Councilwoman Milhaven offers prudent perspectives as revenues surge
By Terrance Thornton | Digital Free Press
The amount of sales and use tax collections by the city of Scottsdale is 20% better than what was expected to hit municipal coffers by February of this year — the latest data available — but there is more than meets the eye when it comes evaluating these economic figures.
The latest monthly financial report to Scottsdale City Council, provided to the local governing board May 17 at City Hall, 3939 N. Drinkwater Blvd., reports a 26% increase in sales and use taxes collected during the same period a part of the previous fiscal year.
“Looking over the last year, these increases are due, in part, to federal stimulus payments and post-pandemic pent up demand,” said Scottsdale Councilwoman Linda Milhaven, offering a conservative perspective on what the numbers mean.
“We know that sales tax revenues are very cyclical so even as we enjoy higher revenues, we must keep in mind that we will also see dips on the future. We must be cautious and not assume that revenues will continue at the current levels. With a little more time, we can have more confidence in our trends.”
A look at the numbers shows there are 10 general purpose sales tax remits tracked at City Hall keeping tabs on sectors from automotive and dining & entertainment to hotel/motel and major retail store collection. In all, Scottsdale budget officials anticipated $100.4 million to come from the 1% major sales tax contributors but instead a total of $120.1 million has hit municipal coffers as of March 2022.
But beneath these positive trends, Councilwoman Milhaven says, a prudent approach may be in order given the up-and-down economic times of the last few years.
“I believe we need to be conservative and see if the current sales tax trends continue,” she said. “I am concerned about rising prices as well as the challenges we have hiring staff. Local businesses are challenged to find staff and, as a result, many are resorting to paying hiring bonuses and raising pay rates. Labor shortages and rising prices are concerning for the local economy.”
Given the common demographic throughout the Valley of the Sun, Councilwoman Milhaven points to rising fuel costs as a troublesome trend.
“Arizona, and Scottsdale, are impacted by national economic trends,” she pointed out. “The rising cost of fuel is especially concerning. With the threat of a looming recession, we must continue to be conservative in our financial projections and our spending.”
Councilwoman Milhaven say she likes the idea of paying down unfunded public safety liabilities at the Public Safety Personnel Retirement System and paying off one-time expenses.
“Given the unusual economic times — federal stimulus payments and post-pandemic demands — we should be putting the money in reserve or using it to fund some one-time expenses,” she said. “For example, we know Arizona public safety pensions are underfunded and that cities will be required to make up the shortfall. Extra one-time money can be used to pay for this kind of one-time expense.”
Housing market state plays havoc on economics
As housing values skyrocket and multifamily housing products still in the pipeline, Councilwoman Milhaven says basic economics could outweigh the allure of the Scottsdale brand.
“Our housing crisis threatens our local economy and may lead to reduced City services or higher taxes,” she said of a lack of housing, affordable or otherwise available within municipal limits. “Our strong, diverse business community significantly contributes to our tax base and helps us keep our tax rates low while providing first rate city services,” she said of the good news.
“Businesses locate where they have access to talent. Most of the people who work for Scottsdale businesses are commuting from other communities. As the price of gas increases and as other communities grow, we should be concerned about how long people will be willing to drive to work here and how long before businesses move and take their tax dollars elsewhere.”
The low selling price for a single-family home in Scottsdale in May 2021 was $288,000, meanwhile during this same period this year that number has swelled to $480,000.
Councilwoman Milhaven says it is figures like these ones that can reshape the economic future of a community.
“Our housing crisis has also slowed our population growth and reduced our state-shared revenues,” she said. We are growing more slowly than the region so we are getting an increasingly smaller share of state-shared revenues. We will need to find revenues to fill this gap.”
A lack of adequate housing stock is creating challenges for diversification of Scottsdale’s local economy, Councilwoman Milhaven contends.
“Lack of housing is also driving up home prices and shutting out young professionals, young families and seniors,” she said. The latest census tells us we are an aging community with fewer and fewer children. We must provide diverse hosing options across all price points to have a robust economy.”
The ultimate challenge? Councilwoman Milhaven says a lack of continued growth can become wider than just Scottsdale.
“Some are concerned that we are growing too quickly; however, we are already growing more slowly than the region,” she said. “If we grow any more slowly, it will be damaging to our local economy, our tax revenues will be impacted, and we will be forced to cut services or reduce services.”