The difference between expenditures-to-revenues has narrowed in the past three years. The national economic climate is tense, which accounts for some of a projected dip in next year’s revenue projection since a significant portion of Sedona’s revenue comes from taxes related to the city’s tourism trade. For more information, see the budget analysis published by Sedona.biz in February.

With the city's total debt at $75 million, City Manager Eric Levitt also wrote: "I admit, our debt is higher then I would ideally prefer; however, we have planned the debt service payments in the financial 5-year plan, and managed the finances in a way to protect the City’s debt position and services against the economic downturn we are currently experiencing in the nation."

Should the city need to raise any additional debt for capital projects, Mr. Levitt cautioned the city council that additional revenues (presumably higher taxes) could be required. 

Specifically, Mr. Levitt expressed concern over the capital outlay required to connect the homeowners to the city sewer system. 

Wrote Mr. Levitt, "Many cities require future extension costs to be bared by the beneficiaries of the extension. However, in Sedona general sales tax has been used to extend lines due in part to environmental concerns, due to local expectations and due to costs per home to extend a line...While the City’s approach has benefited homeowners economically, due to the cost now being over $30,000 per extension, the City cannot continue to extend lines and construct other desired capital improvements on its existing revenue base...Thus, I am recommending that we go to one of two options on future sewer extensions:

• A petition based process that places subdivisions on a priority list. The program would be funded with consistent annual funding that may extend lines to one subdivision every other year depending on the cost of extension to that area. If a subdivision wants to move up on the schedule, it would commit to paying half the cost of the extension.

• Consider at some time in the future putting to a vote a General Obligation Bond [a bond backed by city property taxes] proposal to sewer the remainder of the City."

So, the question is – what should be cut?

People?

Mr. Levitt’s long-term strategy is to avoid making huge increases in staff and programs during good years – so the city doesn’t need to make dramatic cuts during lean years, he said. As city manager, he has accomplished this goal without any increase in taxes or fees in 10 years.

His short-term strategies include a preference for generalists over specialists when hiring employees. Additionally, he doesn’t automatically fill open positions, rather Mr. Levitt’s policy is to re-evaluate each open position, which he said helps the city stay under its staffing budgets year-to-year.

Victoria Ward, director of human resources, said basic economics also help the city save on staff expenses because some city employees do not use their benefits. “Some of them say, ‘I can pay my co-pay or I can put gas in the car,’” she said.

Mr. Levitt put some necks on the proverbial chopping block, including reducing the housing coordinator position to part-time, eliminating one of the city’s part-time attorneys and eliminating the assistant to the city manager position.

But, Mr. Levitt recommended against these and other personnel cuts. Reading his budget summary and understanding his long-term strategy, it seems the city needs these positions and cutting them would be reactionary to current economic worries – if not necessarily reversible in better years.

From the budget summary: “This is generally a two-pronged issue: (1) morale and productivity due to fear of further cuts (2) inability to address new problems and support current and new programming with reduced staffing.”

“Do you think we’re maximizing staff, or that we’re under-staffed?” Mr. Adams asked the HR director.

Ms. Ward carefully replied, “Everyone works hard.”

Projects and Programs?

Mr. Levitt offered up the Sedona RoadRunner long-range planning and a cost-of-living increase for city employees as the most expensive projects and programs that the council could cut. He recommended against these cuts, too, saying in essence that the city might see short-term benefits but that the long-term consequences could be significant.

It would be difficult to maintain morale or to attract qualified applicants if the city did not offer raises, “especially if no actual revenue-to-expenditure gap is realized,” Mr. Levitt stated.

Long-range planning is critical, especially as the city nears build-out. In the not-so-distant future, redevelopment and infill will play important roles in how the city looks and ‘feels.’ The city is developing a strategy, including form-based codes, but the strategy needs to be finished.

The Sedona RoadRunner is part of a multi-phased plan for regional transit that includes other cities and communities, two counties and Northern Arizona University, all of which have made agreements and dedicated funds – including federal grants.

Cutting this program could eliminate Sedona’s options for public transportation in the future, according to Mr. Levitt.

Funding for special events, non-profits and other outside organizations?

The Sedona Public Library, the Sedona Chamber of Commerce and the Sedona Film Office have requested additional funds for the next fiscal year, amounting to about $214,000, according to the budget summary.

The city council could cut some of or more than this amount to offset the budget gap, but Mr. Levitt recommended against it saying it could affect these organizations’ ability to provide programs and services.

About $105,000 is earmarked for community-wide events, community-based service grants, arts grants, historic preservation grants and new events grants.

Several at the meeting agreed that the city’s participation in these organizations is more than philanthropic – the money generally promotes tourism, which in turn promotes tax revenue to fund the city’s budget.

Ridin’ the storm out

So, as Mr. Gomez pointed out, Sedona faces a perfect storm in which the economy looks grim, no one wants increased or new taxes, cutting staff or programs seems a bad idea for the long haul, and some people do not understand how Mr. Levitt manages the budget.

Mr. Levitt said his proposed budget offers Sedona a fiscally sound future for the next five years.

In addition to his track record, Mr. Levitt proposed a new element to the mid-year budget review – setting two benchmarks of $300,000 and $1 million – to review and correct the city’s financial game plan if trends indicate an operational deficit.

Additional budget work sessions are scheduled for 9 a.m. to 2 p.m. on Monday, May 12 and Wednesday, May 14* in the Vultee Conference Room at City Hall. Adoption of the tentative budget is scheduled for the council’s Tuesday, May 27 meeting and a public hearing to adopt the final budget is scheduled for Tuesday, May 24.

*Note:  the budget session for May 14 has been cancelled.

© 2008 Cyndy Hardy. This article may not be reproduced, republished or distributed without written permission from the author.