“We’re already going into the budget with a tough time,” Holbrook City Manager Ray Alley reported regarding state cost-shifts that will impact the city in the upcoming fiscal year.
Alley noted that all of the numbers are not yet available, but he expects the hits to the budget to total around $300,000. That number includes a payment from the city to the state to collect sales tax, new fees from the Arizona Department of Environmental Quality (ADEQ), an increase in retirement costs for peace officers and higher rates for the county to provide magistrate services.
Each county and city in the state is now required to pay a portion of the operating costs for the Department of Revenue. Alley explained that the city’s sales tax collections are up and are expected to continue to increase in the coming fiscal year, but it is not yet clear whether the increase will make up for the new charges being levied for the state to collect and distribute that tax. He also noted that the state is now the only entity that can conduct sales tax audits and the city no longer has the option of hiring private firms to ensure that businesses are making proper payments.
“They’ve hired about 20 to 30 new auditors to do that,” he said.
The city may be able to avoid some of the new fees imposed by ADEQ, if the required documents still exist.
“They want us to provide documents from 10 years ago, or we have to pay the new fee,” Alley explained.
He noted that city staff members are searching for the documents, but expressed his frustration at a requirement to produce paperwork that would not normally be retained for that length of time.
A settlement in a statewide lawsuit regarding cost of living increases for the public safety retirement system will cost the city between $170,000 and $200,000, according to Alley’s estimates. Statewide, the settlement will cost cities, counties and the state approximately $375 million.
Alley also pointed out that Navajo County has had to pass some of the state reductions on to cities, resulting in a massive jump in magistrate fees. This fiscal year, the city will contribute about $7,000 toward the cost of the magistrate. Next year, it will increase to about $41,000. Although the increase is hefty, Alley explained that it is still a cost-effective option.
“It’s a bargain compared to when we used to have to run our own magistrate court,” he noted.
The county provides magistrate court services to the city through the justice court. Alley noted that the pressure being put on the county’s budget due to cost-shifts from the state has left the county little choice but to pass some of those costs down to cities.
“We’re at the end of the line and it all just gets passed down to the local taxpayers,” he said.
