INCREASING CITY REVENUES…

During a City Council candidate forum last week, the moderator asked each candidate to identify three opportunities to raise revenues for the City. The fact of the matter is, there’s no way to increase city revenues in any meaningful amount, except by (1) achieving growth in our economy, including tourism, or (2) increasing the local sales tax or property tax rates. The first usually happens because of factors beyond Council’s control; the second happens at considerable political peril!

increasing-city-revenuesOver many years, we’ve done a great job holding down taxes. Our local sales tax rate of 1.65% is the second lowest in the valley…just ahead of Chandler’s 1.50%. Actually, ours is the lowest by far if you exclude the 0.35% temporary share of our sales tax collected for the purchase of preserve lands.

Similarly, Scottsdale’s property tax rate for debt service and general fund uses is also the second lowest in the valley. Mesa is lowest because it doesn’t assess a property tax for its general fund.

 

Our low tax levels have been achieved with the help of strong growth in construction, a healthy economy and the granddaddy of all reasons…growth in tourism spending! By some estimates, tourists account for more than 25 per cent of all sales tax collected by the City.

 

But, back to the question…“How can we raise revenues for the City?” I couldn’t help thinking how odd the question was; essentially, the moderator was asking each of us to describe three ways we could take more money from the citizens. Councilmembers need to remember the money we have to spend is not “earned revenue”…it is money taken from citizens by force of law as taxes, fines and fees.

 

When I served as Scottsdale City Treasurer, one of the departments reporting to me was “Customer Service” – a strange department name, since the City doesn’t have customers. Customers are individuals who exercise free choice and make decisions to buy or not buy based on price, quality and service. Our so-called customers have no such choice. It’s just another reminder that not all the principles of business in the private sector translate into good principles for managing municipal government. During my tenure, we changed the name of the department to “Business Services.”

 

Without the opportunity to increase revenues by stimulating customer demand (as a business might do), Council’s revenue strategies must focus on existing revenue sources. Specifically, Council needs to protect and support our tourism industry, without which taxes on citizens would increase dramatically to provide the same services. A concern of many is that misguided Council actions to stimulate economic growth in the short-term (approving taller and denser building projects) may actually have the long-term consequence of undermining the appeal of our city as a place for tourists to visit.

 

Additionally, since government receives no market-driven customer feedback (as a business does, when customers simply refuse to buy), Council bears a significant responsibility to spend existing revenues wisely. This involves being sure what services citizens actually want; then, delivering those services at the same or lower cost. This is where well-defined strategies, policies and vision take a priority.

 

Adapting business principles to government services is what I have done for most of my career. I ask for your support in the upcoming Council election.