This article submitted by the city of Sedona AZ.

Sedona AZ (July 7, 2009) – City of Sedona Mayor, Rob Adams, writes about the city of Sedona finances in his article entitled, The City Finances – The Good, The Bad and The Ugly:

After months of research, negotiating, wrangling and sleepless nights, the Sedona City Council approved the City budget for fiscal year 2009-2010 on Tuesday, June 23. In the interim, there has been a considerable amount of misinformation, debate and second-guessing by certain members of the public about the state of the City finances. Comments in the press have included “the City has run amok”, “does our City even know how to budget?” and “the City government must face the economic realities of today.” In order to address concerns of the public, I will look at some of the history behind the budgetary decision-making by staff and Council and give you an overview of where our City finances stand.

THE GOOD

The good news is that the City operating fund (otherwise known as General Fund) is in better financial condition, comparatively, than most other municipalities in Arizona. Because the City has been conservative in its revenue forecasts over the years, our revenues have generally exceeded our expenses. Thus, we have accumulated over a ten million dollar reserve account. Our reserves give us a “rainy day” or savings fund from which we can withdraw if our revenues do not meet our projections. Even though the current economic meltdown has been the worst since the great depression, we are not expecting to dip into more than 5% of our reserves for fiscal year 2008-2009.

In order to meet the challenges of the economic turndown, staff and Council have been proactive in making budget cuts to all funds in the City. Beginning in the early fall of 2008, staff and Council began to reduce City expenditures. Hiring freezes, educational and travel allowance reductions, contingency freezes and elimination of surveys and studies were all initiated to reduce General Fund expenditures. In addition, over $1,000,000 worth of Capital projects were deferred. In the ensuing months, strategies were developed for additional expenditure savings. The new budget includes a reduction in the General fund expenses of over $1,354,000 or 10.23%. The Wastewater fund expenditures have been reduced by $3,389,063 or 14.59%. The Capital fund expenditures have been reduced $5,587,236 or 41%.

City of Sedona Mayor Rob Adams

Numerous other expenses have been reduced or eliminated. In August of 2008, at my request, a committee was formed to re-evaluate the RoadRunner transit system. The recommendations of that committee have resulted in a revamping of the RoadRunner transit system with a 32% reduction in the operating costs. In addition, the Northern Arizona Intergovernmental Public Transportation Authority (NAIPTA) requested and was awarded Federal stimulus funding that will reduce the City’s contribution to the development of a regional transit facility from $450,000 to less than $75,000. The proposed Redevelopment Plan for SR 89A, with an associated cost of $450,000, has been put on hold with the money being put into a contingency fund. If there is an upturn in the economy, the project will proceed. If the economy does not improve, the project will remain on hold or will be eliminated. The Creekwalk project, with an associated cost of over $1,000,000, has also been delayed indefinitely.

The bottom line is, staff and Council have been extremely responsive to the economic downturn. Budgetary adjustments well in excess of $10,000,000 have been made to ensure that the City can meet the challenges of our economy.

THE BAD

The bad news is that the City Council has adopted a budget for fiscal year 2009-2010 that authorizes expenditures that are approximately $370,000 more than projected revenues in the General Fund. This means that the City is authorized to dip into the reserve account up to $370,000 to pay for operating expenses in the next fiscal year.

The obvious question is, why didn’t we cut expenditures even more so that we would be able to balance the budget? As I previously pointed out, the expenditures in the General Fund have been cut by $1,354,000 or 10.3%. This was accomplished by freezing hiring in the City, freezing City salaries, reducing employee benefits, etc. Our employees are doing more for less. In addition, the City reduced funding to many non-profits that provide services for our citizens such as the Adult Community Center, the Library, Sedona Recycles, the Humane Society and the Boys and Girls Club. As a result, these organizations are attempting to continue their services with less funding. The City also provides funding for major arts organizations that provide community benefits such as the Film Festival, the Sedona Arts Center, Chamber Music Sedona and the Sedona Arts Festival. These organizations have had to tighten their belts but are still able to operate and provide critical services and benefits to our community.

The strategy of the City was to reduce expenditures and funding in the budget with minimal impact to jobs or services. If the City had made the decision to balance the budget by cutting an additional $370,000, numerous services and jobs would have been lost. Since the reserve fund has a healthy balance, it was determined that it was preferable to dip into the reserves for this year vs. eliminate jobs and services.

Even though no one was happy with the reductions in their funding, a high level of service will continue to be provided by our City employees, the various non-profits and the arts organizations. Most other cities in Arizona have been forced to eliminate many jobs and a wide range of essential services.

THE UGLY

The ugly part of the Sedona fiscal picture comes in two parts. The first is the potential impact from the State’s attempt to balance its own budget. The second is the ongoing challenges of our Wastewater Fund.

As of July 1, we still don’t know what the financial impacts will be to our City as the State attempts to balance its own budget. Revenues that are normally received from the Vehicle License tax (VLT), the Highway User Revenue Fund (HURF) and Development Impact Fees are in jeopardy of being reduced or eliminated. Depending on the outcome, Sedona’s ability to fund Capital improvement projects may be seriously diminished. At the present time, Sedona has close to 100 million dollars worth of Capital projects that are being considered. The yearly revenues to our Capital Fund are only about 2 million. Any further reductions to our revenues will not only impact our ability to pave streets, build sidewalks and other capital improvements, but it will challenge our ability to simply provide necessary maintenance.

The Wastewater Fund is arguably Sedona’s biggest financial challenge. We are presently spending tens of millions of dollars from the Wastewater Reserve Fund to upgrade, maintain and expand our wastewater infrastructure. Much of the infrastructure was installed over 20 years ago and is in need of upgraded technology and repair of aging and obsolete equipment. In addition, the City is researching alternative methods of disposing of its wastewater. As a result of these major expenditures, the reserve fund is projected to be depleted within the next four years. Difficult decisions are going to have to be made to increase revenues to this fund.

In conclusion, the notion that the City staff or Council has not been proactive or prudent in dealing with the City budget is preposterous. A large reserve fund has been accumulated over the prosperous years and a small portion will be used during the lean years. Budget cuts have been ongoing and will continue to be made to meet the reduction in revenues. Careful consideration has been given to a fair distribution in the reduction of funding to non- profits. The City of Sedona is committed to providing the highest level of service to its citizens within a fiscally responsible budget.

The views that I am expressing are my personal opinions and not necessarily the opinion or position of the City of Sedona or the City Council.

Rob Adams, Mayor
City of Sedona

For the best Sedona Arizona News and Views? Subscribe to www.SedonaEye.com today.