Sales taxes represent more than half of Scottsdale’s total General Fund revenue. Since any major shift to property taxes or other available revenue tools is highly improbable, it’s an “economic given” that the city will continue to rely heavily on sales tax revenue to maintain, upgrade and expand services.
In the hierarchy of competing land uses — single-family residential, multi-family, office, industrial and retail — retail, the money source, is definitely king.
And with surging service demands from a growing population and an expanding employment sector, Scottsdale and other sales tax-dependent cities must protect and enlarge their retail base.
The reality, however, is that market forces are more powerful than public policy in influencing private sector decision-making. Some sources of sales tax income are already either evaporating altogether (departing auto dealerships) or are threatened (potential loss or downsizing of signature events, such as the Barrett-Jackson Classic Car Auction).
That said, the link between policy decisions and economic stability cannot be overlooked. Actions in almost every area of planning and policy making either ease concerns about future revenue flow — or exacerbate them.
For example, whether a taller and more massive project will ease or exacerbate the city’s very real economic challenge, if not the deciding factor, is a critically relevant one that arguably should be weighted heavily in height and density discussions.
Transportation discussions tend to focus on getting workers to and from places of employment. Some destinations — including resorts, hotels and shopping centers — feed the local economy through sales and bed tax revenue. Others — hospitals, fire stations and the like — need workers to deliver essential services.
Less clear in terms of contribution and value would seem to be highly subsidized systems mainly designed to transport large numbers of non-Scottsdale residents to industrial parks and office complexes (including SkySong, put forward by some as justification for a light rail spur).
Can the cost of delivering workers to essentially non-revenue producing employment centers be offset by the hard-to-pinpoint ancillary benefits, such as the sales tax revenue these outside workers might contribute through discretionary purchases in Scottsdale?
Overall, if one begins to add up the “givens,” the outlook is at best obscure and at worst discouraging.
On the revenue side, Scottsdale’s economic health is inextricably handcuffed to retail sales. Hoteliers and retailers indeed relish being in Scottsdale, so much so that some outside the city prefer to use a Scottsdale address.
But, other forces, perhaps more domineering, are eating away at that base. Commercial centers in neighboring communities are emerging as highly convenient and competitive retail options for buyers accustomed to shopping in Scottsdale.
With its soon-to-appear glamour department stores and boutique shops, CityNorth on Loop 101 will invariably lure over the line to Phoenix some of Scottsdale’s big spender residents as well as nearby Airpark employees.
Planned and revitalized retail projects are certain to pull shoppers onto tribal land. Expansive Tempe Marketplace is already a trendy destination for south Scottsdale residents.
The challenge, therefore, can be clearly stated: “Can Scottsdale continue to provide gold-plated services to a growing populace while facing the very real prospect of an eroding or too slowly expanding sales tax base?
And how will policy decisions impact that outcome?”
Ned O’Hearn is a former Scottsdale City Councilman who shares moderating duties on the LINKS Community Forum.