The good news is Mesa probably will avoid layoffs. The bad news is the cash-strapped city is facing two more years of little or no economic growth.
That’s according to the city’s fiscal 2003-04 and 2004-05 draft budgets, released Friday.
Mesa operates on a two-year budget cycle and its fiscal year runs from July 1 to June 30. The City Council begins budget deliberations May 5. Both budgets require council approval.
"We’re straining to keep up, but we think we’re getting closer to having the budget balanced," City Manager Mike Hutchinson said Friday. "Things have improved over the last few months, but we’re not out of the woods yet."
Mesa is projecting a $33 million deficit for 2003-04, up from $31 million the city previously reported. The difference arose from lower than expected revenue collections in January and February, Hutchinson said.
The shortfall is fueled by a $6.9 million reduction in state-shared revenue next year, a projected 5 percent decrease in impact fees, an 11 percent increase in employee health insurance costs, a 72 percent increase in civilian employee state retirement rates, and a 60 percent increase in police officer and firefighter pensions.
Mesa is considering cutting cost-of-living raises for employees next year, Hutchinson said. In addition, the city will continue a hiring freeze that began in February 2002, leaving 229 fulltime positions unfilled, for a projected savings of $10 million, according to a memo released with the budgets.
City officials are recommending $16 million in service cuts next year. However, none are detailed in the draft budget.
Officials have floated a number of cost-saving proposals, including closing city pools on Sundays and holidays, closing libraries on Sunday, cutting adult recreation programs, eliminating a program that installs speed humps, suspending employee benefits and delaying capital expenditures.
City officials were considering eliminating more than 400 jobs next year — something the draft budgets aren’t recommending. Mesa, which is Arizona’s third largest city, has 3,598 full-time and 848 part-time employees.
City officials eased the financial strain by refinancing a number of bonds last year, at a savings of nearly $10 million, and by proposing $8.7 million in utility rate hikes for next year, Hutchinson said. The rate hikes still have to be approved by the council.
Mesa is forecasting no growth in sales tax in fiscal 2003-04, at the suggestion of Mayor Keno Hawker and other council members. For fiscal 2004-05, the city is projecting 3 percent growth in sales tax collection.
"I wanted to be overly cautious and plan on no growth," Hawker said.
Hawker said his priorities going into budget deliberations are public safety, courts, road maintenance and utility service.
"For me, the key on this budget is to look at if we have adequate public safety, first and foremost," Hawker said.
The projected operating budget for 2003-04 is $519.2 million. For 2004-05, the projected operating budget is $534.2 million. The figures don’t include projected revenue from the "quality of life" half-cent sales tax increase, which is used for specific programs approved by voters.
Capital improvement expenditures are forecast at $187.2 million for 2003-04, and $182.9 million for 2004-05. Expenditures next year include nearly $9 million to buy land to build a light-rail segment, about half of which is expected to be reimbursed by other government agencies, and $37.4 million for the downtown arts center, which is under construction.