancy rates are up downtown. Our galleries and stores in Old Town are suffering. So what is the city doing to fix that? Expanding and supporting the “entertainment district,” building lots of apartments, and trying to attract any business that will relocate to Scottsdale, all supposedly to attract the Millennials.

Howard Myers

Does this help or hurt the city overall and how does it relate to the budget problems?

Years ago I analyzed the sustainability of the city, using figures in a sustainability report the city commissioned and other data from the city’s website, and essentially predicted the budget problems we are having now. And, that is without maintenance or retirement benefits being included in the budget, which are necessary expenses that must be included in the annual budget.

The net result was that tourism really made the city sustainable because the analysis showed that development does not come close to paying for itself, with our current tax structure and rates. Rather the positive income from tourism — tourism income minus expenses allocated to tourism — was making up for that loss and providing additional income that allowed us to built a lot of amenities and even have some money left over to put in a capital fund, all with some of the lowest tax rates in the Valley.

But years ago, tourism provided a bigger percentage of our income because we didn’t have as many residents. The analysis also showed that the more dense the development the bigger the loss to the city, so all these apartments they are building will simply drive us further into the red because the expenses to serve them will be far greater than any income we may get from those additional residents. Again, that is without including expenses for maintenance, or some of the retirement benefits we will be saddled with, which were totally ignored in the city study.

The big problem is that we are changing Scottsdale from a very successful sustainable city, based a lot on tourism, which provides more income than expense, into a big city based on the premise that the more residents we have the more income the city will have. While it is true our income will increase the problem is that our expenses will increase more than that income, driving the city toward an unsustainable financial future. To make matters worse, as we transform the city into just another big city, we also lose a lot of the tourists who used to visit the city and spend money in it.

We are told the city is targeting “the Millennial” because they are the future. So we have the “entertainment district” tailored to young people who can obviously get wasted without dramatically impacting their lives, probably because they are still living with their parents.

Yes, they will eventually comprise a significant percentage of our population, however, people don’t think the same way when they are in their 20s as they do when they grow up and become a responsible individual, generally also raising a family. So wouldn’t it be better to target what they will be when they grow up, not who they are now and what they want now which won’t attract them when they grow up.

That is where Scottsdale used to be when we concentrated on tourism and higher-end, single-family residential, targeting slightly older, mature individuals who then had some money and spent it in the city. That demographic is what supported our city during the good years and there is no reason to believe it wouldn’t continue to support it in the future, if that was our focus.

Instead, we are focused on what a 20-year-old wants and on attracting as many businesses here as we can. So the other question is do these businesses contribute anything to the city and its residents? Certain businesses are a good fit to Scottsdale because they support tourism, and higher-end residential, and bring in sales tax income to help run the city, but others contribute very little to the city’s income and create problems for the city.

Unless the business produces significant tax revenue for the city, they can actually cost the city more than any income that can be attributed to the business and/or its employees. In addition, since many of their employees do not live in the city, and still won’t even with all the apartments we are building, traffic will get a lot worse and we are seeing signs of that already. Parking issues are also amplified as these businesses will compete with our downtown retail for the limited parking we have.

The combination of more traffic and lack of parking discourages shoppers from coming to downtown that again negatively impacts our retail businesses and therefore our sales tax income. The exact same problems are being created in the Airpark, our other major hub for both business and retail.

An additional problem the city will have to address in the near future is the loss of retail business to the Salt River Indian community, which is well situated along both sides of the Loop 101 making access to anything there far easier than to downtown Scottsdale or the Airpark, where many car dealerships are located now. Some of those dealerships are already planning to move to the new Auto Mall right off the Loop 101.

A lot of this was brought up in General Plan Task Force meetings, but the majority of the task force consisted of Chamber of Commerce members and people who profit off development either directly or indirectly, so they didn’t believe it. They wanted to hear from economic experts, so we had three economic experts attend a meeting and comment on it all and to my surprise they validated what we did and said these are the issues we need to be addressing.

They also said Scottsdale was the envy of other cities in the Valley because of the tourism income we have and how that has kept our taxes low, and therefore we should not go down a different path but rather strengthen the successful path we were on. Unfortunately, our leaders are taking us down a totally different path claiming we can’t depend on tourism, instead we should court more businesses. You can see from the argument above where that will lead us.

So where do we go from here?

It is way past time for the city to form a collective vision for the future that considers both what makes the city desirable and sustainable. When we ignore either one, we are headed for big trouble and definitely higher taxes and lower quality of life. Without a real plan for the future, based on facts, not on the desires of certain powerful people who just want to profit off Scottsdale’s success without regard to the impact, Scottsdale will become just another big city, with all the problems that come with it, resulting in higher taxes and lower quality of life for all of us who live here.

Editor’s note: Mr. Myers is a longtime resident of Scottsdale

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