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One of two measures that will be on the May 21 ballot for Holbrook residents is Proposition 19-102, which if approved would authorize the city to levy a primary property tax not to exceed $199,000 for the cost of fire and law enforcement service. The tax is a percentage that, as an example, would equal $55.99 per $100,000 of assessed valuation for property owners. So property valued at less would have less tax and those with a property valued at more would have a higher tax.
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The city attempted a similar measure on the 2017 ballot, which the voters failed to support. If it should pass with this election it would be the first city property tax imposed upon the residents in five years.
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City Finance Director Randy Sullivan explained the need for the passage of the property tax measure is primarily due to the state’s Public Safety Personnel Retirement System (PSPRS), which serves all law enforcement throughout the state. Over the years the employer contribution requirements have increased substantially, leaving no option for municipalities.
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According to Sullivan, five years ago when the city did away with the property tax, the financial picture was different. “Now we pay 100 percent on an officer and when we got rid of that tax, we were at like 60 percent per officer. So essentially, if we are paying an officer $40,000 we’re really paying them $80,000 with retirement. Then add another $20,000 because we have to pay health benefits. So, a $40,000 officer is being paid $100,000 a year. You do that with 15 officers and you have $1.5 million and that’s just for those employees,” stated Sullivan.
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When there were fewer officers and the county stepped in with deputies to assist, that took some of that burden but now with the city hiring more police officers, that cost is going to increase. “So now you’re talking close to $2 million out of the general fund just for police department salaries. We’ve only got a $4 million general fund budget so that’s half our expenses,” explained Sullivan, adding that each year the amount contributed to the PSPRS increases.
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When asked how the system is able to require the city to pay more than 100 percent on the retirement, Sullivan explained that PSPRS looks at what the cities have paid for the number of employees and who’s retired and then it looks at what’s unfunded. “So if we’re say, $2 million unfunded in that system we have to pay that somehow,” said Sullivan.
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In explaining on how the funding works, Sullivan stated the funds are invested by PSPRS then they estimated the amount of return on that investment. If the return is less than projected, and it has been, those funds have to come from the city. “Every year that they budget numbers at a shortfall like that it just hurts us.”
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Sullivan explained that last year PSPRS attempted to implement what they called a Tier 3. Tier 1 and 2 are for experienced employees but Tier 3 was to fund those public safety officers fresh out of the academy at a rate of about 50 percent retirement investment from their employers. But that was not the case, leaving the city to pay higher costs for that as well. In addition, a COLA (Cost of Living Adjustment) raise is also built into the system for retired employees.
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The city has no options to select another retirement system as it’s mandated through the state.
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“How are we even going to be able to pay for equipment for the police and fire department if our numbers keep going up like this? We can’t,” stated Sullivan.
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When asked what would happen if the measure should fail to pass, Sullivan said the decision on how to proceed would be made by the city manager, but it would have to involve cuts and as payroll is the largest expense that would be the most likely target. “We’ve budgeted pretty tight for these past years and these payroll expenses are getting out of control. We can put off equipment purchases for a few years but sooner or later that catches up to you,” said Sullivan.
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“Do you want salaries for these people? Of course you do. If this doesn’t pass, people will hurt because of it. That’s the reality of it. Do you value your quality of life here, your police department and what our general fund provides? Then this is what we have to do.” Those questions will be answered by the voters later this month.
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